|President Obama can do three things|
right now to help student-loan debtors
1. Tax Consequences of Forgiven Student Loans. Currently, students whose student loans are forgiven based on disability or because they participated in the Income Contingent Repayment Plan face a federal-income tax bill because the forgiven debt is considered income by the IRS. President Obama could issue an Executive Order or direct the IRS to draft a regulation that would shield people with forgiven student loans from a federal income tax bill.
2. Garnishment of Social Security Checks. In the infamous Lockwood decision, the U.S. Supreme Court upheld the garnishment of Social Security checks of elderly people who defaulted on their student loans. President Obama could simply tell the Department of Education and the student-loan guarantee agencies to stop garnishing Social Security checks as a means of collecting on defaulted loans.
3. Placing Bankrupt Students in the Income Contingent Repayment Plan. At the urging of the student-loan agencies, some bankruptcy courts have placed insolvent student-loan debtors in the Income Contingent Repayment Plan, which obligates them to pay a portion of their income toward their student loans for 25 years. The consequence of this maneuver is to deny student-loan debtors the bankruptcy relief that they reasonably deserve. President Obama could issue an executive order directing the Department of Education and the student-loan guarantee agencies to allow bankrupt student-loan debtors to discharge their college-loan debt in bankruptcy and not ask bankruptcy courts to put these unfortunate people in 25-year repayment plans.
President Obama could do all these things unilaterally without legislation or Congressional approval, and they would not cost taxpayers a significant amount of money. After all, how much money can the Department of Education collect by garnishing people's Social Security checks?
To a certain extent these actions would be merely symbolic; they wouldn't do much to address the huge problem of mounting student loan debt in this country. Nevertheless, if President Obama would do these three things, he would demonstrate his sincere concern about the student-loan debt crisis in a tangible way. And I think a lot of Americans would appreciate the gesture, including the 37 million people who have outstanding student-loan debt.
Giroux, G. (2012, May 18). Obama campaign ad focuses on higher education. Bloomberg's Political Capital Web Site. http://go.bloomberg.com/political-economy/2012-05-18/obama-campaign-ad-focuses-on-higher-education/