Slavery in the United States ended
with the Civil War, but slavery in another form lived on. Slavery was replaced by a new kind of bondage,
whereby tenant farmers and share croppers basically became serfs to their
landlords and were as bound to them as if they were still human chattel. The age of the share cropper and the tenant
farmer did not end until the Great Depression, when the rural poor fled the
land and migrated to the cities or to California.
But those days are over, right? No
one in the United States is a slave or an indentured servant in the 21st
Sadly, our national government has
created a new form of bondage, which it imposes on college students who
participated in the federal student loan program but can’t pay back their
loans. Some of these former students are
burdened with student-loan obligations for decades--hounded by the loans they
cannot repay and the accumulating interest on their debt. Some of them have
become true indentured servants--bound to pay a portion of their income to
their federal student-loan creditors for a majority of their working lives.
The Disturbing Case
of In re Stevenson
If you think I have overstated my
case, you should read In re Stevenson
(2011), a recent decision by the U.S. Bankruptcy Court in Massachusetts. Janice
Stevens took out two student loans in 1983 to obtain additional education beyond
her bachelor’s degree. She took out a third loan in 1987 and another in 1992. By
2008, when she filed for bankruptcy, Ms. Stevenson was in her mid-50s, and her
total indebtedness was approximately $112,000, including accrued interests and
Ms. Stevens filed an adversary
proceeding in bankruptcy court, seeking to have her student loans discharged on
the grounds of undue hardship. Most
people would think she had a pretty good case. Although she had held good jobs over
the years, she had suffered periods of joblessness and homelessness and had sometimes
lived in homeless shelters. In addition, Ms. Stevenson had health issues--back
problems, high blood pressure and an autoimmune disease that required her to
During the bankruptcy proceedings,
Ms. Stevenson held a part-time job at Walgreens, earning less than $500 a
month. She supplemented her meager income with unemployment checks, which were
scheduled to terminate in a matter of months.
She also received a monthly subsidy from the State of Massachusetts to
help her pay her rent.
In spite of Ms. Stevenson’s bleak
economic circumstances, Judge Joan Feeney ruled that her student loans were not
dischargeable in bankruptcy. Judge Feeney concluded that Ms. Stevenson should
continue paying her loans through the federal government’s Income Contingency
Repayment Plan (ICRP), whereby she would pay a percentage of her income toward paying
down her loans for a period of 25 years.
At the end of the 25 year period, any remaining balance would be forgiven.
Did Judge Feeney Make
Ms. Stevenson an Indentured Servant?
When she came into bankruptcy
court, Ms. Stevens had unpaid student loans stretching back to 1983. Instead of
discharging her debt based on undue hardship, Judge Feeney concluded that Ms.
Stevenson should participate in a federal repayment program that would obligate
her to pay a percentage of her income toward her debt for 25 years.
If Ms. Stevenson goes on the ICRP, she will be nearly 80 years old when her payment obligations cease. By that time she will have been burdened with
student-loan debt for well over half a century.
It seems to me that the Income
Contingent Repayment Plan, which Judge Feeney endorsed for Janice Stevenson, is
nothing more than a modern version of indentured servitude, whereby student-loan
debtors like Ms. Stevenson pay a portion of her income to student-loan creditors
for the balance of her working lives.
The federal student loan program is
out of control, and the Income Contingency Repayment Plan is making life harder
for overburdened student-loan debtors, not easier.
Congress needs to do two things. First,
it should amend the bankruptcy laws to allow insolvent student-loan debtors to
discharge their debts in bankruptcy just like any other overburdened debtor.
Second, Congress should pass
legislation abolishing the ICRP option for stressed out student-loan debtors.
People who are insolvent deserve the fresh start that bankruptcy is designed to
give them. They don’t deserve to be saddled with a 25-year repayment plan that
will cripple them financially for the rest of their working lives.
In re Stevenson,
463 B.R. 586 (Bkrtcy. D. Mass. 2011).