A Loan and Afraid

Another bankrupt government policy aimed at college students.

financiopath180-NU.jpg Attention, students: Here's some material the federal government does not want you to study and learn: the latest Congressional Research Service report on the sorry history of why your student-loan debt is such an unreasonable burden.

Good luck reading the entire report. Congress further screws the public by not making its CRS reports (including this one) readily available.

Anyway, two crucial bills currently before Congress would help ease the ridiculous current situation in which student-loan borrowers can't get out from under their debt even when they formally declare bankruptcy. The better of the two bills, S.511, was introduced by presidential contender Hillary Clinton this past February 7 in the Senate. The July 26 CRS report, Student Loans in Bankruptcy, says in its summary:

If enacted, S. 511 would make both public and private loans dischargeable in bankruptcy when seven years have passed from the beginning of the repayment period. Another bill, S. 1561, would eliminate privately financed student loans from those that are nondischargeable in bankruptcy. The purpose of the bill would be to restore the law to its status before the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005.

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"Consumer Protection." Yeah, right. Corporations regularly use bankruptcy to discharge debt — they even matter-of-factly talk about it in their government filings as just another helpful tool to increase profits — but you students can't use it. You used to be able to, but as the report says, "over the years, the scope of student loan dischargeability has been steadily narrowed."

As Congress considers these bills, the CRS prepared the report in language that even the dumbest Congress member can understand. All the sorry history of how Congress has steadily screwed students over recent years — especially the onerous tightening imposed by the Bush regime and GOP-ruled Congress in 2005 of the rules under which you human beings can declare bankruptcy — is in this report. All you can see is the report's brief summary. Why not the rest? Here's how the admirable OpenCRS project explains it:

American taxpayers spend nearly $100 million a year to fund the Congressional Research Service, a "think tank" that provides reports to members of Congress on a variety of topics relevant to current political events. Yet, these reports are not made available to the public in a way that they can be easily obtained. A project of the Center for Democracy & Technology, Open CRS provides citizens access to CRS Reports that are already in the public domain and encourages Congress to provide public access to all CRS Reports.

CRS Reports do not become public until a member of Congress releases the report.

And most of them don't release them. When they do, the reports are not made available in any orderly way, and you often have to pay for them.

Oh, you'll pay in other ways. The bankrupt and onerous bankruptcy laws are just one part of the sad story of unreasonable student-loan burdens. A very good recent take on student loans — particularly regarding politicians' hype about how they're "fixing" the problems — is "No Justice for Student Borrowers," in Port Folio Weekly, out of Hampton Roads, Virginia. Reporter Jennifer C. O'Donnell (talking about other bills, not Clinton's) notes in the July 31 piece:

The bills are Washington’s way of dealing with a slew of media coverage in recent months regarding a generation of student borrowers paralyzed by overwhelming student loan debt. For months, newspapers, national magazines and television magazines harped on the financial distress new graduates experienced at the hands of loan lenders. At the heart of many of those stories was the almost mobster-like business tactics lenders imposed on their borrowers, specifically outrageous penalty fees and fines on late or defaulted loans.

O'Donnell's savvy, smoothly done story goes on:

While politicians high-five each other for coming to the aid of a generation of graduates-to-be, there’s a very vocal group of consumers who aren't impressed.

"This is all really just window dressing," said Alan Collinge, founder and executive director of Student Loan Justice, a grassroots organization of student borrowers working to reform the federal student loan system.

Collinge says the bills completely avoid what is the main concern regarding the issue of student loan borrowing—the lack of consumer protections. In order for student borrowers to enjoy the same rights home, car and other borrowers have, the student loan industry would have to experience a major overhaul, and that’s something Congress has failed to move on, he added.

As I said, O'Donnell's story doesn't talk about Clinton's bill or the other Senate bill. Here's the summary of the July CRS report:

Currently, student loans cannot be discharged when the debtor declares bankruptcy, which means that, unlike most other unsecured debt, student loans will stay with the debtor post-bankruptcy.

There are two bills pending before the 110th Congress that would amend the U.S. Bankruptcy Code to restore limited dischargeability for student loans, consistent with the law at various points in its prior history. If enacted, S. 511 would make both public and private loans dischargeable in bankruptcy when seven years have passed from the beginning of the repayment period. Another bill, S. 1561, would eliminate privately financed student loans from those that are nondischargeable in bankruptcy. The purpose of the bill would be to restore the law to its status before the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005.

This report examines the history of student loan nondischargeability in bankruptcy law and the bills introduced to amend treatment of loans in bankruptcy.

Apparently that's all the government wants you to know.


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