Who Really Ought to Go Bankrupt Over Student Debt? (Hint: It’s Not the Students)
This is Part 3 of a series about the incoherence of the laws on student loans and bankruptcy.
Check out Part 1: Why Student Loans Are Invalid: 20 Years of Undue Hardship
And Part 2: “Undue Hardship:” How it Got Into Student Loan Law. And Why it Makes No Sense
Or just read on here….
For all of those former students who are currently being levied with so-called student debt: Should they all have to declare bankruptcy?
The fact is that students have been operating under mistaken assumptions about the law on student loans and bankruptcy. They were given these mistaken assumptions at “Informational” Sessions held by schools, lenders, and the department of Education.
It may even be that schools, lenders, and the department of Education have culpable liability for misrepresentation and even fraud in their practices of informing students about tuition financing since 1998.
What remains is for former students (both those who currently hold debt and those who are already debt free) to form a class and to take action to seek compensation from these powerful educational and financial institutions. They can afford it — or if they want to claim that they cannot, then they should be the entities facing bankruptcy (and asking forgiveness) — not former students.
The twenty year anniversary of the legislation that made financing education a matter of “Undue Hardship” for students across America is the perfect time to take action.
What we should be asking is this:
“Who deserves to go bankrupt over student debt? The Students? Or the Institutions who made it their practice to — essentially — deceive students by oversimplifying about the legal reality of their debt.”
Or,
“Who really needs to be FORGIVEN for student debt? Is it the students? Or is it the educational institutions, lenders, and the federal agencies who (often receiving plentiful benefits from lobbyists) who promoted an environment of misinformation and a smokescreen of nonsensical legislation?”
After all, students were merely pursuing the educational path recommended to them by virtually every authority figure they ever met and were willing to do so somewhat at their own expense?
The language of “FORGIVENESS” and “RELIEF” really needs to go. The culpability of educators, lenders, and government bureaucrats (including) lobbyists needs to be brought to the forefront.
Undue Hardship: A Red Herring and the Foundation of a Class Action
“Undue Hardship” does not have a meaning when it comes to Student Loan Bankruptcy. If a person qualifies for Bankruptcy, then they are already suffering from an “Undue Hardship!” They should be able to discharge their loans.
The Bill to Legitimize “Student Loan Bankruptcy:” HR.2366
This year, there is legislation on its way in congress to remove the educational exception to the U.S. bankruptcy code. The bill, if successful, would provide a clearer and more direct avenue of relief to many former students who have been held back by a non-sensical law. The bill is the largely the product of the work of studentloanjustice.org
The idea of Student Loan Justice is that hte 523(a) exception to Bankrupcty discharge and its “Undue Hardship” provision is holding millions back from seeking relief on their loans.
One problem: The potential that millions of millennials will be flooding the bankruptcy courts once the exception is removed is not going to encourage lawmakers (most of them baby boomers who are done repaying their loans) to pass this!
And there is the other problem: once loans are discharged through bankruptcy, many former students may find themselves in a somewhat improved financial position. These changes to the law may help to rectify educational financing moving forward.
But still, a massive bankruptcy movement will not help us to hold accountable the schools and lenders who have profited from two decades of misinforming students about the nature of their bankruptcy rights.
And then there is the issue of whether higher education should really be financed by students and parents at all. There are a few radicals out there (increasing in number) who think education at all levels should be paid for through public funds. A lot is going to change in the Higher Education Industry in the next decade or two (about as much as has stayed the same for the last twenty years since 1998.)
Of course, all avenues should be pursued as far as they can go. But even if the law changes, the damages wrought by the practices of Educational Financing for the last two decades needs to be absorbed by the schools and lenders who are really to blame.
After this happens, perhaps, former students and the American public will find it in their hearts to forgive them.
