Help Center

ABI Consumer Bankruptcy Commission Provides Recommendations for Department of Education's Evaluation of Student Loans in Bankruptcy

Alexandria, Va The ABI Commission on Consumer Bankruptcy provided recommendations in response to the Department of Education’s request for information (RFI) on the evaluation of undue hardship claims in adversary actions seeking student loan discharges in bankruptcy. “The Department of Education plays an important role in the administration of the student-loan system,” Commission co-chairs Hon. William H. Brown (ret.) and Hon. Elizabeth L. Perris (ret.) write in a letter provided with the recommendations. “Action at the regulatory level could have a major effect in alleviating the growing burdens of student debt on everyday Americans and the overall economy.”

The Department of Education published its RFI in the Federal Register on Feb. 21 seeking “public comment on factors to be considered in evaluating undue hardship claims asserted by student loan borrowers in adversary proceedings filed in bankruptcy cases.” While the Commission is working on a report of recommendations improving the overall consumer bankruptcy system to be published at the end of the year, it agreed to release several regulatory recommendations that directly respond to the RFI. 

Recommendations include:

Bright-line Rules

“Our recommendations suggest two sets of bright-line rules, one built around federal Social Security and veterans disability benefits and the other based on the federal poverty guidelines. Both require the borrower to have undergone eligibility screening by a federal administrative agency. More importantly, both indicate borrowers highly likely to be in severe financial distress and therefore repayment would likely cause undue hardship.”

Avoiding Unnecessary Costs

“Formal litigation discovery processes should be the last, not the first, resort. If the borrower submits satisfactory evidence of undue hardship outside the litigation process, the student loan creditor should agree that the debtor is entitled to discharge of the student loan debt.”

Alternative Repayment Plans

“The safeguards built into the confirmation of a chapter 13 plan set out statutory requirements more stringent than the Department’s income-driven repayment plans, including a liquidation analysis that is not otherwise considered by the Department. These safeguards should suffice for determining the amount necessary for an alternative repayment.” 

Best Interpretation of 11 U.S.C. § 523(a)(8)

“As the Request for Information notes, many courts have interpreted the undue hardship standard using a three-factor test known as the Brunner test. We believe the best interpretation of the Brunner test will hew closely to the statute and will not include some of the glosses included in applying the test.”

To read the Commission’s full submission to the Department of Education’s RFI, please visit Please note that theserecommendations are focused on the regulatory reforms that are the subject of the RFI and should not be understood as the Commission’s recommendations for possible legislative changes or any other reforms.


ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit For additional conference information, visit

Article Tags: