Trump signed a presidential memorandum on , ordering the federal government to expedite the discharge of federal student loan debt of permanently disabled military veterans. 37 While the federal student loan debt of veterans and other individuals who are permanently and totally disabled was already eligible for forgiveness under the Department of Education’s Total and Permanent Disability Discharge program, 38 the memorandum noted that the process was overly complicated and difficult, which prevented some eligible veterans from receiving discharges.
40 An exception exists if the individual is experiencing undue financial hardship. The most common test for undue hardship is the Brunner test, 41 which requires an individual to show that:
Unlike other consumer debt, such as mortgages and credit card debt, student loans ordinarily cannot be discharged in bankruptcy
- He or she cannot maintain, based on current income and expenses, a minimal standard of living for himself or herself and dependents if forced to pay off student loans;
- Additional circumstances exist indicating that this condition is likely to persist for a significant portion of the repayment period of the student loans; and
- The individual has made good-faith efforts to repay the loans.
In certain situations, ISAs can offer advantages over a traditional student loan
To meet the good – faith – efforts requirement, the borrower does not actually have to make payments, but merely attempt to make payments (i.e., make efforts to find a workable payment plan). One bankruptcy court in Pennsylvania has recommended the following approach to the undue hardship test: «Where a family earns a modest income and the family budget, which shows no unnecessary or frivolous expenditures, is still unbalanced, a hardship exists from which a debtor may be discharged of his student loan obligations.» 42