That old wheel is gonna roll around once more
When it does it will even up the score
Don't be weak, as they sew, they will reap
Turn the other cheek and don't give in
That old wheel will roll around again
This Old Wheel
Jennifer Ember Pierce, songwriter
Sung best by Johnny Cash
If you haven't read Charles Dickens by now, just skip it.
Dickens is well worth reading for his descriptions of injustice in Victorian England: the workhouses, the brutal schools, debtors prisons, and the mercilessness of English law. But contemporary America is descending to the depths of social injustice every bit as sordid as conditions in Dickens' England. If you don't believe me, read Matthew Desmond's Evicted, published less than two years ago.
In particular, millions of student-loan debtors are suffering just as much as the characters in Oliver Twist, David Copperfield or Pickwick Papers. College debtors are defaulting at the rate of 3,000 a day. The U.S. Department reports a three-year default rate of 11 percent, but that figure is meaningless. The five-year default rate for a recent cohort of student debtors is 28 percent, for students attending for-profit schools it's 47 percent.
And the default rate only tells part of the story. Millions of people are in the economic-hardship deferment program--excused from making monthly loan payments while interest piles up. Now we see people stumble into the bankruptcy courts owing three and even four times what they borrowed.
Our government treats all student-loan defaulters like criminals. We aren't hanging and deporting debtors like the English did back in the nineteenth century, but they are treated pretty rough.
For starters, there is no statute of limitations on an unpaid federal student loan. Even if you borrowed the money so long ago you can't remember the school you attended, the government's debt collectors can come after you.
In Lockhart v. United States, our lovely Supreme Court upheld the law permitting the government to garnish the social checks of elderly student-loan defaulters. The vote was 9 to 0. There were no liberals on the Court the day the Lockhart decision came down.
And Congress and the courts have conspired to deprive distressed student-loan debtors access to the bankruptcy courts. Under the "undue hardship" standard nestled in 11 U.S.C. sec. 523(a)(8), debtors cannot discharge their student loans unless they can show undue hardship, which the courts have interpreted harshly.
In recent years, there have been some compassionate and sensible decisions by the bankruptcy courts: the Abney case, the Lamento decision, and the Acosta-Conniff decision out of Alabama (which was reversed on appeal).
But the Department of Education, Educational Credit Management Corporation, and other debt collection agencies have appealed many of these decisions; and few student debtors have the financial or emotional resources for court fights that stretch on for years. In the Hedlund case, for example, a graduate of Whittier Law School fought in the federal courts for ten years before he finally won a partial bankruptcy relief from his student loans.
Several federal appellate courts have softened the "undue hardship" standard somewhat: the Roth decision by the Ninth Circuit Bankruptcy Appellate Panel, the Seventh Circuit's Krieger decision, and the Eighth Circuit BAP Court's Fern opinion.
By and large, however, the bankruptcy courts have abdicated their role of providing honest but unfortunate debtors a fresh start. No wonder the myth prevails that it is impossible to discharge student loans in bankruptcy. And the Department of Education perpetuates this myth by opposing bankruptcy for people who are in severe distress, like the quadriplegic in the Myhre case.
Now we are enduring the Trump presidency. Betsy DeVos, Trump's Secretary of Education, has a nasty disposition toward student-loan debtors. She is busily dismantling the Obama administration's modest initiatives to rein in the corrupt for-profit college industry. The Republican dominated House Education Committee recently released a bill that would do away with all student--loan forgiveness programs. And a bill has just been introduced to protect attorneys from being sued for engaging in unfair debt collection.
America's financial industry, cheered on by the business news channels, chirp the Panglossian notion that Americans are living in the best of all possible worlds. The stock market soars ever skyward, and the economist says we have virtually reached full employment. The economy is growing at a healthy rate, and everyone is becoming wealthier.
But that's bullshit. The reality is this: millions of Americans are living day to day, burdened by consumer debt they can't repay. Student-loan indebtedness now exceeds accumulated credit card debt and car loans. Our Congress, our President, our Secretary of Education, and our courts are indifferent to the stark reality that we are constructing a society very much like Dickensian England.
Justice, Johnny Cash assures us, will eventually be restored. "That old wheel is gonna roll around once more. When it does it will even up the score." I hope Johnny is right. It will be a good sign if DeVos is forced from the Education Secretary's job and publicly disgraced.
Our government treats all student-loan defaulters like criminals. We aren't hanging and deporting debtors like the English did back in the nineteenth century, but they are treated pretty rough.
For starters, there is no statute of limitations on an unpaid federal student loan. Even if you borrowed the money so long ago you can't remember the school you attended, the government's debt collectors can come after you.
In Lockhart v. United States, our lovely Supreme Court upheld the law permitting the government to garnish the social checks of elderly student-loan defaulters. The vote was 9 to 0. There were no liberals on the Court the day the Lockhart decision came down.
And Congress and the courts have conspired to deprive distressed student-loan debtors access to the bankruptcy courts. Under the "undue hardship" standard nestled in 11 U.S.C. sec. 523(a)(8), debtors cannot discharge their student loans unless they can show undue hardship, which the courts have interpreted harshly.
In recent years, there have been some compassionate and sensible decisions by the bankruptcy courts: the Abney case, the Lamento decision, and the Acosta-Conniff decision out of Alabama (which was reversed on appeal).
But the Department of Education, Educational Credit Management Corporation, and other debt collection agencies have appealed many of these decisions; and few student debtors have the financial or emotional resources for court fights that stretch on for years. In the Hedlund case, for example, a graduate of Whittier Law School fought in the federal courts for ten years before he finally won a partial bankruptcy relief from his student loans.
Several federal appellate courts have softened the "undue hardship" standard somewhat: the Roth decision by the Ninth Circuit Bankruptcy Appellate Panel, the Seventh Circuit's Krieger decision, and the Eighth Circuit BAP Court's Fern opinion.
By and large, however, the bankruptcy courts have abdicated their role of providing honest but unfortunate debtors a fresh start. No wonder the myth prevails that it is impossible to discharge student loans in bankruptcy. And the Department of Education perpetuates this myth by opposing bankruptcy for people who are in severe distress, like the quadriplegic in the Myhre case.
Now we are enduring the Trump presidency. Betsy DeVos, Trump's Secretary of Education, has a nasty disposition toward student-loan debtors. She is busily dismantling the Obama administration's modest initiatives to rein in the corrupt for-profit college industry. The Republican dominated House Education Committee recently released a bill that would do away with all student--loan forgiveness programs. And a bill has just been introduced to protect attorneys from being sued for engaging in unfair debt collection.
America's financial industry, cheered on by the business news channels, chirp the Panglossian notion that Americans are living in the best of all possible worlds. The stock market soars ever skyward, and the economist says we have virtually reached full employment. The economy is growing at a healthy rate, and everyone is becoming wealthier.
But that's bullshit. The reality is this: millions of Americans are living day to day, burdened by consumer debt they can't repay. Student-loan indebtedness now exceeds accumulated credit card debt and car loans. Our Congress, our President, our Secretary of Education, and our courts are indifferent to the stark reality that we are constructing a society very much like Dickensian England.
Justice, Johnny Cash assures us, will eventually be restored. "That old wheel is gonna roll around once more. When it does it will even up the score." I hope Johnny is right. It will be a good sign if DeVos is forced from the Education Secretary's job and publicly disgraced.
 |
| Don't give in; that old wheel is gonna roll around again. |
References
Abney v. U.S. Department of Education, 540 B.R. 681 (Bankr. W.D. Mo. 2015).
Matthew Desmond. Evicted: Poverty and Profit in the American City. New York: Broadway Books, 2016.
Fern v. Fedloan Servicing, 563 B.R. 1 (8th Cir. BAP 2017).
Lamento v. U.S. Department of Education, 520 B.R. 667 (N.D. Ohio 2014).
Lockhart v. United States, 546 U.S. 142 (2005).
Krieger v. Educational Credit Management Corporation, 713 F.3d 882 (9th Cir. B.A.P 2013).
Myhre v. U.S. Department of Education, 503 B.R. 698 (W.D. Wis. 2013).
Steve Rhode. Proposed Law Will Make it More Likely Debtors Will be Sued Faster if in n Collections. Get Out of Debt Guy (blog), January 18, 2018.
Roth v. Educational Credit Management Corporation, 490 B.R.
908 (B.A.P. 9th Cir. 2013).
The Wrong Move on Student Loans. New York Times, April 6, 2017.
The Wrong Move on Student Loans. New York Times, April 6, 2017.
