After a Long Pause, 30 Million Student Borrowers Will Begin Repaying Their Student Loans in February. Most Say They're Not Ready.

 Last year, in response to the COVID pandemic, the Department of Education pressed the pause button on the federal student-loan program. 

In March 2020, DOE allowed 30 million student borrowers to stop making payments on their student loans with no penalty and no accumulation of interest. DOE also stopped collection actions during this moratorium and stopped garnishing wages of student-loan defaulters.

That was nearly two years ago, and the party's almost over. Beginning on February 1, 2022, all these borrowers will be required to start making monthly payments on their student loans. 

And guess what? Almost 90 percent of fully-employed student debtors who responded to a survey said they are not financially secure enough to resume making loan payments. If they are forced to begin making payments on their student loans, they say, they will not have enough money to pay other bills--like rent, car loans, and medical expenses.

And the loan processors are sending signals that they aren't equipped to reboot the student-loan system for 30 million borrowers all at once. Scott Buchanan, a spokesperson for the loan servicers, said this:

From a resource perspective, from a system perspective and from a staffing perspective, this is going to put a lot of strain on the system.

Poor babies! Somehow I don't think the student-loan servicers are going to miss any meals.

 Nevertheless, three loan servicers are getting out of the business. As reported by Inside Higher Ed, the Pennsylvania Higher Education Assistance Agency, Granite State Management & Resources, and Navient announced that they will not be servicing loans when their federal contract expires.

Navient is turning over its loan servicing business to Maximus, a for-profit company that trades on the New York Stock Exchange.  (The current price is about $76 a share.) 

Maximus! The name sounds like one of the gladiators in that Russell Crow movie. Maximus was already in charge of collecting on defaulted student loans, a business that must be profitable. Bruce Caswell, Maximus's CEO, made $6.14 million in 2020. 

Some commentators say the job of jump-starting the student-loan collection process is so massive that DOE should extend the loan-payment holiday for a few more months. Others say DOE should forgive all student loan debt--now touching on $1.8 trillion. As Cody Hounanian, Executive Director of the Student Loan Crisis Center, put it:

We need to think diligently about what it means to start payments and if we're better off just extending this deadline and canceling student loan debt.

In my view, the federal government will not cancel all student debt, although DOE might extend the repayment holiday for a few more months. 

I think it is more likely that Congress and DOE will create more generous income-based repayment plans and make it easier for student borrowers to qualify for debt relief through the Public Service Loan Forgiveness Program.

Those reforms--if that is what one should call them--won't solve the student loan crisis. Tinkering with the system won't fix it. The only fair way to grant relief for distressed student-loan borrowers is to give them reasonable access to the bankruptcy courts.

Note: Quotations come from an article by Alexis Gravely published in Inside Higher Ed.

Willie Nelson: "Turn Out the Lights, The Party's Over"

Thinking About Going to Law School? Read ABA's Report on the Impact of Student Debt on Young Lawyers

 If you are thinking about going to law school, you should read a recent report titled "Student Debt: The Holistic Impact on Today's Young Lawyers."

According to the ABA's Young Lawyers Division, 90 percent of young lawyers who responded to an ABA survey said they had taken out student loans to finance their legal education. On average, these young attorneys reported taking on $108,000 in student debt.

The debt level for young Black lawyers was even higher--on average, young African American attorneys had accumulated student debt totaling more than $200,000.

Did any of these young lawyers feel regret about their indebtedness? You bet. 

Ninety percent of the respondents said that "their debt impacted their advancement toward major life milestones, and a majority of borrowers said they are anxious, stressed, regretful or guilty due to their loan debt" (as summarized by Insider Higher Ed's Alexis Gravely).

Did these young lawyers feel like they got good value for their law school tuition? Less than half (47 percent) said that their legal education was worth the cost.

How many respondents would still go to law school if they had the opportunity to live their lives over? Only about 6 in 10.  And only a little more than half of the lawyers surveyed (55 percent) said they would attend the same law school.

 In fact, more than half of the survey respondents who were dissatisfied with their law school said they wished they had chosen a school that charged lower tuition. About three out of ten said they wished they had chosen a school located in a better job market.

In essence, the ABA uncovered a high level of regret and dissatisfaction among young lawyers, feelings associated with their student debt.

Does the ABA have any suggestions for solving the problems that were identified by their survey? Not really. 

Here are the ABA's recommendations, which are mostly bullshit:

• "Expand access to and awareness of, free financial and mental health resources for recent law graduates . . ." In other words, free psychiatrists and debt counselors!

• "Continue to lead, sponsor, and support initiatives that holistically foster financial wellness and professional development of young lawyers."  I have no idea what that means.

• "Improve the Public Service Loan Forgiveness Program . . ."  Lots of luck!  

• "Improve financial literacy and awareness of the legal job market and the cost of law school attendance . . . ." In other words, law students should wise up.

• "Reform the federal student aid programs . . . ." Again, lots of luck.

The ABA had some more vacuous suggestions, but I won't bore you with them.

Note, however, the ABA did not advocate shutting down all the second- and third-tier law schools that are charging their students out the butt for their law degrees and then turning them out into a lousy job market.

Nor did the ABA advocate lowering law-school tuition rates, which are north of $50,000 a year at many schools.

So--thanks for nothing, ABA.