WASHINGTON–Some borrowers have begun to win bankruptcy court fights and been allowed to cancel private student loans.
The borrowers have successfully argued in some cases that the wording related to the legal definition of a student loan has been vague.
According to a report in the Wall Street Journal, however, the borrowers have been able to get several bankruptcy courts to agree with their arguments related to the law that says “without proving extreme hardship a borrower can’t discharge a loan made for an educational benefit.”
It is that wording, some borrowers said, that allows them to cancel their loans because the loans fall outside this category of debt. Such reasoning has been applied to loans obtained to attend schools without accreditation or to study for a bar exam, according to the Journal.
The report notes, however, the argument applies only to a slice of the private student loan market, which makes up less than 10% of the more than $1.3 trillion in outstanding student debt.