Introduction to Bankruptcy Discharge for Student Loans
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I have been following the student loan crisis (and it is such) well over a decade. I have engaged certain politicians on the issue in public. I have worked with Alan Collinge at Student Loan Justice Org for well over a decade. He is in the process of completing his 1 million signature petition asking for relief from Joe Biden and Democrats.
My three children have each had loans and I parental loans funding their education. Been in forbearance when work was hard to find. I do not recall paying interest only which seems to be happening more so now.
Early in his senatorial career, Biden played a role in making it easier for students and parents to take out burdensome loans, spanning across several decades. Later, his landmark bankruptcy reform legislation made it nearly impossible to discharge student loans.
I hate to say it; but, Joe Biden has been involving himself in student loans by making them impossible to pay down or discharge due. He has claimed to have had parent and student loans for all of his children in the amount of $298,000. I do not think he worried to much about them as his net worth was $15 million. I did worry about ours as I had a second mortgage for a 15 years due to fighting legal battles.
History of the Bankruptcy Discharge for Student Loans, (cappex.com)
- Discharging student loans went from being able to discharge them pre-1976 due to undue hardship for the borrower and the borrower’s dependents or being in repayment for at least 5 years. Not terribly unreasonable.
- Excepted from discharge during the first 5 years in repayment in 1978.
- Exception to discharge (change) excludes deferments and forbearances from the 5-year exclusion period. 1979
- Exception expanded (change) to include loans insured, guaranteed or funded in whole or in part or made by a governmental unit 1979.
- Establishes a totality circumstances test for undue hardship requiring consideration of the borrower’s past, present and likely future financial resources. Andrews v. South Dakota Student Loan Assistance Corp. 1981
- Nonprofit exception to discharge is expanded to include private student loans that were made under “any program funded” in whole or in part. 1984
- Establishes a three-prong definition for undue hardship. Brunner v. New York Higher Education Services Corp. 1987 Brunner Test
- Borrowers may discharge student loans in bankruptcy after 7 years in repayment. Crime Control Act of 1990.
- In 1998, borrowers were no longer able to discharge student loans in bankruptcy after 7 years in repayment unless they can demonstrate undue hardship in an “adversarial proceeding.” I think this one includes pistols at 30 paces. Higher Education Amendments of 1998
- Qualified education loans, which include most federal and private student loans, are excepted from bankruptcy discharge. 2005. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
President Joe Biden has had his fingers in this along the way for a few decades. In 2001 Hillary Clinton convinced President Bill Clinton to veto a similar bill which Joe Biden supported. It was resurrected in 2005 with Joe’s support and signed by Bush in 2005.
Since 1970, Biden has been involved in Student Loans
A few of the more important issues. In 1990 Biden was the chief sponsor of the Crime Control Act, which lengthened the waiting period before a student loan borrower could discharge student loans. In 1997, he did not sign on to reversing some of the student loan changes recommended by a federal panel.
In 1998, Biden supported a change in the bankruptcy code that created an “undue hardship” standard for federal student loans, making it significantly more difficult for borrowers to discharge their federal student loans in bankruptcy. In 2001, Biden continued to oppose efforts to loosen bankruptcy restrictions.
In 2005, Biden supported a change in the bankruptcy code that made it much more difficult to discharge private student loan debt in bankruptcy by also applying a harsher “undue hardship” standard. Prior to then, private student loans were not treated much differently than other forms of consumer debt in bankruptcy. Timely, as private student loans started rapidly expanding across college campuses.
As we have experienced since 2021, Joe Biden has not shown much support for student loan relief. He did say he would support such and can do so. Less than 1% of all student loans have been discharged in bankruptcy.
I am beginning to believe there is a fear of some will be able to escape student loans. These loans were designed to be predatory eliminating any recourse through the lender and/or through the courts.
References (from my Library)