NACBA/NCLC Call on ED to Issue Guidance Adopting Safe Harbors for Undue Hardship for Student Loan Borrowers

NACBA/NCLC Call on ED to Issue Guidance Adopting Safe Harbors for Undue Hardship for Student Loan Borrowers

On May 14, 2021 NACBA and National Consumer Law Center (on behalf of its low-income clients) sent a joint letter to the Department of Education urging the Department to issue guidance adopting objectively defined criteria (“safe harbors”) for undue hardship for student loan borrowers seeking bankruptcy relief, instructing student loan servicers to consent to the discharge under those circumstances.

In making this determination, at a minimum, NACBA and NCLC recommended that the Department of Education direct its servicers to agree that there is an undue hardship if any of the following are applicable to, and reliably proven by, the borrower:

  1. the borrower is receiving disability benefits under the Social Security Act;
  2. the borrower has been determined by the Secretary of Veterans Affairs to be unemployable due to a service-connected disability;
  3. the borrower’s income is derived solely from retirement benefits under the Social Security Act or from a retirement fund or account, and the annual household income for the borrower is less than the median family income of the borrower’s applicable State as reported by the Bureau of the Census;
  4. the borrower provides for the care and support of an elderly, chronically ill, or disabled household member or member of the borrower’s immediate family (including parents, grandparents, siblings, children, and grandchildren of the borrower, the dependents of the borrower, and the spouse of the borrower in a joint case who is not a dependent) and the annual household income for the borrower is less than the median family income of the borrower’s applicable State as reported by the Bureau of the Census; or
  5. during each year of the three-year period before the filing of the petition, the annual household income for the borrower has been less than the median family income of the borrower’s applicable State as reported by the Bureau of the Census.

Read the full letter

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