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New Cases and Developments

NACUA's Legal Resources staff summarizes current higher education cases and developments and provides the full text of selected cases to members. New cases and developments are archived here for up to 12 months.  Cases provided by Fastcase, Inc.

Selected Topics: Students Financial Aid
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Financial Aid; Bankruptcy & Student Debt; Students

Chorches v. Catholic University of America (D. Conn. July 13, 2018)

Ruling denying Defendant’s Motion to Dismiss. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against Catholic University of America (CUA) to recover tuition payments made by Debtors, the parents of a CUA student over the age of eighteen, totaling $64,845.50. At issue was whether the Debtors received less than “reasonably equivalent value” in exchange for the transfer and alternatively, whether the Debtor and their daughter should be considered a single economic unit. Limiting the definition of “reasonably equivalent value” to purely economic terms, the court found that the Debtors’ moral obligation to pay their daughter’s college tuition did not amount to a legal obligation and any “anticipated economic benefit they [would] have gain[ed] in having a financially self-sufficient daughter due to her college education” were speculative. The court further found CUA’s single economic unit argument unpersuasive since the federal laws they cited—the Expected Family Contribution age provision under Title IV’s formula for need-based student aid, provisions of the Affordable Care Act that require insurers to keep individuals under twenty-six on their parent’s insurance, and provisions of the tax code that recognize exemptions for qualifying dependent children under the age of twenty-four—did not impose a parental obligation to financially support their children’s education after age eighteen. Last, despite the Connecticut General Assembly’s amendment of its bankruptcy statute to exclude undergraduate tuition payments from recovery as constructive fraudulent transfers, the court found that the amendment did not apply retroactively to the case at hand.

7/16/2018
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Financial Aid; Students

Cobb v. Florida Atlantic University (Fla. App. July 5, 2018)

Opinion reversing Appellee’s Final Administrative Order and remanding for further proceedings. Appellant, a Florida Atlantic University (FAU) student, alleged that FAU erroneously classified him as a non-resident for tuition purposes under Florida Statute 1009.21, which requires a showing of “permanent legal residency in the state for at least 12 consecutive months.” Appellee required student to show proof of permanent, full-time employment in Florida for a period of 12 months prior to submitting his residency petition.  The court found Appellee’s application of the statute clearly erroneous in two respects: 1) the statute does not require Appellant to show, through documentation or otherwise, permanent employment in the state for at least thirty hours per week, and 2) the statute allows for other forms of residency evidence beyond employment status. The court remanded the matter for Appellee to reconsider Appellant’s request.

7/9/2018
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Financial Aid; Bankruptcy & Student Debt; Students

Roumeliotis v. Johnson & Wales Univ. (Bankr. Conn. June 19, 2018)

Memorandum Decision granting Defendant’s Motion for Summary Judgment. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against Johnson & Wales University (JWU) to recover tuition payments made by Debtors, the parents of a JWU student, pursuant to Federal Direct Parent PLUS loans. Plaintiff argued that the at-issue payments were constructive fraud transfers because they constituted “an interest of the debtor in property,” under the Bankruptcy Code and similar provisions of the Connecticut Uniform Fraudulent Transfer Act (CUFTA). Reconciling the statutory framework of the Higher Education Act of 1965 and Parent PLUS loan program with applicable Bankruptcy Code provisions, the court determined that the Debtors never had an “interest” in the PLUS loans since they lacked possession or control of the funds. Consistent with the holdings in Eisenberg v. Pennsylvania State University and The Majestic Star Casino, LLC v. Barden Development, Inc., the court noted that finding otherwise—and therefore making the funds available to Debtors’ creditors—would undermine the Congressional intent of the HEA and PLUS loan program, which expressly requires funds to be transmitted directly to educational institutions, rather than the parent-borrower, so that funds are only used for educational expenses. Moreover, a contrary holding would unduly increase the Debtors’ interest in the PLUS loan proceeds, which they would not have otherwise had possession of before filing for Chapter 7 bankruptcy.

6/19/2018
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Financial Aid; Students

Skeens v. University of Louisville (Ky. App. June 1, 2018)

Opinion Reversing and Remanding an order of the circuit court granting Appellee’s Motion to Dismiss. Appellant is the stepchild of a Kentucky firefighter who sought a tuition waiver under Kentucky law (KRS 164.2841) for his enrollment at the University of Louisville (UL) Law School. UL argued that Appellant, as a step-child, did not qualify for a tuition waiver under KRS 164.2841. Looking to relevant state regulations on firefighter benefits, the court determined that “stepchild” was within the definition of parent-child relationship. The court further noted that there was “no reason to define the parent-child relationship [in the statute] any differently.”

6/5/2018
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Financial Aid; Students; Foreign Students

Barrett v. Regents of the University of California (Cal. App. May 15, 2018)

Unpublished Opinion affirming Defendant’s Motion to Dismiss. Plaintiff, a student at the University of California (UC) Berkeley School of Law, alleged that UC breached its employment contract with Plaintiff by failing to award her tuition remission for work that she performed as a reader in the Academic Student Employee (ASE) program. Preliminarily, the court affirmed dismissal since public employment in California is governed by statute, and not contract.  Moreover, Plaintiff could not proceed on an alternative theory of liability because UC Berkeley’s policies expressly specified that graduate students in “self-supporting” programs, such as the LL.M program in which the Plaintiff was enrolled, were ineligible for tuition remission.  

5/17/2018
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Financial Aid; Bankruptcy & Student Debt; Students

Novak v. Univ. of Miami (Bankr. Conn. Feb. 27, 2018)

Memorandum of Decision granting Defendant’s Motion to Dismiss. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against the University of Miami to recover tuition payments (totaling $66, 616) made by Debtor, the parent of a University of Miami student, pursuant to a Federal Direct Parent PLUS loan. Plaintiff argued that the payments were constructive fraud transfers because they constituted “an interest of the debtor in property,” under the Bankruptcy Code and similar provisions of the Connecticut Uniform Fraudulent Transfer Act (CUFTA). Looking to the federal and statutory framework of Parent PLUS loans, as well as the holdings of Eisenberg v. Pennsylvania State University and Shapiro v. Gideon, the court found that the Debtor never had an “interest” in the Parent PLUS loans since she lacked possession or control of the funds. Further, the court found that the loan proceeds “could not have been available in any circumstance to pay [the debtor’s creditors],” thereby concluding that such a finding comported with the “spirit and purpose of fraudulent transfer provisions in the Bankruptcy Code and CUFTA.”

3/2/2018
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Students; Bankruptcy & Student Debt; Financial Aid

Boscarino v. Ithaca College (Bankr. Conn. Feb. 27, 2018)

Memorandum of Decision granting the Defendant’s Motion for Summary Judgment. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against Ithaca College to recover tuition payments made pursuant to a Federal Direct Parent PLUS loan. Finding Eisenberg v. Pennsylvania State University and Novak v. Univ. of Miami dispositive on the matter, the court held that the Parent PLUS loan payments were not part of the Debtor’s estate, either “prior to the filing of her bankruptcy petition” nor would they “have been available for distribution to her creditors at that time,” and therefore were not fraudulent transfers to Ithaca College.

3/2/2018
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Financial Aid; Students; Government Relations; Authorizations & Regulations

Request for Information by the Department of Education on Evaluating Undue Hardship Claims in Bankruptcy Proceedings (Feb. 21, 2018)

Request for Information issued by the Department of Education’s Office of Postsecondary Education on factors and tests to be considered in evaluating “undue hardship” claims asserted by student loan borrowers in bankruptcy court. The U.S. Bankruptcy Code provides that student loans can be discharged if repayment would impose an undue hardship on the borrower, but the standard for determining an undue hardship has previously been left to federal courts, which devised two tests for this analysis: the Brunner test and the Totality of the Circumstances test. The factors under both tests look to the debtor’s payment history, work history, medical history, future employment prospects, willingness to participate in repayment plans, and necessary expenses that are unique to the debtor, among other considerations. The Department invites the public and interested parties to provide comment and information on: 1) factors to be considered in evaluating undue hardship claims; 2) the weight to be given to each factor; 3) whether the differences between the two tests currently used by federal courts result in inequities among borrowers; 4) circumstances in which loan holders should concede an undue hardship claim by borrowers; and 5) whether the 2015 Dear Colleague Letter, which provides guidance to guarantors and educational institutions in defending bankruptcy proceedings, should be amended. Responses must be received by May 22, 2018. 

2/22/2018
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