DeSantis unveils economic plan, aim to ease process for discharging student loans through bankruptcy
This article came by way of Dale Coberly. In particular, Dale thought making student loans the responsibility of universities rather than students was enlightening.
Florida Gov. Ron DeSantis unveiled a new economic plan Monday as part of his 2024 presidential bid that includes a goal of easing the path for student loans to be discharged through bankruptcy.
DeSantis’ “declaration of economic independence” includes 10 pillars that he says will “reverse the decline of our nation’s struggling economy and fight for the middle class.”
One of the pillars includes “reforming” the education system to “make universities, not taxpayers, responsible for the loans their students accrue” and to allow those loans to be discharged through bankruptcy “like any other loan.”
It is currently possible to get student loans discharged through bankruptcy, according to the Department of Education’s website, but the process has proven to be difficult. Under current department guidelines, student loan borrowers must, in addition to filing for bankruptcy, demonstrate to a bankruptcy court why repaying their student loan would cause “undue hardship.”
“I have sympathy for some of these students because I think they were sold a bill of goods. I think these universities knew that they could take all this federal loan money,”
DeSantis said Monday at a campaign event in New Hampshire.
“So we need to do things to make it better for our students to be able to have pathways for success, but it starts with holding these universities accountable.”
President Joe Biden has made sweeping efforts to forgive some student loan debt for borrowers, though the Supreme Court struck down his proposed program last month. Millions of borrowers are set to resume student loan payments this fall after a hiatus that has been in effect since 2020.
DeSantis’ plans come as the governor is under fire for new teaching standards that require middle schoolers to be instructed that “slaves developed skills which, in some instances, could be applied for their personal benefit.” Many Black Republican lawmakers, such as Rep. Byron Donalds (R-Fla.), have taken issue with the new standards.
The economic plan is the third major policy announcement DeSantis has made since launching his campaign — following his plan to secure the border and a plan for a “mission first military” — and comes as he continues to lag in polls. In a new New York Times/Siena College poll released Monday, former President Donald Trump held a 37-percentage point lead over DeSantis in the GOP presidential field.
The same morning as DeSantis’ unveiling event in New Hampshire, the state’s governor, Chris Sununu, told conservative talk radio host Hugh Hewitt that DeSantis “shouldn’t worry about policy stuff.”
“You are the leader, you are the winner, you’re the person that is going to inspire the rest of the party to get bigger and more excited,” said Sununu, who recently announced he will not run for reelection in the Granite State.
“So it’s really about, kind of, a little bit of that charisma and leadership that they’ve got to show to folks one-on-one.”
DeSantis said Monday that he rolled out his economic plan to declare “economic independence from the failed elites and policies that have harmed this nation’s middle class.”
“We are not cogs in a global economic empire,” DeSantis said, adding:
“The goal of our Declaration of Independence is simple. We the American people win, they lose.”
Well, yes, student loans should be dischargeable through bankruptcy, like all other loans. This puts the risk where it belongs, on the lender.
“make universities, not taxpayers, responsible for the loans their students accrue”
I don’t understand this. State universities are funded by the taxpayers. Where will they get the money to lend, if not from taxpayers?
I hate to give an inch to the Meatball, but any solution to this problem begins with making student loans dischargeable through the bankruptcy process.
SW:
Yes, indeed. Mr. Biden needs to backstep on his bankruptcy stance which caused this mess.
@Bill,
Yes, Joe was no hero on student loans.
I understand that the idea of collateral on a loan is different between student loans and, say, car or home loans. But at the end of the day, lenders need to monetize risk.
I assume that ‘monetizing risk’ includes recovering losses by selling repossessed assets? You can’t reposses an education.
well, the article came from Politico. I will not vote for DeSantis because I think he is more dangerous than Trump. But his statement about student loans is very close to what I believe. and I think that means that we should find a way to capitalize on it.
As for where the money will come from… the money is already spent. If the scchools were the lenders, I think DeSantis;, and my, point is that they should take responibilty…as all lenders should ultimately bear the risk that the lendee will not be able to repay the loan….makes them more creful about who they lend to..especially if they are the ones providing the service that the loan is paying for. I have been asking the Student Loan forgiveness people for some time now who will be hurt if the loans are forgiven, and I have never gotten an answer.
As for the loans being fogiven by bankruptcy…I did not know that was possible from what I have been hearing. If it’s just a matter of “demonstrating to a bankruptcy court…well isn’t that the way bankruptcy works?
We need to make sure DeSantis is really saying this, that it has a chance of catching on, and that we know what WE are talking about when we are arguing for forgiveness, If the loans were being made by the school, they were effectively lending money to themselves and exposing the borrower to debt slavery by making the loans non-dischargeable, especially if , as seems the case, the “education” being paid for was not worth the cost.
I am a little worried about those who are worried that “the taxpayer” will bear the cost.
good place for a smart MMT-er to step in and explain how money works to those people.
DC,
Yes sir.
RCW
Mr. Biden needs to backstep on his bankruptcy stance which caused this mess.
[ By the way, a Republican Secretary of Education spoke to just this point about student loans in the late 1980s. I will in time remember where I read this fairly recently. ]
Mr. Biden needs to backstep on his bankruptcy stance which caused this mess.
[ By the way, a Republican Secretary of Education spoke to just this point about student loans in the late 1980s. ]
The issue of how a poorly structured student finance or loan program could increase the tuition and fee costs of colleges and prove self-defeating for students was discussed by William Bennett who was Secretary of Education from 1985-1988 under President Reagan.
I happened to notice this mentioned recently in a New York Times discussion.
ltr
thanks for the info. a link might be helpful, but it might run into Tmes paywall. google search might work with info you provided.
ltr
i did a quick google search. looks to me like Bennett was one of the bad guys
if you can find your time article it might help.
well, yes. monetize risk.
loan shark? price gouger? predatory loan? debt slavery? debtor’s prison?
“they hired the money, didn’t they?” [famous quote from Calvin Coolidge]
“your money or your life”? after all, a mugger is taking quite a risk. why would he do that if he couldn’t monetize it?
“a pound of flesh”? [famous quote from william shakespeare regarding monetizing risk.]
or, as George Bernard Shaw said in 1904, “John Bull’s Other Island”… oh, dear, it is rather long, but the whole play is only about fifty pages. you really should read it for yourself. it’s funny, and it talks about “an old financial hand.” it could open up a whole new world to you.
Coberly,
Thanks for keeping it real.
RC
RC
thanks. i try. help me to keep it real.
Overall, the trouble with ‘Student Loan debt’ is that it’s HUGE.
And the claim is that the bankruptcy process is predicated on the notion that assets can be seized & sold. An ‘education’ does not fall into this category. I dunno, has this just been an excuse for not permitting bankruptcy for student debt?
As for Desantis, on this issue he just seems to be trying to ‘disadvantage’ Trump. IMO this is just not going to work for him. Trump may be (seems to me to be) a monster, but at least he is ‘charismatic’, as far as his base is concerned. Desantis can continue fighting him for the Florida vote. We’ll see how that works for him.
@Fred,
“And the claim is that the bankruptcy process is predicated on the notion that assets can be seized & sold. An ‘education’ does not fall into this category.”
Yes. That’s what I meant by collateral in my comment above.
Of course, that doesn’t mean that student loans can’t or shouldn’t be dischargeable by bankruptcy. It only means that lenders shoulder the risk of bankruptcy and have to monetize that risk for student loans, just as they do for all other loans.
Evidently, Biden thinks that asking lenders to absorb $4T worth of debt would be asking too much. Go figure.
@Fred,
On what evidence do you base the assumption that there would be $4 trillion in bankruptcy losses if student loans could be dischargeable by bankruptcy?
According to Forbes, there is $1.75 trillion in total student loan debt (including federal and private loans). I seriously doubt that 100% of all borrowers would declare bankruptcy and be approved.
https://www.forbes.com/advisor/student-loans/average-student-loan-debt-statistics/#:~:text=The%20federal%20student%20loan%20portfolio,by%20about%2043%20million%20borrowers.
I stand corrected. (I’ve seen $4T I know, but not today.)
Today, I see $1.64T to $1.77T .
Student Loan Debt Statistics
Student loan debt in the United States totals $1.774 trillion. The debt accumulation rate is slowing, and recent analytics indicate that most consumers manage their student loan debt responsibly.
The outstanding federal loan balance is $1.644 trillion and accounts for 92.6% of all student loan debt. …
(The notion is that such federal debt can just be written off, with the stroke of a Presidential pen. Or maybe something almost that easy?)
But still,
Millennials Face Record (nearly) $4 Trillion Debt Crisis
A Wall Street Journal analysis of Federal Reserve data reveals a concerning financial situation for people ages 30 to 39, which constitute the majority of the millennial generation.
The demographic accumulated nearly $4 trillion in debt during the fourth quarter of 2022, reflecting a substantial $140 billion rise from the preceding quarter. The surge represents a 27% increase since late 2019, constituting the most significant upswing in debt accumulation since the 2008 financial crisis. …
Americans in Their 30s Are Piling On Debt
WSJ – February 25 – behind a paywall
Danielle Smith and her family thought they had finally escaped the paycheck-to-paycheck cycle they had fallen into. They saved money during the pandemic while they were stuck at home. They used stimulus checks to chip away at $20,000 in credit-card debt and enjoyed a reprieve from monthly payments on their $160,000 in student loans. …
Hey Fred:
I would encourage you to be on topic to posts. Open threads are available (when I remember to create them) for open comments on any acceptable and reasonable topic.
I consider that the topic here ultimately is why Joe Biden refuses to simply wipe out sudent debt, or arguably why bankruptcy is not permitted for student debt. If you think it’s just about why Ron Desantis wants to allow such bankruptcy, and that’s actually important, then fell free to remove my posts.
Presumably Desantis thinks this will get him some votes, at the expense of Donald Trump. Nuf said?
… In the late 1990’s and early 2000’s, Biden was one of the chief architects of bankruptcy reforms that made it extremely difficult for borrowers to discharge student loan debt in bankruptcy. The restrictions initially only applied to federal student loans, but were subsequently expanded to include private student loans in 2005. …
… Trump has opposed widespread student loan forgiveness, bankruptcy reform, and debt-free college. He has proposed privatizing the federal student loan system, although it is unclear what the implications of that would mean for borrowers if enacted. …
Trump Vs. Biden On Student Loans: Where They Stand
Forbes – August 25, 2020
some miscommunications going on here.
first..all lenders “monetize” their loans: they charge interest. they should know there is risk in lending money and they need to take responsibility for that risk: not get the congress to write laws that expose people to debt slavery. we have, or had, bankruptcy laws because even the big money people understand the risk of a population trapped in loans they can’t repay. I do not know that the lack of “collateral” has any legal bearing on the operation of bankruptcy laws. the debtor obviously has a responsibility to repay what he borrowed….but not to the point of financial death.
second… Dobbs appears to have assumed thatt the 4T debt was all “student debt.” we all make mistakes like this [i may be making it right now] but it is typical and reliable that some people make mistakes like this all the time: get a single “fact’, get it wrong, then project it as the explanation, or excuse, for the whole situation.
It worries me a lot that young people are taking on so much debt. it is possible they have no choice in the current economy, it is also possible they just lack prudence: normal economic common sense. it is possible the student loan law was written at a time when the population at large was showing a willingness to borrow themselves into unsustainable debt, declaring bankruptcy, and then starting over again…explaining to some extent why such a bad law was written.
third..i have no doubt that DeSantis is “just trying to” enhance his political position. but that is not the point. the point is that his doing this gives the “forgive student debt” folks a huge opportunity to take advantage of his doing so, to get their “demand” a hearing and the sympathy of a lot of voters who so far don’t really care about the issue.
what i see here is what i would call the typical “take an issue and scatter it to the four winds by using it as an excuse to express their previously prepared opinions about everything remotely related (sounds the same) issue. and so nothing gets solved. the Congress is only interested in dividing the spoils among their sponsors.
and there IS a question of whether Biden can just wipe out the loans with a stroke of the pen. some evidience that he is doing just that up to a point…a point short of justice and relieving people of an unbearable burden. But without actually knowing all the facts, and trying to think through all the factors, all we do is add noise to the “debate.”
in the real world loans are forgiven all the time. and in the real world some loans are predatory. these are not necessarily the same thing.
it looks to me, based on incomplete evidence, that the debts should be wiped out at the stroke of a pen. it would help everybody and hurt nobody. the law was badly written: i invitation to fraud and abuse.
but we probably need to re-educate “the young” that borrowing is not always a good idea, and they can’t expect to be bailed out every time they find themselves in trouble. but that’s a separate issue.
You continue to mislead.
Property can be repossessed & resold. Not true for ‘educations’.
Apparently you think this is unimportant.
Oddly enough, college ‘educations’ can prove to be practically useless in the job market. And therefore worthless. If yer lucky, of some value as ‘credentials’.
@Fred,
And yet, the unemployment rate for college grads is lower than for those with less than a college degree.
“In February 2022, the unemployment rate for people 25 years and older who were high school graduates with no college was 4.5 percent. Those with less than a high school diploma had a similar unemployment rate, 4.3 percent. The unemployment rate for people with some college or associate degree was 3.8 percent. Those with a bachelor’s degree or higher had the lowest unemployment rate at 2.2 percent.”
https://www.bls.gov/opub/ted/2022/high-school-graduates-with-no-college-had-unemployment-rate-of-4-5-percent-in-february-2022.htm
Good for them! Didn’t work for me, until the Vietnam War (and the draft) was over. But at least I got to serve my country.
Just because it works for most, doesn’t mean it works for all.
And if it cost them a lot… That can be a problem.
Dobbs
I think I only mislead those who prefer to be lost. please see related comment at the end (presently) of this thread.
meanwhile i think i may have been the person who introduced AB to the “fact’ that student loans were “without collateral” and therefore shocking interest rates might arguably be justified. note arguably…at the end of the day debt slavery cannot be justified. and, hell, i might as well say it here instead of waiting for a giant summing up at the end of the thread: i did not think you were off topic. bill and I have very different ideas about “off topic” sometimes.
I do think that you are pretty careless much of the time about the “facts” you select…not off topic so much as wildly non-sequitur: more “sounds like” that any discernible logical connection to either my argument or your own,
you only mislead yourself. but sometimes end up on the side of the angels in spite of yourself.
‘Dobbs appears to have assumed thatt the 4T debt was all “student debt.”’
I misremembered the amount. $1.6T-$1.7T is a large amount to ‘forgive’, but at least less than half of $4T. However, our recent leaders (Biden, Trump (?)) seem to have decided either amount is too much to cancel.
Dobbs
the way commens are organized here, and the delay between comments and replies appears, means that i did not see your correction until after i commented on the original “mistake.” even at that, i think my comment helped explain the mistake. it is not a crime to make a mistake, nor a crime to point it out, or even, as is my won’t, to try topoint out how it happens.
Frankly, the difference between 4T and 1.6T is meaningless to people… these might as well be imaginary numbers. SS liars routinely throw around numbers like 20T or even 200T just because they sound scary. I could say there are six trillion atoms in the point of a pin. but it’s still only the point of a pin.
i make enough mistakes of my own, but “won’t” for “wont” is purely spell-check’s mistake. i am glad that computer intelligence has reached a level to imitate human arrogance. what can possibly go wrong go wrong go wr
I think the ‘never explain, never apologize’ dictum is best for typos is best, as I make more than my share.
‘the difference between 4T and 1.6T is meaningless to people’
Is that true? Both are pretty big amounts, and one is 2.5 times the other.
But at least either could be covered by one or two of those trillion dollar platinum coins the guv’mint could mint if they dared or cared to.
Dobbs
and there are five trillion miles in a light year. do you really have any idea what that means?
oooh! big number!
the reason one number is bigger than the other is that one tells you tht that there is more of something than something else, who knew?
the bigger number is about 40 thousand dollars per person. the smaller number is about 30 thousand dollars per person. so maybe student debt is only about half of total debt per person? (serious rounding going on here.)
if those people paid about 10% of their income toward paying down their debt, they would be debt free in about eight years. i don’t know if “debt” includeds mortgage debt. see if you can figure out how big a number you can scare yourself with by calculating that, (resonable estimates accepted.)
You may not know that a parsec is even longer than a light-year.
And neither one is a time unit!
Obama administration urges no bankruptcy relief for student debt
UPI – October 20, 2015
(Joe Biden, the elder statesman of the Obama administration seemed to have much to do with this.
I would like to think Biden learned how to be more progressive from his experiences as Obama’s VP. But not in all things. And after all Obama was also a centrist.)
yes, I remember Obama’s purple speech. i was as thrilled as everyone else. i did not realize at the time that it was typical Harvard graduate speak for “no prinicples at all.”
not that “progressive” actually means “morally correct.” they both fall well short of “knowing what you are talking about.” knowing enough at least to take in the other guy’s point of view…something that happens , if ever, in the few seconds of silence before your mind assembles it’s own devastating reply.
No doubt Dobbs has not read my reply to his “you continue to mislead” comment. perhaps he does not get notification of comments [neither do I any more for unexplained reasons].
this is the sort of thing that leads to those Weehauken moments.
Sure I did. I just try not to respond to ad hominem comments. You should too.
Dobbs
actually, yours was the ad hominem, mine was trying to help you feel better about being wrong.
Saying that you mislead was not ad hominem. It’s just your style.
What happened in Weehawken New Jersey?
On July 11, 1804, Alexander Hamilton and Aaron Burr met on the dueling grounds at Weehawken, New Jersey, to fight the final skirmish of a long-lived political and personal battle. When the duel was over, Hamilton would be mortally wounded, and Burr would be wanted for murder. …
Well, at least people remember Hamilton. Who remembers Burr.
Wasn’t he the guy who played Perry Mason all those years.
Who remembers he started out as a wife-murder in ‘Rear Window’?
OOPS. A typo. ‘wife-murderer’
only in New York where Hamilton’s in-laws ruled politics. Hamilton had defamed Burr and would not retract or even discuss..which might have resolved the issue. Burr had reason to call him out. Hamilton had no particular reason to accept the duel. George Roger Kennedy wrote a book about this. gives a rather different picture than the opera.
Silly me, I thought that the fact that an education is not recoverable collateral was the REASON for a GSL program. Discharge the bad debts through bankruptcy and after the dust settles the government is on the hook. This is not debt forgiveness, it would be orders of magnitude less expensive than simply forgiving all debts. It is an opportunity for equity in the process. Opposing this simple remedy seems to be simply outing yourself as a compatriot of the scammers.
SW
silly you. i have no idea what you are talking about. take a look at the wiki article on history of student debt. it’s more complicated than what you hear on the news.
The GSL Program
The FFEL program was known formerly as the Guaranteed Student Loan (GSL) program. The GSL program, originally authorized in the Higher Education Act of 1965, empowered state and private nonprofit agencies to guarantee student loans and to establish loan insurance for lenders who did not have access to state or private nonprofit agencies. The GSL program, renamed the FFEL program in the Higher Education Amendments of 1992, has experienced enormous growth. …
Good Job, Fred! Read more.
Remind me to stay away from Weehawken.