Debtors were forced to wait at least five years after their loans were due to apply for a discharge. Since 1976, federal student loan debts have faced barriers to the traditional bankruptcy discharge available to other debtors, purportedly to protect taxpayers from footing the bill for savvy Americans who earned their degrees and then quickly used the discharging powers of the bankruptcy court to cleanse themselves of their student loans. Millions of debtors unable to pay back their loans, without any government relief in sight? Seems like yet another scenario where the bankruptcy courts can fill a void left by Congress. Recognizing the live nature of the issue, progressive democrats have called for cancellations of up to $50k in loan debt as a starting point. Congress recently agreed to cancel around $6b in student loans for borrowers that have a total and permanent disability. Politicians are finally chipping away at the problem, albeit in small chunks. But when I first got out of school and the reality of how much money I owed finally struck me, the debt was more of a constant and explicit preoccupation, a matter of life and death. Miller writes for The Baffler:Īfter ten years of living with the fallout of my own decisions about my education, I have come to think of my debt as like an alcoholic relative from whom I am estranged, but who shows up to ruin happy occasions. Not to mention the psychological burden of carrying around a load of debt that never seems to get smaller. Those saddled with prohibitive loan debt are less likely to start small businesses and spend on goods and services, foreclosing them from the activities that keep the gears of our economy running. Moreover, the recent pandemic-induced financial crisis - however short-lived it may have been for some segments of the economy - has had a disproportionate impact on low income, first generation, women, and minority students. Though some colleges have pledged to adopt “need-blind” admission policies to ensure their programs are affordable, these policies are only feasible for the most elite institutions with the largest endowments. Over 40% of outstanding debt was for graduate school students, as masters students end up taking on more than twice the debt of their undergraduate counterparts without the corresponding incomes needed to justify the degrees. For context, Americans owe more in student loans than they do in either credit card or auto loan debt. Will bankruptcy courts solve a national crisis?Īmerica’s student loan crisis shows no signs of abating.Ī plot of loan debt growth over the past twenty-odd years shows a healthy upward trajectory, with the current number at a whopping $1.7t dollars, 90% of which is held by the U.S.
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