10 Jan Student Loan Opinion From Missouri Bankruptcy Judge Federman.
Judge Federman issued his opinion in Marie v. Citibank, Case No. 07-6032 on November 20, 2008. The Debtor incurred over $210,000 in student loans seeking a doctoral degree in psychology. When she failed to obtain her degree, she filed for Chapter 11 and sought to have her loans discharged under §523(a)(8).
At the time of her trial, approximately $180,000 of her student loans were held by ECMC and $30,000 were held by Sallie Mae; while the ECMC loans were subject to an Income Contingent Repayment Plan (ICRP), the Sallie Mae loans were not. The Debtor, relying upon In re Reynolds, 425 F.3d 526 (8th Cir. 2005), claimed that she suffered from depression that affected her ability to work and that was exacerbated by the existence of her loans.
The court found that the Debtor suffered only from temporary depression that did not prevent her from being capable of obtaining employment in her field and earning an annual salary of about $40,000. However, using the totality of the circumstances approach followed by the 8th Circuit, set forth in In re Long, 322 F.3d 549 (8th Cir. 2003), the court found that requiring her to repay the Sallie Mae loans and a portion of the ECMC loans would pose an undue hardship on her, and were therefore dischargeable.
The court examined the ICRP option available to the Debtor for the ECMC loans and found that, even if she was earning an annual salary of $40,000, her monthly payments calculated under the plan would pose an undue hardship when considered with her reasonable monthly expenditures.