Hope for Student Loan Relief?

With the start of a New Year and a New Administration in the White House, one has to wonder if there might finally be some progress made in regards to Student Loan Relief that is meaningful through Bankruptcy. After all, President Elect – Trump of all people, should realize the value such relief could bring toward jump starting the economy.

He has used the Bankruptcy Code brilliantly to preserve various businesses and along the way preserved thousands of jobs as well as related state and community tax bases. The result provided resources to seed many more job creating businesses that generated enough wealth to propel him to the Presidency. Thus, one might say, “The “fresh start” of Bankruptcy turned hopelessness into success, as it was intended.”

Hopefully, Mr. Trump believes the benefits of Bankruptcy are not to be limited to businesses only. After all, people seem to find themselves in unsustainable financial arrangements the same as businesses do. And, this is not always of their own making, as evidenced by the seemingly endless and ongoing settlements “Big Bank” and “Money Managers” continue to enter into with the Government and/or one Attorney General or another.

As noted in previous articles, Student Loan Debt is now second only to Mortgage Debt; and fully one third of it is in default. It has become another “Inconvenient Truth.” as indicated in the article headings of the last issue of 2016 of NACCTT Journal. (National Association of Chapter Thirteen Trustees) The articles are pulled from resources like The Washington Post, The New York Times, Business and Professional Journals, American Bankruptcy Institute, etc:

  • Put Student Loan Debt Back Where It Belongs: In Bankruptcy
  • The Disturbing Trend of People Losing Social Security Benefits To Student Debt
  • Devry University to Pay $100m To Settle Lawsuit Alleging It Misled Students
  • What Do Rising Interest Rates Mean for Graduates With Student Debt?
  • Fed Rate Hike Will Boost Costs of Variable Rate Student Loans
  • The Student Loan Crisis Isn’t Just A Millennial Problem
  • S. Government Collecting Student Loans It Promised to Forgive
  • Student Loan Collecting Companies’ Post-Election Value Skyrockets
  • Student Loan Borrowers Should Be Wary of Defaulting Again

(Reading these articles, one would think student loan lenders have been taking lessons from those who crafted the real estate collapse with inflated appraisals, falsified applications and the greater fool theory; and in fact, they are essentially the same!)

While the NACTT doesn’t underwrite the articles, their presence certainly shows the problem is more than just “inconvenient.” Especially when the Critical Case Comment section focuses on why Chapter 13 Trustees should “take a second look” at how the “separate classification of student loan payments” (a practice heretofore held to be nearly sacrilegious), can actually further the interests of the Chapter 13 Program and Creditors, besides just the interests of debtors.

While Mr. Trump is “DIALING BACK” destructive and self-defeating rules and regulations, he might want to consider asking Congress to Dial Back the Bankruptcy Code as it was prior to BAPCPA, (enacted in 2005), especially as it relates to Student Loans.

There are other solutions proposed as noted in another article from the NEW YORK TIMES by Sheila Bair, former Chairwoman of the FDIC from 2006-2011.

To Boost the Economy, Help Students First

In her article Ms. Bair makes the point of how and why Student Loan relief benefits EVERYBODY. The “boost” in consumer spending that could result from relief of Student Loan Debt could be redirected into housing, autos and other normal family expenses. This is the kind of spending that sets economies in motion; and sets those who are trapped in the false promise of student loan debt free.


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