Case Chronicles: Jennifer the Community College Health Worker Who Overcame Aggressive Interest Rate
Welcome to Case Chronicles, where we tell the stories of people who received student loan debt relief via adversary proceedings.
All information in Case Chronicles is from the public record, but we have changed any names to provide some privacy.
Jennifer eliminated more than $50,000 of student loan debt in bankruptcy. This is her story.
For several years in the early 1990s, Jennifer took community college classes while she started her career in community healthcare. She borrowed just over $16,000 to pay for her classes but never earned a degree.
Jennifer spent her entire career working as a community health worker for her state, providing aging and disability services. Despite receiving frequent merit raises for her good work over the years and being single with no dependents, Jennifer never made enough money to get ahead of the aggressive interest rates on her student loans. By 2018, she had paid more than $15,000 toward her loans through consistent, monthly payments. Yet, she still owed more than $67,000.
Jennifer knew that there was no way for her to pay off her student loans with her take home earnings. She filed for chapter 13 bankruptcy in 2012, and, with her attorney, filed an adversary proceeding requesting full discharge of her student loan debt in 2018.
Jennifer’s attorney argued that repayment of the full student loan amount would constitute an “undue hardship” under the three-part Brunner test. The lender opposed discharge, arguing that Jennifer should be put on an income-based payment plan that would allow her to make payments of over $500 each month for 25 years, and then to have the loan forgiven.
Ultimately, the judge said that the income-based plan was not a possible solution for Jennifer since she was already in her 50s and, even with aggressive $500+ payments, would never be able to get ahead of the interest accumulation; she would owe more than $100,000 even after 25 years of payments! Furthermore, the judge agreed with Jennifer’s attorney and determined that she passed the Brunner test:
- The monthly repayment amount required to actually pay off the loan would not leave Jennifer with enough money to maintain a “minimal standard of living.”
- Even if she received a merit increase, her financial circumstances were “unlikely to change.”
- Jennifer’s history of making more than $15,000 in repayments demonstrated “good-faith efforts” to repay the loan.
The judge ordered that the interest on Jennifer’s loan should be entirely discharged, “rather than be yoked to a pay-as-she-earns time bomb” and forced to pay the ever-climbing loan with interest. Jennifer got a partial discharge of more than $50,000. She only has to pay off the original $16,000 loan amount, at a monthly rate that she can actually afford.
At Lexria, our mission is to make financial justice accessible. We’re starting with student loan discharge for people who have filed or are considering filing bankruptcy — people like Jennifer.
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