A Solution to the Student Loan Crisis
My friend T.J. Mullin and I wrote an op-ed almost five years ago, proposing a solution to the student loan crisis without enriching high-paid professionals. In view of the current Supreme Court case (the oral argument on which it seems that Biden’s plan to forgive $10k per student will be struck down), I am copying the article:
The media has recently focused on a ticking time bomb for both students and parents: student loans.
As bankruptcy lawyers who have represented debtors from the lowest to the highest court in the land for more than 40 years each, we’ve seen this unfair situation become an epidemic, especially in light of many working adults who have sought education or training to meet the demands of today’s global economy or have guaranteed their children’s debts.
Most people have heard the saying “nothing is certain in life except death and taxes.” However, if income taxes are more than three years old, in general, they can be eliminated in a bankruptcy, yet student loans survive bankruptcy and are not subject to any statute of limitations. Student loan providers have an iron grip on the labor of countless thousands, making them like Dark Age serfs, so perhaps the saying needs to be changed to “... death and student loans.”
The problem is twofold: First, borrowers and their parent guarantors are liable for these loans until death. Second, schools and banks dole them out liberally because Uncle Sam is guaranteeing many of them and the lenders have no skin in the game or can hound their borrowers forever.
First, debtors previously could discharge student loans if they filed for relief under a Chapter 13 Wage Earner’s Plan. Chapter 13 is a mini-reorganization for individuals wherein over a three-to-five-year period, the debtor must pay the greater of his disposable income or the amount creditors would get in a Chapter 7 liquidation, or so-called “straight” bankruptcy. This provision in Chapter 13 should be reinstated. Allowing debtors to discharge student loans in bankruptcy would provide relief to student loan debt serfs, while wealthy or high-earning student loan debtors (or their wealthy guaranteeing parents) would still repay their loans because their income and assets would be available to all creditors in a bankruptcy filing under any chapter.
Second, in the future, government-backed student loans should have recourse to the school so that if, for instance, a school makes a $50,000 loan to a student seeking a degree and later files for bankruptcy, the school has to pay the lender back.
The student loan ticking time bomb can be defused by these simple solutions.
We encourage elected leaders of both parties, sympathetic to the plight of hard-working people who are trying to better themselves, to enact these changes and challenge all candidates in the bistate area to state their positions on this crisis.
Norman W. Pressman has been in private practice since 1974, concentrating in bankruptcy since 1978. He has argued cases before the U.S. Court of Appeals for the 8th Circuit and the U.S. Supreme Court.
T.J. Mullin has been in private practice since 1976, concentrating in bankruptcy since 1989. He was the first debtor’s attorney to receive the Missouri Bar’s Michael B. Roser Award for Excellence in Bankruptcy
Here is a link the article as published in the St. Louis Business Journal:
https://www.bizjournals.com/stlouis/news/2018/08/16/commentary-student-loans-and-death.html?