President Joe Biden’s recent effort to cancel $20,000 in student loan debt—which has since been stifled by lawsuits by Republicans in various states—is now moving to the Supreme Court, with a final decision expected in May or June.
Student debt cancellation gets to two core issues in the United States: racial justice and income inequality. According to the Brookings Institute, Black households carry more student debt, regardless of income, which affects their creditworthiness and ability to save money, buy homes, and have more general financial freedom. Student debt cancellation is an equity issue, plain and simple.
For those who are struggling financially, the decision to declare bankruptcy is a difficult one. To add insult to injury, it is virtually impossible to discharge student loan debt, thanks to 29 years of maneuvering by Congress. Current laws force borrowers who need to discharge their student loan debt to prove to a judge that the education debt has created an “undue hardship.” The vague and high legal standard has been critiqued by a number of parties, including the American Bar Association.
The University of Michigan tells us that Black college graduates are equally likely to file for bankruptcy as those without a degree; essentially, the policies as they exist encourage Americans to take on debt to finance their education, but also make it virtually impossible for these students to discharge this debt even during extremely difficult financial times.
In November, the Departments of Education and Justice issued new guidance regarding bankruptcy for student-loan borrowers to attest to their hardships and help those agencies assess their discharge requests. It is a step in the right direction, and while the guidance could be helpful for some, the “undue hardship” requirement is still subjective—and the Biden administration's decision would not codify the changes into law, meaning the next administration can disregard these changes.
In 2021, Democratic Sen. Richard J. Durbin and Republican Sen. John Cornyn sponsored the FRESH START Through Bankruptcy Act, which would allow borrowers to discharge their federal student loans through bankruptcy after 10 years. Although the legislation stalled in committee, the bill has clear bipartisan support and would have a monumental impact on borrowers struggling the most under the student debt crisis.
The ability to declare bankruptcy is a beacon of possibilities for people facing harsh economic setbacks, but student loan debt is still one of the only types of debt people cannot escape from through bankruptcy. With the fate of President Biden’s student debt forgiveness program still up in the air, a congressional move to allow student loan debt to be discharged through bankruptcy would be a lifeline for student loan borrowers of all ages who find themselves in the tightest of economic circumstances.
Sign the petition to Congress: Allow student loan debt to be discharged through bankruptcy.
christinelarusso January 28, 2023 at 02:25AM From Daily Kos
0 Comments