“Undue Hardship” Discharge — The Top Priority for Student Loan Solutions

A campus

By:  Donald L. Swanson

The student loan crisis and potential legislation to solve it are in the news these days.  Lots of ideas are bandied about on what legislation might look like.

Top Priority

There is a top priority for such legislation that dwarfs all others.  The number one priority, bar none (and it’s not even close), is this:

–The “certainty of hopelessness” test [see this article] for an “undue hardship” discharge of student loans (under § 523(a)(8) of the Bankruptcy Code) needs to be eliminated and replaced with a more humane test.

Congress and Consumer Debtors

Congress does not like consumer debtors.  For example, Congress keeps many out of Chapter 7 by means testing and limits Chapter 13 eligibility to unsecured debts of $250,000.

But the most blatant example of dislike is allowing the “certainty of hopelessness” test to remain in effect for an “undue hardship” discharge of student loans.

The Problem’s Source

The source of the “undue hardship” problem is the combination of those two words in the statute:

Definition of “undue” = “unwarranted; excessive”; and
Definition of “hardship” = “a condition that is difficult to endure; suffering; deprivation; oppression.”

Under this combination, it’s not enough to show “suffering” that’s “difficult to endure”: instead, the “suffering” must also be “unwarranted” and “excessive.”  So, the combination results in a “certainty of hopelessness” test for discharging student loans in bankruptcy.

A Real-Life Example

There is a real person (I promised not to use her name) in a real Chapter 13 case, who is oppressed  by the current standard.

Here is her story in her own words:

“I’m a psychologist and the ‘certainty of hopelessness’ standard shocks me as, in my work, it places the individual into the realm of suicidality.”

“I’m 53, self employed, mother of two college aged kids (taking on their own student loans now) that I raised alone.”

I’ve been “Robbing Peter to pay a Paul all these years” so that I could “pay $900 monthly to my student loan,” which “I could never afford to begin with.”

Such realities “ultimately led me” to file Ch 13.  “Then a week after filing,” I received “a breast cancer diagnosis.”

Then, after “two surgeries and radiation,” I had to discontinue treatment “because I was in new debt with the big deductibles.”

“I’m in the midst of an adversarial proceeding” seeking a hardship discharge of my student loans.  But I’m pessimistic because my “burden of proof is just impossible!”

“And I’m still working,” which “counts against me” in the bankruptcy “despite my income taking a hit through all the treatment.”

And get this: “I paid $140,000 over the years on a $118,000 loan and still owe $97,000 (more now since it’s in default.).”

“This just seems unreal to me!”

“Indentured servitude” is what it is, “and it never gets better.”

Undue Hardship Discharge

The foregoing facts should quality for an undue hardship discharge.  And it shouldn’t even be a close call!

But such facts might not qualify under today’s law.

This is an abomination!  Congress needs to correct the situation—and it needs to do so quickly!!

A Small-Step Solution

Here’s a small-step solution:

–Removing the word “undue” from “undue hardship” in § 523(a)(8) should go a long way toward eliminating the ”certainty of hopelessness” abomination.


Congress should act quickly to rescue our student loan debtors caught in impossible financial circumstances.  The “certainty of hopelessness” test needs to be eliminated immediately!


** If you find this article of value, please feel free to share. If you’d like to discuss, let me know.

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