History of Discharging Student Loans in Bankruptcy
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)
Joe Biden’s Role in the Student Debt Crisis Dates to the 1970s (theintercept.com)
History of the Bankruptcy Discharge for Student Loans (cappex.com)
Where Does Joe Biden Stand On Student Loan Debt? (forbes.com)
How Biden helped create the student debt problem he now promises to fix | US elections 2020 | The Guardian
President Biden changing his mind on student loan forgiveness ‘is a tremendous victory,’ Rep. Pressley says (msn.com)
Joe Biden Backed Bills to Make It Harder for Americans to Reduce their Student Debt | Consumer Bankers Association
Well, that right there is enough to explain his inexplicable loss of support among young voters.
In a prior comment by me.
If the interest rate was held at 2% (Warren suggested this rate) which Akers, Chinagos, Delisle, etc. scoffed at. Limit the payment to $250/month. It would take 166 months (14 years) for those 62 and older with an average debt of $40,000. Think that is possible?
How about 51 – 61 with a debt of $44,000? Same interest rate. It would be 208 months or 17 years. Is either reasonable when they should be slugging money away for retirement or living off of it.
The pushback I get on this stuff is unbelievable. Much of this took place in 2005 with the Bankruptcy Abuse Prevention and Consumer Protection Act https://www.theguardian.com/us-news/2019/dec/02/joe-biden-student-loan-debt-2005-act-2020.
Among ALL living, serving public officials, Joe Biden deserves the MOST CREDIT OF ALL for creating the student loan crisis.
Bankruptcy is the key, and Biden is the guy who got it gone from student loans.
SMH. I can only hope that S.2598 passes quickly, and we can put this catatastrophe in the rear-view mirror.
Other visitors are welcome too! The story needs to get out more. They are trying to minimize this issue. In many cases $10,000 will never touch principal and it will go straight to interest and fees.
My loan was in the 60’s. The whole experience was different from the kids today, and even the middle aged adults of today.
The whole point of the loans was to help the student prepare for a better life than they would have had with less education. If that cannot be accomplished, then why not just write it off as a failed project? If someone has paid all they can without hardship (a generous reading, preferably) for two decades – then just call it even and write off the loss.
Is this reasonable anyone???
It doesn’t look reasonable to me. Certainly not the “Balance Overview.”
And it would be interesting to know why Biden favors it.
But, at the risk of incurring more misunderstanding and hate, I think you need to work harder on your messaging…why are you getting “pushback”?
I think “no means test” [AOC?] doesn’t help. I also think ignoring the fact that other people suffer abuse at the hands of lenders, and the revised bankruptcy laws, does not help. But I don’t have a whole lot of confidence in what I thin
Unfortunately for your side (which is mostly my side) no one has a lot of confidence in anything anybody else says anymore. My instinct is to agree with Jane…write the whole thing off as a failed experiment..but you have to sell that to the masses, not to say the moneyed interests.
Meanwhile it’s a tricky thing to stir up hate against Biden when the Enemy is at the gates.
No one is stirring up hate for Biden. Biden mostly owns this as he is the one in the last 30 years who has actively campaigned against students with his “Come on Man,” I did it you can too. In 2005, was the last chance for students to have an opportunity to declare bankruptcy. Biden helped to sponsor the 2005 Legislation.
2.4 million people with a 2% interest rate and a maximum payment of $250/month of a $40,000 balance would take more than a decade to pay off the balance. And this is for 61 year-olds. Well in their seventies they might pay it off.
I think you need to google it and see for yourself. I listed six articles at the end. There are more scattered within the text. My messaging is clear. These loans would not be tolerated for consumers.
I can not help you more than what I have. It might be better if you do not read my posts on Student Loans.