Supreme Court Rules Against Student Loan Industry

The BLT: The Blog of Legal Times:

Rejecting the views of 33 states, the federal government, and the student loan industry, the Supreme Court today unanimously ruled in favor of a loan delinquent who used the bankruptcy laws to restructure his debt.

The decision in United Student Aid Funds v. Espinosa was the only ruling handed down today, and the Court is not expected to issue any rulings when it sits tomorrow, making it unlikely there will be any rulings again from the Court before March 30, the next decision day on which it will be in session.

Read the whole story: The BLT: The Blog of Legal Times

Comments

[kwoodberryesq]

04:56 PM on 04/07/2010

Well the court was correct on this... the bank did not pursue their due process right to preserve the right to collect on the student loan. All creditors have the right to object to a bankruptcy, but must assert such rights, in this case the bank did not assert their rights, part of the debt was forgiven and th right cannot be revived once you have been put on notice and did not respond to the notice. I only wish I had done this!

[jakiew]

01:57 PM on 03/24/2010

typo--don't deserve respect

[jakiew]

01:56 PM on 03/24/2010

JN explained it, it was procedural rules, nothing else. those five cons have no respect for the people , who pay their salaries and benefits, that is obvious with every decision since they have been in the majority. so they do deserve respect. every decision was against the person ,or all citizens when they stopped the vote count so bush would win, and for the corporations. the cons didn't like the fact that the swiftboat film on hillary couldn't be publicized because corporations paid for it and that the democrats out foxed mccain on campaign funding. so they had to make their own laws so that wouldn't ever happen again. so what that we have a constitution and they are not supposed to make laws. they are an illegitimate court majority and they should be ousted.

[JNarragansett]

02:28 PM on 03/24/2010

The point that I was trying to make is that traditional views of politics do not influence supreme court decisions the way the comment boards would suggest. Another example, as you allude to, is Citizens United. If you passed an amendment saying that corporations were not people, the effect of the ruling would not change one bit as the court made the determination on the basis of speech rather than speaker.

The point being that if you want to understand supreme court decisions, read up on the law rather than politics.

[banker67]

10:13 AM on 03/24/2010

Anyone know what happens when a student declares bankruptcy and as a bankrupt give up on a student loan? Generally, is that debt for tuition gone along with other debts?
Given that so many recent graduates can't find work and have no significant assets, wouldn't they be better off declaring bankruptcy to get rid of these loans?
Never mind the 'responsible' thing to do. Citibank, Chase, Lehman and all those other MBA-driven institutions have thoroughly demonstrated the respect accorded 'responsibility' in the lending industry.
Now that we've bailed out the billionaires, why not give the students a break too?

[ScarlettMocha]

11:23 AM on 03/24/2010

Even if you file bankruptcy, you are still obligated to pay student loan debt. It may be rolled into any payments you are making during the bankruptcy, but when the bankruptcy is discharged, student loan debt returns to you for continued payment.

YOU CANNOT FILE BANKRUPTCY ON A STUDENT LOAN - IT IS YOURS FOR LIFE.

[Committee of One]

12:10 PM on 03/24/2010

You didn't read the article, did you?

[HerbTee]

01:54 PM on 03/24/2010

Scarlett, please go to this link and read:

http://legaltimes.typepad.com/blt/2010/03/supreme-court-rules-against-student-loan-industry.html

[JNarragansett]

09:48 AM on 03/24/2010

After reading the case, here's why it was decided this way. It wasn't determined on the factual merits of whether the court wants to protect students or corporations. It was determined based upon procedural rules and a failure to object. There were questions related to notice as Espinosa did not follow proper procedure, and neither did the court. In the end, they failed to prove or make a determination of "undue hardship". USAF claimed that this breach of procedure resulted in a violation of their due process rights, but the court determined that the creditor had actual notice, and an opportunity to respond, but failed to object. This does not mean that student loans can be discharged without "undue hardship" but that USAF can not modify the plan because of their failure to timely object. This plan was sent to the creditor in 1992 and when presented with a repayment plan that would excuse Espinosa's requirement to pay the accrued interest, USAF did not object.

[foxbat]

09:11 AM on 03/24/2010

Funny that NOW that Thomas, more specifically his wife, is in the spotlight, that he makes a non-corporate decision. Wonder how long that'll last ... or not last as the case may be.

[Margo Arrowsmith]

08:04 AM on 03/24/2010

Even a broken clock used to be right twice a day. (back before digital)

[lovbug]

02:49 AM on 03/24/2010

I'm surprised Clarence Thomas even did something that may help others. Maybe he's afraid that Sotomayor will and it will show him up, his true color that is, and it's not black.

[Leigh49]

08:46 AM on 03/24/2010

Fanned.

[fromdnorth]

11:35 AM on 03/24/2010

We should have listened to Miss Hill...

[KarateKid]

10:52 PM on 03/23/2010

A big part of the healthcare reconciliation bill now being discussed in the Senate is the Student Loan part of the bill. If passed, banks will no longer be agents in giving student loans, only the federal government. It is easier to obtain student loans from the government than a private bank, and this previous arrangement is not working out, mainly for the students.

So, there's a lot more riding on the passage than meets the eye.

http://documents.nytimes.com/health-care-reconciliation-bill#p=1

Look on the end of the table of contents on page 2 of the table of contents.

Hope this helps.

[poseA]

07:41 AM on 03/24/2010

"It is easier to obtain student loans from the government than a private bank, and this previous arrangement is not working out, mainly for the students."

I don't know about that. My wife and I both obtained private student loans and it was pretty easy. We both paid 0% interest while in school and for 6 months following our graduation and 1% fixed after the fact. Those are great terms in my opinion.

[viflyer]

08:51 AM on 03/24/2010

THATS YOU!!!! It always amazes me how Repubublican trolls see EVERYTHING through what happened to THEM. Like it's the same for everyone else.

Well, do a little research into the abuses of the PRIVATE student loan industry.

[Pammy2]

12:25 PM on 03/24/2010

How long ago was that? My student loans 30 years ago were 3%. Private student loan rates are now exceeding 8%. And I did my homework and the best rate available was 8.25%. And then they immediately sell it to the Dept. of Ed, so why do we have to pay private banks anything? They're profiting without taking any risk at all, and being subsidized by taxpayers. How does that pass the smell test?

[LeftRight]

08:27 PM on 03/23/2010

Well it looks like the NeoCons are trying to keep us fat dumb and happy for the next step on their process to ruin America. Not that I'm complaining about the decision, just realizing that it ain't much compared to Citizens United....

[Forester]

05:32 PM on 03/23/2010

This sounds good, but not sure what the greater implications are to the student loan situation.

Might this actually make it harder to get loans if lenders now feel they are now at a higher risk for defaults?

Anyone smarter than me out there to help on this?

[Patrick Garies]

11:00 PM on 03/25/2010

Congress is expected to move student lending from banks to the federal government, so I don't think that this would make much difference. The government can force you to repay because it has enforcement power and can charge students lower rates because it doesn't exist to make a profit.

As for this actual case, without reading the case text, it sounds like this is not so much a "you can declare bankruptcy," but a "you can declare bankruptcy if you give the lender sufficient notice and they fail to act upon that notice" case. In other words, the lender screwed up.

[lemondade]

05:20 PM on 03/23/2010

JUDGE THOMAS IS A DISGRACE TO HIS HERITAGE.

[fromdnorth]

07:11 PM on 03/23/2010

His heritage as a human being...

[deepintheheartoftejas]

09:16 PM on 03/23/2010

What, are you a corporate banker? You think people should be debt-slaves for the rest of their lives, without being able to use last-resort bankruptcy to escape from crushing, usurious loans?

[poseA]

07:44 AM on 03/24/2010

I don't get where you think private student loans are such evil arrangements. They've worked out well for my wife and me. However, we are accustomed to paying our debts ourselves. As any decent and responsible person should be.

[booboopickle]

04:38 PM on 03/23/2010

Thomas is a supreme court justice we could have done WITHOUT!

[badwalrus]

03:56 PM on 03/23/2010

*UPDATE*


I just heard a rumour that Judge Sotomayor and Judge Thomas may still be paying on their loans from the 70's! I hope that doesn't represent a conflict of interest, but it certainly would represent a *compound* of interest.

[lisakaz2]

03:41 PM on 03/23/2010

Interesting. Wonder what the vote was. I guess the court was tired of the student loan industry thinking that they could collect even from bankrupt people, like they were special and out of reach of courts. I am glad they trampled on the court and the court fought back because this means poor students have a fighting chance.

[Sam418]

03:51 PM on 03/23/2010

Unanimous. First sentence.

[WiltonDiary]

04:53 AM on 03/24/2010

It was the Republican Congress that gave them that authortiy; it is hard to believe the SCOTUS ruled that way.