Phi Beta Cons

Supreme Court Declines to Make it Easier to Discharge Student Debts

Last year, the Department of Education issued a ruling that favored graduates with big student loan debts, (which I wrote about here), but that has not had any impact on the courts.

In Tetzlaff v. Educational Credit Management Corp., the debtor (a 57 year old man with over $260,000 in loan debt and rather poor prospects for finding employment paying enough so he could handle the payments) sought discharge, but was turned down by the trial court in Wisconsin and then by the Seventh Circuit. Here is that opinion.

Advocates for making student debt discharge easier were hopeful that the Supreme Court would grant certiorari, hear the case, and rule in favor of Tetzlaff. Yesterday, however, the Court declined to grant cert, so the law remains as it is, with the stringent Brunner test posing a high barrier to discharge. The Wall Street Journal story on the case is here.

I feel sad for Tetzlaff, but whether he struggles to repay loans he improvidently took out, or the taxpayers cover the loss (as they probably will in any case), the problem won’t go away until we get the feds out of the business of lending for college (and graduate education, as in this case), making it easy to run up huge debts without any likelihood of being able to repay.

George Leef is the the director of editorial content at the James G. Martin Center for Academic Renewal.

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