We're In a Student Loan Crisis. How Do We Get Back?
Alan Collinge has recently contributed a guest post on Forbes that proposes what we could do to fix the student loan problem. This is a problem that's turning many hopeful graduates into hopelessly indebted serfs. One of Collinge's suggestions - and it may be his best suggestion - is to bring bankruptcy protection back for student loan borrowers.
When Collinge makes this suggestion, he uses the word "restore."
In other words, bankruptcy protection for student loans (which was essentially stripped by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) should be made an option once again for borrowers who, for instance, find themselves unable to find gainful employment and fall behind on student loan payments.
Student loan debt should be treated like any other types of unsecured debt, like credit card balances, medical bills, and personal loans. Here's why: by making student loan debt non-dischargeable in bankruptcy, the lending system has been seriously skewed toward benefiting the lenders and schools.
This comes at great cost to the students.
To fix the problem, Collinge makes these suggestions:
- At a "minimum," restore bankruptcy protection to student loans
- Institute reform at the U.S. Department of Education, so that it serves the needs of students rather than exclusively the interests of lenders and schools
- Request that the Department of Education shut down the worst schools
If we don't do this, Collinge argues, we face what he appears to fear most: "broad, public rejection" of the student loan lending system. This, in turn, could have dire consequences on our struggling economy.
Collinge concludes his piece with a call for politicians to honestly face the issue (and make a good faith effort toward solving it) for the good of education and of the economy generally.
As bankruptcy attorneys at the law firm of Ledford & Wu in Chicago, we have seen first-hand how stripping borrowers of bankruptcy protection for student loans has impacted the lives of those who become mired in debt. Bringing bankruptcy protection back for these borrowers could possibly be one of the more positive changes in bankruptcy law to happen in our lifetimes.