During times when I absolutely cannot stand to listen to one more horrific story of children being massacred, political corruption, or reports from Ukraine, I stream vintage TV. The current facilitator of my distraction is the series “Parenthood,” which features a character with Asperger’s syndrome, although, in reality, this child does not have the condition. In almost every episode, this character screams “It’s not fair!” about various issues. I suspect that many people feel exactly this way about President Joe Biden’s pledge to eliminate (some) student debt. I’m conflicted because I feel the same way about allowing debts to be reduced or eliminated in bankruptcy. It’s a conundrum.
Ordinarily, federal student debt cannot be discharged or reduced by bankruptcy. There are exceptions if the student borrower files a separate “adversary” bankruptcy claim and can prove extreme hardship. Even if not approved, filing this claim could reduce the borrower’s monthly payment amount.
On the other hand, credit card debt and other debts owed to suppliers and service providers can be reduced or even eliminated in approved bankruptcy judgments. As a result, some of these creditors are forced out of business because the people who hired them are absolved of their debt. The bankruptcy process is supposedly means-tested to determine how much debt can be obliterated and what assets must be forfeited to accomplish that. Yet some of the richer people in our world are allowed to file for bankruptcy multiple times, all the while shielded by their corporations. Since the corporation is liable for the debt, the individual is allowed to keep multiple homes and other assets without any effect on their credit rating. Fair? Let’s ask some of the small businesses that suffered when former President Donald Trump’s various corporations were granted bankruptcy relief.
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Truthfully, what bothers me most about the student debt relief issue is the fact that nearly 40% of the people who have delinquent student debt in 2021 never finished college, according to the Department of Education. It wasn’t only those students deceived by fictitious promises of a great education and fantastic job prospects but students at reputable institutions who simply didn’t finish, often because life got in the way.
When the draft was still in force, boys could be called up if they didn’t carry a full load of classes. Women were not subject to the draft, of course, but both sexes could suddenly find themselves with families to support and no time for school. And yet, such things happen in life, don’t they? If you total a new car you bought in installments — you still owe for that car. If an airplane slams into your mortgaged home, you still owe the lender. Hopefully, you took out insurance for the latter two catastrophes. But insurance was not an option for students seeking loans. Not surprisingly, according to the Education Department, women currently owe close to two-thirds of delinquent student debt. Then there’s the issue of people carrying student debt into retirement.
The federal Office of Student Aid says people between ages 50 and 61 amassed the highest average student loan debt in 2021 as they sought training for new careers. These new loans are not yet delinquent. But for those over 65 on fixed incomes, that’s not always true. In the recent past, benefits for Social Security, veterans, and railroad retirement could only be garnished for delinquent child support and federal income taxes. This is no longer the case. Now, they can also be garnished for delinquent federal student loans, even though various (usually means-tested) programs can offer relief for seniors in such circumstances.
Since we’ve discharged debt to many industries previously, and we allow individuals to shield personal income and assets by way of corporate ownership, couldn’t we consider some relief for the poorest of us carrying student debt — particularly those who never finished school? Essentially, they paid for a product (an education) that they never received. Still, any relief sought should be means-tested and not across the board.
Is it fair that many people have paid off their student debts without receiving any absolution, while these new folks will have their debt reduced or removed? Maybe not. But to quote my mom in this regard, “Nobody ever promised you fair.”
Janet Y. Jackson is a Post-Dispatch columnist and Editorial Board member.