Thursday, June 6, 2019

Student Borrowers Beware: Joe Biden is a Lackey of the Banks

Fourteen years ago, Congress passed a so-called bankruptcy reform law at the behest of the banking industry. One provision--inserted solely for the benefit of the banks—made private student loans non-dischargeable in bankruptcy unless the debtor could show “undue hardship.” The banks justified this heartless legislation as a way to reduce interest rates on private student loans. They argued that the additional protection for creditors would make it possible for banks to loan students money at a lower interest rate because defaulting borrowers would find it virtually impossible to discharge their private college loans in the bankruptcy courts.

This legislation benefited Sallie Mae, Wells Fargo and other major players in the private student-loan market, but the U.S. Department of Education issued a report in 2015 arguing that this provision should be repealed.

This is what the DOE report had to say:
There has been no evidence that the 2005 changes to bankruptcy caused interest on student loans to decline or access to credit to increase significantly. As private student loans generally do not include the consumer protections, such as income-driven repayment plans, included in federal loans, the undue-hardship standard for bankruptcy discharge leaves private student loan borrowers in financial distress with few options.
According to an article in International Business Times (IBT), Senator Joe Biden was an enthusiastic supporter of this Fat Cat Assistance Act, which made it harder for insolvent student-loan debtors to obtain bankruptcy relief. As IBT’s David Sirota observed:
Though the vice president has long portrayed himself as a champion of the struggling middle class--a man who famously commutes on Amtrack and mixes enthusiastically with blue-collar workers—the Delaware lawmaker has played a consistent and pivotal role in the financial industry’s four-decade campaign to make it harder for students to shield themselves and their families from creditors, according to an IBT review of bankruptcy legislation going back to the 1970s.
Indeed, Ed Boltz, who was president of the National Association of Consumer Bankruptcy Attorneys in 2015, observed that “Joe Biden bears a large amount of responsibility for passage of the bankruptcy bill.” In fact, the New York Times reported that Biden voted for the bill four times: in 1998, 2000, 2001, and in March 2005, when the bill finally passed the Senate by a vote of 74 to 25.

And—surprise, surprise!—as of 2015, the financial industry had donated $1.9 million to Biden over the course of his career. Now Joe is launching another campaign for the presidency.

So if you get an opportunity to vote for Joe Biden, keep this mind: he is a lackey of the banks. And if you are a student-loan debtor who supports Mr. Biden's presidential bid, then you are an idiot.


Christopher Drew & Mike McIntire. Obama Aides Defend Bank’s Pay to Biden Son. New York Times, August 24, 2008.

David Sirota. Joe Biden Backed Bills to Make It Harder for Americans to Reduce Their Student Debt. International Business Times, September 15, 2015.

U.S. Department of Education. Strengthening the Student Loan System to Better Protect All Borrowers. Washington D.C., October 1, 2015. [Note: This DOE report has been removed from the web.]


  1. If student debtors can discharge their loans in bankruptcy, then private banks will either restrict who they loan to, and/or leave the student lending business due to huge losses.

    Back in 2005, this was considered a bad scenario. Today with the federal government able to make about 90% of the loans, we would say 'who cares?'

    The whole liberal-Democrat model under Clinton and successors was to 'leverage' private lenders to do socially constructive things.
    This was largely a botch but we did not know that in 2005.

    1. I call BS. Federal student loans were made no dischargeable in BK back in 1998 under similar Democratic leadership and college costs skyrocketed shortly thereafter. Interest rates did not go down either. In other words, there was seven years of data before 2005 showing that non-dischargeability did not help borrowers yet private student loans were made nondischargeable in BK anyway! The 2005 and 1998 changes lined the pockets if the colleges, government, and private lenders, borrowers were left out in the cold.

  2. The ABI recommended that anyone earning less than 175 to 200 per cent of poverty would automatically qualify to have loans discharged in bankruptcy.....

    We suggest two thresholds. First, any borrower whose household income averages less than 175% of the
    national poverty guidelines — currently $21,245 for a household of one — for the seven years before a
    bankruptcy filing be considered to have undue hardship. We recommend increasing the figure to 200%
    of the national poverty guidelines at the time of a bankruptcy filing in two situations: retirees on fixed
    incomes, and persons providing support for an elderly, chronically ill, or disabled household

    This is progress!