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The first student loans, per se, were given by Harvard University to its own students in 1840. At that time, Harvard was a private single-sex educational institution and its students were all male.
Over one hundred years later came the GI Bill in 1944. This gave World War II veterans access to free education.
Sparked by the launch of the Sputnik satellite, the 1958 National Defense Education Act provided student loans only to those majoring in math, science and engineering to compete with the Soviet Union, as some believed the United States as a nation had lacked in the areas of science and technology overall.
Equal access to education for men and women in all fields eventually came to fruition.
On November 8, 1965 at 12:30 p.m. in the Strahan Gymnasium at his alma mater, Southwest Texas State College, San Marcos, Texas, President Lyndon B. Johnson unlocked the “door to education,” as he put it, by signing the Higher Education Act. Right before he signed the legislation into law, the President said in a rousing speech that “education is no longer a luxury.”
That Act created student loans as we know them today.
By the early 1970’s many young adults were filing for Bankruptcy and discharging student loans right after graduating from college and graduate school, and before embarking on their careers and making significant amounts of money.
In 1976, Federal Regulations were put in place to stop the discharge of student loans, with some exceptions for (the ill-defined) undue hardship. In the 1978 Bankruptcy Reform Act, the Bankruptcy Code was amended to reflect the same effect of those Federal Regulations.
In the early 1980’s, the 8th Circuit established a “totality of the circumstances” test for student loan discharge in the case of Andrews v. South Dakota Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702, 704 (8th Cir. 1981).
But the big change came in the 1987 case of Brunner v. New York Higher Education Services Corp., 831 F.2d 395, 396 (2nd Cir. 1987) which created a highly specified three-prong test for undue hardship: “(1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.” Making student loan discharge nearly impossible for most.
This remains the law in the majority of circuits.
Thirty-five years later, on November 17, 2022, the Department of Justice (DOJ) issued guidance for its attorneys handling cases seeking discharge of student loan debt in coordination with the Department of Education. The purpose of the guidance is to “enhance consistency and equity in the handling of these cases.” The guidance pertains to all Bankruptcy cases filed in all circuits.
Let’s take a step back and examine the procedure of seeking discharge of student loan debt. In order to begin, one must file for Bankruptcy. Inside that Bankruptcy case, the Debtor must then file an Adversary Proceeding, which is, for all intents and purposes, a lawsuit against the student loan company. Prior to 2022, the Debtor would have to pass all three prongs of the Brunner Test or the Totality of the Circumstances Test, depending on the circuit. But now, before you get to the tests, the Debtor has to fill out and submit an Attestation form to the Department of Justice. The DOJ can then either recommend to the Court full or partial discharge and the case can then be settled outside of court, or the DOJ can refuse discharge and the case then goes to the Judge for trial and the Brunner Test or the Totality of the Circumstances Test is applied.
Although at fist blush, this doesn’t seem like a significant change, it is, in fact, quite remarkable as the DOJ relies on these three conditions: “(1) the debtor presently lacks an ability to repay the loan; (2) the debtor’s inability to pay the loan is likely to persist in the future; and (3) the debtor has acted in good faith in the past in attempting to repay the loan.” These factors are different than Brunner or the Totality of the Circumstances, and dare I say, more lenient.


Attorney Theresa Rose DeGray is the owner of Consumer Legal Services, LLC, a debt relief agency in Orange helping people file for bankruptcy relief under the Bankruptcy Code, among other legal services.