Hello and welcome to Student Debt Resolution Strategies. My name is Natalie Jean-Baptiste. I'm a bankruptcy and student debt relief attorney based in New York City. And before we get started today, I just want to share a little bit of my story with you all and let you know how I got to be an expert in student loan debt resolution. Um, when I started my career out of law school, I only wanted to be an entertainment attorney. I worked for some of the biggest record labels in the world, but behind the scenes, I was struggling with my student loan debt and other debt. So. I decided to file for bankruptcy and I represented myself. And in the process, I taught myself bankruptcy law and learned that there was an exception to the general rule that student loan debt is not dischargeable. It's called the undue hardship exception. So, you know, naively, I endeavored to get my student loans discharged. And although it was crazy at the time, because this was ten years ago, I successfully settled my $156,000 student loan for $36,000. So I wiped away $120,000 of student loan debt. So after my success in my own case, I decided that I wanted to help other people in the same situation. So I started my own practice and I've been doing this work for almost over a decade now. And. It's something I'm very passionate about. And as many of you know, the Supreme Court just blocked Biden's debt relief plan. So a lot of student loan borrowers are going to be looking for answers. So now is a good time. If you do work in any type of consumer or debt relief space to learn all the different programs that are available to assist student loan borrowers. All right. So let's begin. Okay. So let's just talk about why this course is important. Right. And I mentioned that millions of Americans are burdened with unaffordable student debt. And the Biden administration has been implementing measures to address sloppy loan servicing and failures in the various debt relief programs. The student loan system is confusing and difficult to navigate for many borrowers. Even for me as an expert in the field, the laws are continually changing. So it's it's important to keep up to date and learn what the programs are. So if it's confusing for US attorneys, you can imagine how confusing it is for the borrowers. And like I mentioned, this course is for anyone who's handling student debt relief and any attorneys that counsel clients on consumer matters, whether you're doing debt collection, defense, general bankruptcy work. You know, it's good to know these debt relief options. So the key takeaways for today is you'll learn about President Biden's action plan in response to the Supreme Court's ruling. You'll review the recent announcements by the Department of Ed, including something called the Fresh Start Initiative. And you'll understand the changes to the income driven repayment plans and loan forgiveness programs. So our agenda for today. So first I'll cover introduction to student loans. For many of you who may not be familiar with the types of loans. I'll give you a background on that and then we'll talk about the debt relief plan that the Biden administration introduced and the legal challenges that it faced. Also discuss the Fresh Start initiative and then the borrower defense to repayment. And then we'll discuss the new income driven repayment plan that is just implemented in the last couple of weeks. It's called save. And then also there's something called the one time income driven repayment account adjustment, followed by public service loan forgiveness. And last but not least, we'll discuss discharging student loan debt in bankruptcy. Okay. So first, some facts and figures. Right now, the student loan debt in the US is more than $1.75 trillion, and that's more than any other type of debt. Besides home mortgages, about 45 million Americans have student loan debt and the delinquency rate is 11.4%. The average borrower owes about $28,000. And it's important to note that 92% of all student loan debt is federal. So one of the first and most important questions when you're representing a student loan borrower is to figure out what types of loans they have. So the student loan would be either federal or private. And it's important to know which because the approach to helping the client is going to be very different. So first I'll discuss, you know, the characteristics of a federal loan. The interest rates are lower. They're anywhere between 4.9, 9% and 7.5%. There are flexible repayment options. There are loan forgiveness programs available. But on the flip side, there are very serious default consequences when someone defaults on a federal student loan, for example, the federal government can garnish their wages without a court order. They can offset their tax refunds or any type of federal benefit. So and that's without a court order. So that's important. And also for federal student loans, there is no statute of limitations. So it's forever. And also important to note is that it's not tied to credit worthiness. There's no cosigner required. Okay. So for private student loans, the interest rates are as high as 15 to 20%. So that's a big difference. Most private lenders do not offer flexibility or income based repayment or anything like that. There is no loan forgiveness programs. On the lender. But on the positive side is that the lender has to litigate and win a judgment in court in order to collect. And each private loan would be governed by the statute of limitations for that state. And another complication about private loans is that nine times out of ten, it's co-signed by a parent or a family member. It can even get messier if it's an ex spouse or an ex-boyfriend. So there's usually a cosigner involved who's affected by the borrower's delinquency or default. Okay. So on this slide, we'll see the examples of federal versus private loans. So federal loans, there are a few types. So there's direct loans. There's something called FFA loans or fowl loans. And those are sort of a hybrid because they're guaranteed by the government, but they're issued by private lenders. Perkins Loans are guaranteed by the government, but they're issued by the school. The school is the lender. And then there's direct plus loans for either parents or graduate students. So direct loans are funded directly by the Department of Education, and the Department of Ed owns those loans. On the other side. Here are some examples of private lenders. So Sallie Mae and Navient. It's important to note that Navient also services federal loans, but they are private lender. There's Discover citizens while Wells Fargo fintech lenders like Sofi and Ernest and the loans from the school. Another thing that you should note. For your clients. Sometimes borrowers are attracted to these fintech lenders like Sofi because they're promised a lower interest rate or they're going to save on payments. But keep in mind, when they refinance with Sofi, that they're going to lose all the benefits that come with having federal student loans. So. If the government decides to forgive all the loans tomorrow or implements new programs for income driven repayment, none of that will apply if the person has refinanced with Sophie, because now that federal loan is a private loan. So that's important to warn clients about. So figuring out how you're going to help the client, you need to identify the loan, right? So there are two ways of doing that. So if it's a federal loan, you have your client go to studentaid.gov and they log in using their FSA ID. It's important that you have the client do this. You should not access their student aid account, even with their permission. It's a violation of federal law for anyone besides the borrower to access this this database and this account. So here, this is what the dashboard looks like when person logs in and then they can view their loan details. They'll look at the principal and the interest. And then if it's a private loan or if you want to just verify all the debt. And have them check their credit report. They can obtain one for free on annual credit report.com. And when you do a side by side comparison of the student aid report versus the credit report, if anything appears on the credit report, that's not on the student aid.gov report, that means it's definitely a private loan. Okay. So now let's talk about the Biden administration's debt relief plan and the legal challenges. Even though the Supreme Court has blocked this relief for now, I want you to understand what the program is, because the Biden administration has a plan B to implement this relief plan. Right. So there's a bit of background. So the Covid 19 pandemic. After that, the government paused payments and implemented zero interest. So it was automatic. And it's an administrative forbearance. From that day there was zero interest and it stopped collections on defaulted loans. Okay, so which loans were eligible? So if it's a direct loan and for a loan that's held by the Department of Ed, a Perkins loan held by the Department of Ed, any defaulted loans that are not held by the Department of Ed and defaulted heel loans were eligible, loans that are not eligible or non defaulted for loans that were not held by the Department of Ed, So they were still with the Guaranty Agency. Or the lender. So interest continue to accrue and payments were due. Federal Perkins loans that were not held by the Department of Ed and non defaulted heel loans and of course, private student loans were not eligible for this relief. Okay. So the this is what the Biden administration's debt relief plan provides. So it provides up to $20,000 in debt relief to Pell Grant recipients with loans held by the Department of. And up to 10,000 in debt relief to non Pell Grant recipients. The borrowers are eligible for this relief if their individual income is less than $125,000 a year. Or $250,000 for households. Keep in mind that the relief is capped at the amount of the outstanding debt. So, for example, if the person is eligible for $10,000 of debt relief and they only have a $7,000 balance, they'll get $7,000. Cancelled, but they are not entitled to receive $3,000. So it's capped at the amount of the outstanding debt. Okay. So. These are the types of loans that are eligible. Direct loans for loans that are held by the Department of Ed. Perkins Loans that are held by the Department of Ed and Defaulted loans. Okay. So these are the two lawsuits that were. Were brought against the relief program. The first one is the one that we all know about is Biden versus Nebraska. And this is where six GOP led states were suing to overturn the program. So that included Nebraska, Arkansas, Iowa, Kansas, Missouri and South Carolina. The lesser known case. Was brought by two individual borrowers backed by the Job Creators Network. One who didn't qualify for any forgiveness and one who only qualified for the 10,000. That case, even though it hasn't been in the news as much as the first case that won the Supreme Court ruled that those borrowers did not have standing to bring the case. All right. So, again, the relief is blocked. Just so you know, 26 million people submitted applications, 16 million applications were processed and approved. But on June 30th, the Supreme Court issued a decision blocking the relief. And under the court's ruling, the Department of Ed is prohibited from implementing the administration's one time debt relief program. And also Congress recently passed a law preventing any further extensions of the payment pause. So it's really coming to an end. The interest will start accruing again on September 1st and payments are going to be due starting in October. Borrowers will be notified before the payments restart. Okay. So let's just I want to get into the meat of the ruling. So the Supreme Court, they ruled that the Biden administration overstepped its authority by imposing student loan forgiveness, which the White House justified under the. A Heroes Act of 2003 and legislation that allows the Secretary of Education to waive or modify any student financial assistance programs during national emergencies, As the Biden administration argued that the Covid 19 pandemic is. But just also keep in mind that the national emergency officially ended in May. So this was already on shaky ground because they're relying on something that's essentially over. Right. And that's part of the reason it got struck down. Okay. So in A63 decision, the conservative majority held that the administration exceeded its authority. Chief Justice Roberts wrote, The Heroes Act provides no authorization for the secretary's plan when examined using ordinary tools of statutory interpretation, let alone clear congressional authorization for such a program. The question here is not whether something should be done, but it's who has the authority to do it. Right. So, you know, Justice Roberts and the majority, they're saying that the president does not have the authority to do this. The secretary of education does not have the authority. This is something that needs to come from Congress. The Biden administration did make a persuasive case that it was acting within its authority. As Justice Kagan wrote in the dissent, joined by Justices Sotomayor and Jackson, the statute provides the secretary with broad authority to give emergency relief to student loan borrowers, including altering usual discharge rules with the secretary, did fits comfortably within that delegation. She emphasized that the delegation of its authority is not some tucked away provision, but it's at the statute's very center in its waive or modify language. So in response to the Supreme Court's ruling, the president did take immediate action to provide debt relief for student loan borrowers. He announced that the administration will be pursuing debt relief using the secretary's authority under the Higher Education Act. And the secretary does have authority under that act. It will just take a bit longer for that process. They also finalized the most affordable repayment plan ever created. It's called Save. And I'm going to get into the details of that later in the presentation. Um, they also they're instituting something called the 12 month on ramp to repayment. And it's going to run from October 1st of this year to September 30th of 2024. So that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus placed in default or referred to debt collection agencies. So it'll just give them, you know, a little bit of breathing room to adjust to starting to make payments again. Okay, so here are some things that you can advise your clients on how to prepare to resume their payments so borrowers can verify who their loan servicer is by logging into Studentaid.gov. So it's important because, you know, especially since the pandemic, so many loan accounts have been switched to different loan servicers. Some of the loan servicers are not even in business anymore. And not doing not contracted to do work with the Department of Ed. So about 30 million borrowers have a new loan servicer. So that's really important. First step to verify who the servicer is. They also need to update their contact information because it may not be the same that it was three years ago. Right. And people who haven't had to make a payment. For example, if someone graduated, you know, if their class of 2020, they've never had to make a payment. So if their contact information is still their dorm room, they need to update that with their loan servicer. The borrowers should also evaluate their repayment plan options, and particularly any IDR plans. Any borrowers who are on auto debit prior to the payment pause should confirm their auto pay enrollment with the servicer. Okay. So next up, we're going to talk about the Fresh Start initiative. Right. So the Fresh Start initiative is designed to get borrowers out of default, right? So it's a one time temporary program that offers special benefits to borrowers with defaulted loans. It automatically provides some benefits, such as restoring access to federal student aid so people who who default on student loans are not eligible for additional loans and grants. But with the Fresh Start program, it'll restore their access to those loans. Okay, so here are a few ways that the Fresh Start program can help. It's going to get the loans back in good standing. The loans are going to be moved out of default, even if the borrower already used the one time loan rehabilitation option. So loan rehabilitation was a way for the borrower to get out of default previously, and it was a one shot deal. So. If you already rehabilitated alone and defaulted again, then you weren't eligible to rehab the loan. Right? But now, regardless of whether the borrower used that already, they can get the loans back in good standing, which is amazing. Um, and they're also going to become eligible for any of the income driven repayment plans, loan forbearance, deferments, student loan forgiveness, all of the programs, the relief options that are available to accounts in good standing. It's also going to clean up their credit. So the record of Miss Loan student loan payments is going to be removed from the credit reports and the loan status will change from in collections to current. Okay. It's going to stop any debt collection, including wage garnishments and withholding of tax and federal tax returns and federal benefits. Okay. Um. And like I mentioned before, they're going to regain the chance to apply for federal student aid, including grants, loans, work study to help them return to school if they want. Okay, so there are three ways to apply for the Fresh Start program. They can go to mid-decade dot gov, and then there's an 800 number they can call or write to the default resolution group, which is the servicer for defaulted student loans. Okay. So up next, we have the borrower defense to repayment. And this is for borrowers who attended predatory for profit schools. So. This is where the school misled the borrower or engaged in other misconduct in violation of certain state laws such as the consumer protection laws, and by making false promises and misrepresentations. So a lot of these schools target veterans, people of color, poor people. They target students and promise them the moon and don't deliver. Right. So they lie about the admissions selectivity, job placement numbers, earning potential transferability of credits. So these schools are just basically shams. They they charge, you know, people borrow money to attend those schools and then they have a worthless degree. Okay. So several changes came into effect on July 1st. So the borrower defense to repayment may be automatically applied to certain groups of students. The loan can be discharged through borrower defense to repayment under an expanded list of claims, and the schools will no longer be allowed to require students to engage in pre-dispute arbitration or sign class action waivers. Okay, so the borrower defense claims can be based on one of five categories of actionable circumstances. So substantial misrepresentation, substantial omission of fact, breach of contract, aggressive and deceptive recruitment and judgments, or final secretarial actions. And again, it will apply to all claims pending or on or received on or after July 1st, 2023. Okay, So this is a list of schools. These are the worst offenders. So anybody who attended any of these schools would automatically qualify for this relief. Corinthian College, ITT Tech, Kaplan. Westwood College. Devry and Art Institute. Okay, So next up, we have income driven repayment plans. Okay. So. Income driven repayment plan that sets the monthly student loan payment at an amount that's intended to be affordable based on the borrower's income and family size. So there are four income driven repayment plans. So the first one is revised pay as you earn. The second one is pay as you earn, which is an older version of revised pay as you earn or repay. The next one is IDR. In the last one is income contingent repayment. So all of these income driven repayment plans have loan forgiveness built in. Right? So it's designed to forgive the loan after either 20 or 25 years of payments, whatever balance remains, after making the number, the required number of payments, the balance will be forgiven. All right. So one of the important things that you can help your clients with is figuring out how to calculate what their monthly payment would be under the plan. So the first and most important thing is figuring out what's called a discretionary income, right? So the definition of discretionary income is the difference between the borrower's annual income and 150% of the poverty guideline for the borrower's family size and state of residence. Um, and then for ICR income contingent, they use 100% of the poverty guideline. The poverty guidelines are updated every year and it's maintained by the US Department of Health and Human Services, and you can easily Google it and find out what the poverty guideline is for your state. It's the same for all 48 states, and then Alaska and Hawaii are slightly higher. Right. So here is an example of what discretionary income means, right? So the monthly payment for repay, we're using the 10% formula because for the repay payment, it's 10% of the amount by which the borrower's adjusted gross income exceeds 150% of the poverty line applicable to the state and family size divided by 12. So on this slide, we have an example of what the monthly payment would be under repay. So 10% of the discretionary income. So this is for a single borrower with no dependents making $40,000 a year. Right. So 150% of the federal poverty line for a family of one is $21,870. So you subtract that from the annual salary and you're left with $18,130, and that's the discretionary income. So 10% of that is $1,813. And when you divide that into 12, then you get the monthly payment of $151.08. So this chart shows the poverty guideline and 150% for the household size for all the 48 contiguous states and the District of Columbia. Like I mentioned, Hawaii and Alaska are slightly higher, but. This is the information. So if you, you know, need to calculate your client's monthly payment and discretionary income, you can just refer to this chart. Okay. So, of course, recently after the Supreme Court decision, the Biden administration announced the new plan, which is called saving on a Valuable education or save for short. So it'll be calculated the same way I just described, but. It's going to cut payments down by half, right? Because instead of 10%, it's going to be only 5% of discretionary income. And. This is again down from the 10% available under repay. And also instead of using 150% of the poverty guideline, they're using 225%, which will lower the monthly payment. So basically. Um, if someone makes about minimum wage $15 an hour, they will have no monthly payment. Okay. Another important factor is that it'll forgive loan balances after ten years of payments instead of 20 years for borrowers with loan balances of 12,000 or less. And one of the most important things is that it's going to cover the borrowers unpaid monthly interest. So that. They're not going to watch their balances grow as the interest compounds, because many times when someone is on an income driven repayment plan, their payments don't even cover the interest. Right. So then they just even if they're on it for 10 or 20 years, they're just watching their balances grow and. It affects their credit, their ability to buy homes. So now they don't have to worry about the interest because that's, you know, it's going to be eliminated. Right. So that's one of the big, major changes of the save plan. Okay. So just a couple more points about the new plan. It allows for $0 monthly payments for anyone who makes less than 32,800 per year. It replaces the Repaye plan. So if the borrower is already on repay, their payments will automatically adjust to reflect the savings of the benefits of the Save plan. They don't have to do anything. Also, the Save plan excludes spousal income for borrowers who are married and filing separately. It eliminates the need for the spouse to co-sign the borrower's application. Okay, so next we have the payment count adjustment. So this is major as well because it's going to add more qualifying payments towards debt forgiveness for many borrowers. Right. So this was announced on April 19th of 2022. Um, they announced they announced that they're. Would be a one time revision and to address past inaccuracies, forbearance, steering and deferments. So one of the major problems with the loan servicers was that they didn't advise the borrowers properly on the income driven repayment options. So if a borrower called in to their servicer and said, Well, I can't afford my payments, what should I do? They're like, Oh, we can put you in forbearance for 12 months or a six months. And of course the borrower would say, okay, because okay, I don't have to make any payments. But that was not the right answer. They should have advised them that they were eligible for a $0 payment so that they could make progress towards their loan forgiveness. So to address this issue. That's part of why this count adjustment is being offered. And they're going to receive the borrowers are going to receive credit for past periods of forbearances that would otherwise not qualify. Okay, so these are the payments that will count. So any months in repayment status, regardless of the payments made, loan type or repayment plan, 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance, any months spent in economic hardship or military deferments after 2013, any months spent in any deferment except for in school deferment prior to 2013. At any time in repayment on earlier loans prior to consolidation of those loans. Okay. A couple more things. So any borrower with loans that have accumulated time and repayment of at least 20 or 25 years will automatically will see automatic forgiveness, even if they're not currently on an IDR plan. So this is they're going it's going to start this summer. They may if they've reached the required number of payments, the balance will be discharged automatically. Right. So borrowers who have commercially managed Perkins or Heal loans should apply for a direct consolidation loan by the end of 2023 to get the full benefits of the one time account adjustment. Right. Because remember, this applies to direct loans only. So if they have other types of loans, they can consolidate and take advantage of it. But they have to do it by the end of the year. Um, in many cases, if borrowers made qualifying payments that exceed the applicable forgiveness, those borrowers will receive a refund for the for their overpayment. Borrowers with loans in default can benefit by getting out of default, including through the Fresh Start initiative before the account adjustment. But the time and default is important to note. The time and default will not count towards the IDR. It has to be one of the categories that I just mentioned. Okay. So let's talk about public service loan forgiveness. And these are this is for people who are working in the public sector. The program forgives the remaining balance due on direct loans. If the borrower makes 120 qualifying payments. And it has to be after October 1st of 2007 because that's when the program was introduced. So payments that were made prior to that, even if they were working in public service, won't count because the program didn't exist. It the payments have to be made under an income driven repayment plan while working full time for the government or a nonprofit employer. So qualifying employers include the government organisations or agencies at any level. So it could be federal, state, local or tribal. It includes US Military, AmeriCorps and Peace Corps. Any non-for-profit organizations that are 500 and 1C3. It has to be 500 and 1C3 specifically. There are other types of nonprofits that don't qualify, and they wouldn't be qualifying employers and then other types of nonprofits that provide certain types of qualifying public service as well. And so. There's a full time requirement, right? So the full time means that the borrower meets the employer's definition of full time or at least 30 hours per week, whichever is greater. If the borrower is employed in more than one qualifying part time job at the same time, they can meet the full time requirement if the combined average is at least 30 hours a week. Okay, So these all these requirements need to be satisfied for a qualifying payment. The payment has to be made after October 1st of 2007. It has to be under a qualifying repayment plan for the full amount due as shown on the bill and no later than 15 days after the due date. While employed full time by a qualifying employer. Okay. So there was something called the temporary expanded public service loan forgiveness, and it was a short lived program. And so it was there were some additional conditions where the borrowers became eligible for loan forgiveness if they made some payments under a non qualifying payment plan. But then this was later replaced by the waiver, which I'll talk about. In this slide. So. The the limited waiver ended in October. October 31st of last year. So the time limited changes to the program referred to it allowed borrowers to receive credit for past payments of repayment that would otherwise not qualify for pslf. Right. But remember. That this was a very limited time. So if the person didn't apply for their credits prior to October 31st of last year, then none of this even mattered. But I still need to touch on it anyway. Okay, so they would get credit for payments made on other types of loans like FFL or Perkins. If they consolidate. So they would get credit for those prior to this waiver, even if they made, you know, nine and a half years worth of payments on an FFA loan, it would not count towards public service loan forgiveness. But the waiver eliminated that. And if somebody consolidated, they would get credit for those prior payments. Okay. So and for the waiver, any type of payment counts. So even if they made a partial payment or the payment were late, the payments were late, then they would apply those as qualifying payments, military deferments and forbearances counts and. But just keep in mind that the qualifying employer and the 120 payment count, that's still applies regardless of the waiver. Those two requirements did not change. Okay. So. Oh. The extent expanded list of qualifying payments now includes the graduated repayment plan, extended repayment plan, Consolidated standard repayment and the Consolidated Graduate graduated repayment plan. On Studentaid.gov there's a self-help tool. So if the client clicks on that link, they can get all the information they need about applying for the program and checking their qualifying payments and things like that. So it's student aid.gov/pslf. Okay, so now we've come to my favorite topic, which is discharging student loans in bankruptcy. Right. So in November of last year, the DOJ announced new guidance regarding the discharge of student loans in bankruptcy. The new process will leverage the Department of Education data and a new borrower completed attestation form to assist the government in assessing a borrower's discharge request. So this new guidance is very significant because the current standard for discharge of student loans was random, arbitrary and unfair. The litigation was often too costly for the debtor to afford. So this is one of the biggest issues was that the debtors who were clearly suffering from undue hardship, they can't afford the legal fees that it takes to bring this process forward. So by eliminating the the need for a full out litigation, it's going to make it more accessible for the debtors. Okay. So the guidance seeks to rectify this. By setting clear, transparent and consistent expectations for discharge, reducing burdens on debtors by simplifying the process and increasing the number of cases by which the Department of Ed agrees to support a discharge. Okay. So keep in mind that this is a policy change. It's not an amendment to a statute or rule. The adversary proceeding is still required. The guidance is by and for the Department of Justice, and it was developed by DOJ in conjunction with the Department of Education. Okay. So it's it's their guidelines on interpreting undue hardship that's found in 523 and is for purposes of settlement and stipulating to discharge. Okay. And per the guidance document is not intended to and does not create any rights substantive or procedural, enforceable at law by any party in any manner. Okay, so the guidance applies to federal direct loans. Any debtors in an open bankruptcy as of November 17th, 2022. Right. Or cases with an adversary proceeding already filed and pending as of November 17th, 2022. And of course, debtors in future bankruptcies. Okay, So here are some of the objectives of this program or these guidelines is to assure access to justice for student loan borrowers in financial distress who seek bankruptcy relief. It provides clear eligibility requirements for bankruptcy debtors seeking undue hardship, discharge of student loans. It's providing a more expeditious process that will facilitate the granting of undue hardship discharges where warranted and is to resolve undue hardship adversary proceedings by stipulation, and it reduces the cost of litigation for deserving bankruptcy debtors and the federal government. Okay. So. Now let's get into the substantive law that applies to this discharging student loans in bankruptcy. Right. So under 523 eight of the bankruptcy code, certain student loans may not be discharged in bankruptcy unless the bankruptcy court determines that the payment of the loan would impose an undue hardship on the debtor and the debtor's dependents. The debtor is required to file an adversary proceeding to determine the discharge ability of a student loan debt. So. Keep in mind that it's not as simple as just filing a bankruptcy petition. The adversary proceeding must be filed. So this is like your typical litigation. The the borrower is the plaintiff. And then whoever holds their student loan debt, they're the defendant or defendants. So you know, that part. That's what is the like more work and more expensive. But that even with the new guidance, you can't skip that part. The adversary complaint needs to be filed. Okay. So the majority rule for determining undue hardship is something called the Brunner test. Okay? And the burden of proof is on the debtor to establish undue hardship. And they have to establish that they can't maintain based on their current income and expenses, a minimal standard of living for themselves and their dependents if they're forced to repay the loans. They also have to show that additional circumstances exist, indicating that the state of affairs is likely to persist for a significant portion of the repayment period. And then they also have to demonstrate that they made good faith efforts to repay the loans. And the minority rule is something called the totality of the circumstances test. And this is adopted by the eighth Circuit and some courts in the First Circuit, the debtor. The bankruptcy court must consider the debtor's past, present and reasonably reliable future financial resources. Also, a calculation of the debtor's and her dependents, reasonable and necessary living expenses and any other relevant factors and circumstances surrounding each particular case. So under the DOJ guidance, the applicable factors, it pretty much combines the elements of Brunner and totality of the circumstances. So the DOJ will consider the present ability to pay the future, ability to pay and good faith efforts made by the debtor. Okay, So let's evaluate or let's take a look at the first factor, which is the present ability to pay. So if a debtor's expense is equal or exceed the debtor's income, the department will determine that the debtor lacks the present ability to pay. Right. So it's going we're they're going to use the IRS standards to determine allowable expenses the same way they would in a like a Chapter 13 bankruptcy. And also the IRS national standards is the same dollar amounts as under the means test, the local standards. Unlike the means test, the debtors are limited to actual expenses, and the standards serve only as a cap. The IRS looks at other necessary expenses, and then most important is that they'll look at reasonable expenses not yet incurred. So this is really important because so many people who are struggling with student loan debt, they would be spending money on certain things that they need, like medical care or child care or a place to live. But they're just scraping by. So they're either living with roommates or family for going necessary medication, leaving their child with a family member who's not really equipped to take care of that child, but they can't afford daycare. So things like that. So that's also factored into the budget. They look at the expenses that the debtor should be incurring, but they're not because they literally can't. Okay. So in this analysis, you're going to compare the expenses to income. And the debtor's gross income includes any Social Security or unemployment benefits. The assistant US attorney should use the standard monthly payment amount. This is also a major change because, you know, I've been litigating this issue for, like I said, over a decade. And one of the biggest arguments that the Department of Education would make is that, oh, well, the debtor is entitled to a $0 payment so they can afford it. What's the problem? But that's unrealistic because they continue to carry this balance. So now the assistant US attorney has to use the standard monthly payment amount, which for some debtors is like a mortgage payment and they obviously can't afford it. So we're not going to have that back and forth about, well, they're eligible for a $0 payment. So I am so relieved that I don't have to ever have that argument again. Okay. More on the present ability to pay. If the expenses are greater than income, then this part is satisfied. And also partial discharge may be an option. So whatever. The court feels the debtor could afford. They may have to pay that, but then the the rest of the debt would be discharged. Okay, Next up, we have the future ability to pay. So if any of the following circumstances create a presumption that the debtor's ability to pay the loans in the future is unlikely. Right. So if they're 65 or older, if they have a disability or chronic injury. If they've been unemployed for at least five of the last ten years. If they fail to obtain the degree for which the loan was procured and the payment status has been anything other than in school for at least ten years. So if they have any of these factors, then the second prong, the future ability to pay that is satisfied and you can move on. Okay, so the presumptions are rebuttable and of course you can claim all of them that apply. Right. So if they didn't get their degree and they're over 65, you definitely want to check all those check as many boxes as you can for that debtor. Um. If a presumption. Does not apply, the debtor can attest to other facts relevant to their future ability to pay. So if it doesn't fit into any of those categories comfortably, they can also make the argument based on other circumstances. Okay. So last we have the good faith efforts, right? So. Evidence of good faith includes making a payment, any application for a deferment or forbearance other than in school or grace period. Applying for an income driven repayment plan. Applying for a consolidation loan if they responded to outreach from a service or collector. Any engaging meaningfully with the Department of Ed or their loan servicer regarding payment options, forbearance and deferment options or loan consolidation. And if they engage meaningfully with a third party that they believed, would a system assist them in managing their student loan debt. Because there are a lot of third party companies out there, some of them are scams, some of them are legitimate, but they're offering people help to, you know, either apply for IDR or consolidate or loan forgiveness. So if they can prove that they were engaging with this company that they thought would help them, that is also evidence of good faith. Okay, So other criteria include their efforts to obtain work, maximize their income and minimize their expenses. Right. So if they're, you know, staying with their family to save money and they've been applying for jobs left and right, but they just haven't been able they haven't been lucky. Um. Any actual payment history. So if the if they have made payments and then also if they have evidence that they really lacked the financial means to pay. So if they literally can show in their budget there was no money for me to make any payments, then that should also be considered if they enrolled in any of the income driven repayment plans and also if they didn't enroll. That's not controlling either. The assistant US Attorney should accept any reasonable explanation or evidence supporting the debtor's non enrollment in an IDR plan. Okay, so here are a few of the resources that you can use to get more information on how to help your clients manage and eliminate their student loan debt. So the first one is student aid.gov. Everything is, you know, up to date and available on that website. All the applications for the programs that I mentioned, like either consolidation or borrower defense to repayment. Um. There. The documents are all there. It's just, you know, it's a great resource for any client who has federal student loans. There's also the student loan borrower assistance.org protect borrowers.org. The National Consumer Law Center and of course, the Department of Education Ombudsman is the toll free number there to get in touch with the Ombudsman who can help with any complicated or unique issues. And then here on the last slide, this is my contact information. Please, please feel free to reach out to me if you're working on any cases that you know that you need assistance or just want to bounce ideas off of. For student loans. I know I'm really passionate about this work and I want to be a resource to you all. And like I always say, I'm not new to this. I'm true to this. Even though student loans are very trendy right now, everybody's, you know, talking about them and, you know, jumping on the bandwagon. But this is something that, you know, I know well and I'm, you know, helped, you know, just wanting to be as helpful as a resource as I can. So please feel free to reach out. All right. And thank you so much for attending today. I appreciate you being here and good luck with your cases. Take care. Have a good one.