Since Donald Trump is once again taking up student loan forgiveness, I’d like to do a contrast and comparison if I may with another forgiveness program most of us are somewhat familiar with.
Since the dawn of the republic, we have had in one form or another a program called ‘bankruptcy’. Yes, you are let off the hook for your loans, but there are penalties to be paid.
When a business files bankruptcy (like the Trump Casino), the business is then taken over by creditors and sold to another entity in order to recoup the losses. If you have ever had a business taken away from you, you know how painful that is.
When a person like myself files bankruptcy, they also incur penalties. They range from a low credit score, to being unable to apply for jobs that require a security clearance. More than 20 years after I filed bankruptcy, I’m still paying those penalties.
Let’s contrast that with student loan forgiveness. You want that loan wrote off, with precisely zero penalties attached to it. Poof, it’s gone, and people just go about their lives as if nothing ever happened.
So, after all that, here’s my question: why is student loans debt so special, that it deserves to be forgiven with zero consequences?
First, the Biden programs aren’t zero consequence. They allow you to wait till you are earning before you start repaying.
For me, this makes sense. It’s good for the country to have an educated citizenry. And of course it’s good for the citizen personally. But tuition has become a runaway train for a number of reasons we seem incapable of addressing.
Try the IBEW. As far as I know they couldn’t care less if you had a felony conviction. At least out here. Building apartments everywhere. Plenty of construction work.
Anyway, sorry for your hardship. I pray things get better for you.
The obvious reason for excluding bankruptcy is the temptation to declare it right after graduation when you have few assets. I would allow it maybe ten years after a person graduates. No one is going to intentionally stay poor and with few assets for a decade to,get out of paying on a student debt. And if they are still in that situation, obviously schooling didn’t pay off for them.
The thing about student loans and bankruptcy is that in bankruptcy you show that your debts significantly exceed your assets (and assets can even get liquidated to satisfy some of those debts.) And a young adult right out of school with school loans is almost guaranteed to be in that boat. He doesn’t have any assets. He has student loans. So BANKRUPT!!
On that alone I can understand the fact that you can’t list student loans in bankruptcy.
I don’t like the fact that the loans are held by the government. It should never have gotten in the student loan business. In my opinion, the final responsibility for the loan should rest on the institution where it was used. Make the college stand behind the value of the degree they confer to the student. Make the college responsible for selecting students who are most likely to finish their degree. With million- and billion-dollar endowments, the funding pool is available for that. (And if the loans are made to credit-worthy students, that pool would generate income for the school.)
When you continue to earn $20k more than a high school grad, a low credit score isn’t much of a barrier. And unlike me, they aren’t dependent on security clearances to get jobs either.
So, let’s talk about an appropriate penalty. How should we penalize people who want student loan forgiveness?
(note: this is from the government. If Jeff Bezos wants to use his money to pay off the student loans taken out by Amazon employees, I say let him).
