Debtor Can Escape Navient’s ‘Tuition’ Loans in Bankruptcy (2)

July 15, 2021, 6:11 PMUpdated: July 15, 2021, 9:20 PM

A debtor who owed two private, direct-to-consumer school loans to Navient Corp. could eliminate them in bankruptcy because the lender didn’t show that the money was an “educational benefit” as defined by the bankruptcy code, the Second Circuit ruled.

Most student loans are difficult to eliminate in bankruptcy unless a debtor can show that repaying them would cause “undue hardship.” The U.S. Supreme Court recently declined to hear two cases addressing the issue despite calls to address it.

Interpreting Section 523(a)(8)(A)(ii) of the bankruptcy code “to cover all private student loans” would “improperly broaden” its scope, the U.S. Court of ...

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