“STUDENT LOAN BILL OF RIGHTS”
Officials from the Department of the Treasury, the Department of Education and the new Consumer Financial Protection Bureau are ordered to issue a report to President Obama not later than October 1st of this year on whether bankruptcy laws or other laws and regulations should be amended to provide greater help and protection to citizens graduating with massive student loan debt. According to the White House, forty million Americans have student loan debt with an average balance well in excess of $28,000.00.
President Obama signed a “student aid bill of rights”, spelling out an assortment of changes in policy regarding student loans. “We’re going to require that the businesses that service your loans provide clear information about how much you owe, what your options are for repaying it, and if you’re falling behind, help you get back in good standing with reasonable fees on a reasonable timeline,” the President told a crowd of almost 10,000 cheering students at Georgia Tech University recently.
Student loan debt has become the most significant indebtedness issue in America, surpassing credit cards. One result has been that the most well educated, brightest young people in the country are putting off major investments such as buying homes, the collective impact of which hurts our economy. Senator Dick Durbin (D. Ill) added that “(I)t’s not only young people facing this crisis, it is parents, siblings and even grandparents who co-signed private loans making payments decades later. It’s time for action. We can no longer sit by while this student debt bomb keeps ticking.”
This shift in government policy echoes a shift in public attitude. Right here in Nebraska, a healthy 28 year old debtor in bankruptcy with no significant health problems recently won a case allowing her to discharge almost $120,000.00 of student loan debt. It appears that the arrogant attitudes of the student loan lenders whose only repayment option was essentially “move, find a better job, you might be able to make more money and keep paying.” The Judge noted that this might be true of anybody, but this hard line position was “not a reasonably reliable future financial resource.”
The lending industry has not surprisingly resisted loosening student loan bankruptcy standards. Since bankruptcy can discharge debts arising from payment defaults on private jets, Caribbean vacation condos, yachts, and divorce property settlements, it really doesn’t seem to make a lot of sense to deny the ability to discharge investments in higher education. I’ll bet it won’t be long before the mortgage industry agrees, urging that Congress allow this money to be freed up for graduates to be able to afford to buy homes.
© David G. Hicks, Attorney at Law