"The U.S. Supreme Court agreed today to hear arguments in a case that hinges on whether students can avoid repaying their federally backed student loans without showing that making the payments would cause them financial distress or 'undue hardship,'" The Chronicle of Higher Education reports. "In 1994, Francisco J. Espinosa filed for a Chapter 13 bankruptcy, listing $13,250 in federal student loans as his only debts. He agreed to repay the loans, held by United Student Aid Funds Inc., over four years. The lender was notified of the court-approved plan and did not object even though it had filed a claim for $17,832, which included interest on the borrowed amount. After the repayment plan was finished, however, United Student Aid tried to collect the difference and then filed suit, arguing that the Chapter 13 plan was void because federally guaranteed loans cannot be discharged unless the borrower initiates an 'adversarial proceeding,' showing both the bankruptcy court and the lender that repaying the loans would be nearly impossible."

You can read the complete June 16, 2009 Chronicle of Higher Education article on-line.

Additional Media Coverage

Supreme Court Will Hear Appeal in Student Loan Case Inside Higher Ed

Posting of "Financial Aid in the News" does not imply endorsement or support by NASFAA. If you attempt to access an article and receive a "not found" message, it is likely that the article has been removed from the site. Posted 06/16/09 to www.NASFAA.org. Please submit Web site questions or comments to Web@NASFAA.org.