Law & Courts

Supreme Court Considers Student Loans, Bankruptcy

By Mark Walsh — December 08, 2009 1 min read
  • Save to favorites
  • Print

The U.S. Supreme Court has waded into the complexities of the student-loan industry, having heard a lender’s challenge to a court-approved bankruptcy plan that allowed an Arizona man to discharge some of his educational loan debt without proving “undue hardship,” as federal law requires.

Student loans are one of several forms of debt, including back taxes and child support, not easily discharged in bankruptcy.

The case, United Student Aid Funds Inc. v. Espinosa (No. 08-1134), involves Francisco J. Espinosa, an airline ramp agent in Phoenix who in the late 1980s received some $13,250 in student loans to attend trade school. In 1992, he filed for Chapter 13 bankruptcy protection, proposing to repay the principal—but not some $4,000 in interest. The bankruptcy court in Phoenix notified Indianapolis-based United Student Aid Funds Inc., but the lender did not object to the discharge plan.

Later, the U.S. Department of Education, as the guarantor of the loans, began collection efforts against Mr. Espinosa for the outstanding interest, but he won a ruling requiring the creditors to cease those efforts.

In an appeal to the high court, lawyers for the lender and the Obama administration said that upholding Mr. Espinosa’s bankruptcy relief would encourage many more debtors to try an end run around the legal requirements for student-loan debts.

During oral arguments in the case on Dec. 1, Toby J. Heytens, an assistant to the U.S. solicitor general, told the justices that “there is an important public interest at stake here, which is that the Department of Education is reinsuring all of these loans.”

But Michael J. Meehan, the lawyer representing Mr. Espinosa, argued that creditors and debtors should be able to agree to discharge “a portion of the student loan without a finding of undue hardship.”

The justices grilled both sides.

“You are taking a burden that Congress has put on the debtor and switching it to the creditor,” Justice Ruth Bader Ginsburg said to Mr. Meehan.

But Justice Anthony M. Kennedy wondered whether creditors could waive interests during bankruptcy proceedings, then “come in 10 years later and say, ‘This is a void judgment.’ ”

The case should be decided by July.

A version of this article appeared in the December 09, 2009 edition of Education Week as Supreme Court Considers Student Loans, Bankruptcy

Events

This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Budget & Finance Webinar
Innovative Funding Models: A Deep Dive into Public-Private Partnerships
Discover how innovative funding models drive educational projects forward. Join us for insights into effective PPP implementation.
Content provided by Follett Learning
Budget & Finance Webinar Staffing Schools After ESSER: What School and District Leaders Need to Know
Join our newsroom for insights on investing in critical student support positions as pandemic funds expire.
This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Student Achievement Webinar
How can districts build sustainable tutoring models before the money runs out?
District leaders, low on funds, must decide: broad support for all or deep interventions for few? Let's discuss maximizing tutoring resources.
Content provided by Varsity Tutors for Schools

EdWeek Top School Jobs

Teacher Jobs
Search over ten thousand teaching jobs nationwide — elementary, middle, high school and more.
View Jobs
Principal Jobs
Find hundreds of jobs for principals, assistant principals, and other school leadership roles.
View Jobs
Administrator Jobs
Over a thousand district-level jobs: superintendents, directors, more.
View Jobs
Support Staff Jobs
Search thousands of jobs, from paraprofessionals to counselors and more.
View Jobs

Read Next

Law & Courts District Can Deny Opt-Outs on LGBTQ+ Books, Court Rules
Religious parents objected to a Maryland district's policy ending opt-outs for elementary school 'storybooks' with LGBTQ+ themes.
5 min read
A pedestrian passes by the 4th Circuit Court of Appeals Courthouse, June 16, 2021, on Main Street in Richmond, Va.
A person walks near the U.S. Court of Appeals for the 4th Circuit's courthouse in Richmond, Va. A panel of the court denied an injunction seeking to restore religious parents' opportunity to opt their children out of LGBTQ+ "storybooks" in a Maryland district.
Steve Helber/AP
Law & Courts Brown v. Board of Education: 70 Years of Progress and Challenges
The milestone for the historic 1954 U.S. Supreme Court decision striking down racial segregation in schools is marked by a range of tributes
12 min read
People mill around the third floor of the Kansas Statehouse in front of a Brown v. Board of Education mural before hearing from speakers recognizing the 70th anniversary of the landmark Supreme Court case on April 29, 2024 in Topeka, Kan.
People mill around the third floor of the Kansas Statehouse in front of a Brown v. Board of Education mural before hearing from speakers recognizing the 70th anniversary of the landmark Supreme Court case on April 29, 2024 in Topeka, Kan.
Evert Nelson/The Topeka Capital-Journal via AP
Law & Courts Republican-Led States Sue to Block New Title IX Rule
A pair of lawsuits focus on the rule's protections for students' gender identity.
5 min read
Demonstrators advocating for transgender rights and healthcare stand outside of the Ohio Statehouse on Jan. 24, 2024, in Columbus. Four Republican-led states filed a lawsuit Monday challenging the Biden administration's new Title IX regulation, which among other things would codify protections based on sexual orientation and gender identity.
Demonstrators advocating for transgender rights and healthcare stand outside of the Ohio Statehouse on Jan. 24, 2024, in Columbus. Four Republican-led states filed a lawsuit Monday challenging the Biden administration's new Title IX regulation, which among other things would codify protections based on sexual orientation and gender identity.
Patrick Orsagos/AP
Law & Courts Why It Will Now Be Easier for Educators to Sue Over Job Transfers
The case asked whether transferred employees had to show a 'significant' change in job conditions to sue under Title VII. The court said no.
8 min read
Light illuminates part of the Supreme Court building at dusk on Capitol Hill in Washington, Nov. 16, 2022.
Light illuminates part of the Supreme Court building at dusk on Capitol Hill in Washington, Nov. 16, 2022. The high court on Wednesday, April 17, 2024, made it easier for workers, including educators, to sue over job transfers.
Patrick Semansky/AP