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Copyright (c) 2011 Brigham Young University Law Review
Brigham Young University Law Review

NOTE & COMMENT: Student Loans in Bankruptcy and the "Undue Hardship" Exception: Who Should Foot the Bill?

2011

Brigham Young University Law Review

2011 B.Y.U.L. Rev. 819

Author

Kyle L. Grant*

Excerpt



I. Introduction
 
One of the fundamental characteristics of the American dream is that anyone should have the opportunity to get an education regardless of their ability to pay the cost. The Federal Student Loan Program started as a small allocation from the Department of Education to guarantee private loans in those exceptional cases where a person wanted to attend college but lacked the means to pay and the credit to obtain financing. Today, the Federal Student Loan Program accounts for more than half of the revenue produced in many higher educational institutions, making student loans a staple of American education. In public universities, 62% of students graduated with some kind of student debt; that number was 72% at private universities, and at the increasingly popular for-profit universities - where tuition rates are among the highest in the nation - it was a whopping 96%. 1 Along with this rise in federal funding and student loan guarantees, default rates skyrocketed as well, forcing many to seek the protection of bankruptcy to avoid mounting debts. 2 As it turns out, the winning state for the most student debt is Arizona, home to the largest for-profit educational institution, the University of Phoenix. 3

It's no secret: educational loans put students, as well as lenders, in a precarious position. There is no guarantee of employment for the student after graduation and no collateral for the lender. When the federal government started guaranteeing student loans, these loans were treated like any other kind of ...
 
 
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