student loans

Central Virginia Community College v. Katz

Issues

In accordance with the Constitution's Bankruptcy Clause, must states and state government units surrender the sovereign immunity granted to them under the Eleventh Amendment for the purpose of establishing and maintaining uniform Bankruptcy laws?

 

After filing for chapter 11 bankruptcy, Wallace's Bookstores, Inc., formerly a national, private supplier of college books, filed complaints against four public higher education institutions in Virginia. As Wallace's court appointed  a liquidator , Mr. Katz sought to recover money owed by the Virginia Institutions. The Virginia Institutions argue that as a private party, Mr. Katz cannot sue the state or "arms of the state" without abrogating the states' sovereign immunity guaranteed under  the Eleventh Amendment. They maintain that without consent, states cannot be sued by private parties. Mr. Katz denies being classified as a private party and argues that Article I's provisions and purpose of uniform bankruptcy laws across states are an exception. This case raises numerous public policy issues relating to funding of public, higher education institutions and debtor/creditor relationships.

Questions as Framed for the Court by the Parties

May Congress use the Article I Bankruptcy Clause, U.S. Const. art. I, ? 8, cl. 4, to abrogate the States' sovereign immunity?

The petitioners, Central Virginia Community College, Virginia Military Institute ("VMI"), New River Community College, and Blue Ridge Community College ("the Virginia Institutions") are public, higher education institutions partially funded by the Commonwealth of Virginia. Brief of Respondent at 1.

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Department of Education v. Brown

Issues

Do two student-loan borrowers have Article III standing to challenge the Department of Education's Student Loan Debt Relief Plan, and did the Department of Education act consistent with its statutory authority and applicable procedural requirements in adopting the Plan?

This case asks the Supreme Court to clarify whether two student-loan borrowers have Article III standing to challenge the Department of Education’s Student Loan Debt Relief Plan (“Plan”), and whether the Department of Education acted consistent with its statutory authority and applicable procedural requirements in adopting the Plan. The Department of Education argues that Brown lacks Article III standing to challenge the Plan, that the Plan is statutorily authorized under the HEROES Act, and that the Secretary of Education has the authority to waive or modify the relevant procedural requirements. On behalf of herself and a similarly situated individual, Myra Brown counters that she has Article III standing to challenge the Plan, the Department of Education lacks the statutory authority to adopt the Plan, and the Plan is procedurally defective. This case has significant implications for the viability of the Student Loan Debt Relief Plan and the scope of executive power.

Questions as Framed for the Court by the Parties

(1) Whether two student-loan borrowers have Article III standing to challenge the Department of Education's student-debt relief plan; and (2) whether the department's plan is statutorily authorized and was adopted in a procedurally proper manner.

On October 12, 2022, the Secretary of Education proposed the Student Loan Debt Relief Plan (“Plan”) under authority granted by the Higher Education Relief Opportunities for Students Act of 2003 (“HEROES Act”). Myra Brown, et al. v. U.S. Department of Education, et al. at 5.

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Lockhart v. United States

Issues

The Supreme Court faces an issue of statutory construction and interpretation in this case. The language in the Debt Collection Improvement Act (as of 1982) conflicts with language in the Higher Education Assistance Act (as of 1991) as to the time limitation on collection of debt owed to the government. The former prohibits collection of debt more than 10 years outstanding, while the latter contains a clause explicitly stating that there is no such limitation. The Court will hold that either the earlier statute is controlling because it has not been explicitly repealed (thus, shielding debt more than 10 years outstanding), or else the later statute's language constructively repeals the earlier provision (thus, making all debt to the government susceptible for collection).

 

The language of the Higher Education Assistance Act clearly countermands any statute of limitations found in other statutes or administrative law that may bar the government from collecting, through administrative asset or garnishment, outstanding student loan debt. However, the amended Debt Collection Act, the Debt Collection Improvement Act, which was passed after the Higher Education Assistance Act, included language that expressly prevented administrative offset of social security benefits if the claim was outstanding for more than ten years. The Eighth and Ninth Circuits disagree as to whether the ten year statute of limitations applies to prevent offset of social security benefits. If Congress intended to protect social security benefits from administrative offset, then seriously delinquent debtors will be excused from repayment in this fashion. However, should the Court decide that Congress intended to prospectively abrogate the statute of limitations when it passed the Higher Education Assistance Act, then the government will be able to collect overdue student loans by withholding a certain amount from the debtor's social security benefits. Either way, statutory safeguards exist to protect those beneficiaries whose sole income is social security from offsets of excessive amounts.

Questions as Framed for the Court by the Parties

Do the Social Security Act and the Debt Collection Improvement Act bar the United States from withholding social security benefits to collect student loan debt that has been outstanding for more than ten years, as the Eighth Circuit has held, or does the Higher Education Act eliminate any such bar, as the Ninth Circuit held below?

A. Statutory Background

The Debt Collection Act of 1982 (31 U.S.C ? 3716) provided for the collection of outstanding debts owed to the United States through means of administrative offset.? Under this statute, the United States could apply to an administrative agency in order to recoup debt owed by an individual.

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United Student Aid Funds v. Espinosa

Issues

1. Is a bankruptcy court’s confirmation of a debtor’s Chapter 13 plan void when the plan improperly discharges the debtor’s statutorily non-dischargeable student loans?

2. Does a debtor violate the due process rights of a student loan creditor when, instead of commencing a statutory adversary proceeding by filing a complaint and serving it, the debtor merely states in his Chapter 13 plan that the debt owed to the creditor will be discharged?

 

Francisco J. Espinosa filed for Chapter 13 bankruptcy and proposed in his Chapter 13 reorganization plan that he would repay $13,250 in student loans to United Student Aid Funds (“Funds”). Although Funds claimed they were owed an additional $4,582.15, the U.S. Bankruptcy Court for the District of Arizona confirmed Espinosa's plan as proposed, and Funds did not object to the confirmed plan. Espinosa repaid all debts according to the Chapter 13 plan. Funds subsequently began to intercept Espinosa's income tax refunds, claiming that Espinosa had improperly discharged his student loans, because Espinosa had not initiated a statutorily required adversary proceeding to determine whether repayment of the student loans would constitute an "undue hardship." While the U.S. District Court of Arizona held that Espinosa had violated Funds' due process interests by failing to initiate an adversary proceeding and serve a complaint and summons upon Funds according to the statutory procedure, the United States Court of Appeals for the Ninth Circuit reversed, and Funds now appeals. The Supreme Court’s decision in this case will determine how student loans and other debts are collected in bankruptcy and will affect the overall relationship between debtors and creditors in America.

Questions as Framed for the Court by the Parties

1. Student loans are statutorily non-dischargeable in bankruptcy unless repayment would cause the debtor an "undue hardship." Debtor failed to prove undue hardship in an adversary proceeding as required by the Bankruptcy Rules, and instead, merely declared a discharge in his Chapter 13 plan. Are the orders confirming the plan and discharging debtor void? 

2. Bankruptcy Rules permit discharge of a student loan only through an adversary proceeding, commenced by filing a complaint and serving it and a summons on an appropriate agent of the creditor. Instead, debtor merely included a declaration of discharge in his Chapter 13 plan and mailed it to creditor's post office box. Does such procedure meet the rigorous demands of due process and entitle the resulting orders to respect under principles of res judicata?

In 1988, Respondent Francisco J. Espinosa borrowed $13,250 in student loans through the Federal Family Education Loan Program, which grants federally guaranteed loans. See Brief for Petitioner, United Student Aid Funds, Inc.

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