Now I know I’ve written about exceptions to the non-dischargability of student loans in Bankruptcy, and I stand behind what I’ve written. What I wrote was correct and the test of undue burden under 11 U.S.C. § 523(a)(8) is correct. However the practical complications of overcoming this test can be quite difficult. Take for example the case of Mark Allen Jesperson. The US Court of Appeals for the Eight Circuit ruled Mr. Jesperson must repay $360,000 in student loans, even though two lower courts ruled requiring Mr. Jesperson to repay the loans would essentially sentence Mr. Jesperson to a life of debt, akin to debtors prison without walls.
Mr. Jesperson had obtained a bachelors degree and a law degree, however had not been able to secure stable employment and could not seen to earn more than $25 an hour.
Mr. Jespersons argument simply was: based on his income he could never repay his student loans and therefore he had met the three part test I wrote about earlier.
However the Justices disagreed, finding that Mr Jesperson’s low income qualified him instead for an income based repayment Plan, stretching out his student loan payments from 10 years to 25 years. In this case because of his relative young age (43), good physical and mental health, and marketable skill set; having low income specifically was not an undue burden, and would not overcome the three part test.