Robert Murphy, an unemployed 65-year old, took out several Parent PLUS student loans — federal debt parents can use to finance their kids’ education — to send his three children to college. For the last three years, he has been appealing his way to the Boston federal court that is now considering his case to discharge these debts. A win for Murphy would relieve him of hundreds of thousands of dollars in student debt—and could fundamentally change the way U.S. bankruptcy courts handle borrowers who can’t repay college loans.

Questions:

1. At the heart of his case is a Congressional exclusion from bankruptcy for student loans added in the 1970s. Explain this exclusion.
2. Undue hardship is one of the main keys to this case. Why? Explain its importance.
3. Why would it be a dangerous thing for the government if the First Circuit announces a rule for debtors to discharge their student loans in bankruptcy?

Source:
Kitroeff, N. (2015). This Court Case Could Unshackle Americans From Student Debt. Bloomberg Business.com, Oct. 8 (Retrievable online at http://www.bloomberg.com/news/articles/2015-10-08/this-court-case-could-unshackle-americans-from-student-debt)