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Obama Administration asks for no leniency on student loan debt

The Obama administration is trying to prevent a bankruptcy court from being able to erase student loan debt with regard to federal loans. The Obama administration argues that the loan program's financial stability would be hindered if the courts begin to forgive student debt.

Attorneys for the U.S. Department of Education recently intervened in a case where a 65-year-old man was trying to eliminate his student loan debt through the bankruptcy process. The Department of Education lawyers filed a motion asking the court not to erase the student loan debts of borrowers who say they are suffering from dire financial circumstances.

According to the arguments, the 65-year-old man -- who is both unemployed and has reached retirement age -- should try to find work in order to pay off his debts. Attorneys further argued that student loan holders should not receive leniency unless circumstances show a certainty of hopelessness and there is a total incapacity for the circumstances to change.

The 65-year-old man asked the First Circuit Court of Appeals to relieve him of multiple Parent Plus loans that the Department of Education backed. He received the loans to fund his children's education. In his court proceedings, the man has asked for a definition of what "undue hardship" means with regard to paying back student loans. If he wins the case, it would alter how U.S. bankruptcy courts decide matters relating to student loan debt.

Traditionally, federal student loan debt is untouchable during bankruptcy proceedings except in extremely unique situations. It will therefore be very interesting to see if the bankruptcy court rules in favor of the 65-year-old man in the matter.

Source: RSN, "Obama Administration Urges No Bankruptcy Relief for Student Debt," Amy R. Connolly, Oct. 21, 2015

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