Law Advisor Blog


Will 2022 bring Winds of Change to Student Loan Borrowers in 2022, in Maryland and Elsewhere?

Janet M. Nesse

In January of 2022, after a years-long fight Navient (one of the largest student loan lenders in the United States) agreed to a settlement between itself and 39 attorneys general representing student loan borrowers. Navient was accused of various improper practices.  Although it denied liability, Navient is cancelling $1.7 Billion in student loan debt owed by 66,000 borrowers.  It is also paying $95 Million to 350,000 borrowers, resulting in a payment of approximately $260 to each of those borrowers. Maryland was a signatory to the agreement and approximately 1100 Maryland residents will receive some relief.

The conventional wisdom has been that student loans are generally not dischargeable in bankruptcy, so borrowers will still owe those amounts at the end of their bankruptcy case.

There is some proposed bi-partisan legislation pending in Congress that would allow student loans to be discharged when they have been in pay status for ten (10) years.  If passed, this legislation would return federal (not private) student loans to a status that they held for many years.

 In some additional good news for borrowers, in the case of Randall v. Navient, Judge Harner, bankruptcy judge in the United States Bankruptcy Court for the District of Maryland, held that a student loan was at least partially dischargeable.  The standard for discharging such a debt is whether repayment will cause “undue hardship” to the debtor.  That standard has been almost impossible to meet in many Courts.  In this case, the Debtor was 68 years old, had no significant assets, and little ability to either increase her income or decrease her expenses.  She did have some ability to pay back some portion of her student debt.  Instead of denying the Debtor’s request, Judge Harner bifurcated the debt, declaring a substantial portion dischargeable.  This decision represents a very substantial potential improvement of the position of student loan borrowers in bankruptcy in Maryland.

 For information on these various student loan issues contact Janet Nesse or any of the other members of our Bankruptcy Group; Craig Palik, Steve Goldberg, Justin Fasano, or Chris Hamlin.