Showing posts with label Biden's student-loan forgiveness plan. Show all posts
Showing posts with label Biden's student-loan forgiveness plan. Show all posts

Tuesday, June 14, 2022

Parent-Plus Loans Are a National Scandal

President Biden is flirting with a massive student-loan forgiveness plan--$10,000 in debt relief for 97 percent of all college borrowers.

The Washington Post, perhaps America's most progressive newspaper, urges him not to pull the trigger. 

"Biden could ease the burden on the genuinely disadvantaged in a number of more targeted ways," the WP editorial board advised, "and avoid setting a precedent for broad forgiveness of loans that future presidents will be pressured to match."

I think Biden will honor his campaign promise and forgive $10,000 in student debt for millions of borrowers. Is that a good idea?

I don't think so. As the WP pointed out, this plan would cost almost a quarter of a trillion dollars, and 71 percent of the benefits would go to the top half of the income scale.

Instead, why doesn't the Biden administration focus on debt relief for the most overburdened student debtors and their parents? 

According to the Century Foundation, which recently published a report on the Parent Plus program, 3.7 million parents collectively owe $104 billion--money that parents borrowed to help pay their children's college expenses. 

This is what the Century Foundation found:

  • The median Parent Plus debt is $29,600.
  • Thousands of retired or disabled parents have had their Social Security benefits reduced because they defaulted on their Parent Plus loans.
  • Black and Hispanic parents take out proportionately more Parent Plus loans than White parents.
  • The use of Parent Plus use is greatest at HBCUs, where most students are African American.
  • At 59 HBCUs, no more than ten percent of Parent Plus borrowers made significant progress in paying off their loans after ten years.
  • And here is a shocking statistic: "At some large for-profit colleges, Parent Plus makes up the majority of all financial aid received by undergraduates."
If progressive political leaders want to do something significant to address the hardships created by the federal student loan program, they should do these three things:

1) Stop withholding Social Security benefits to elderly and disabled student borrowers and Parent Plus borrowers, something Senator Elizabeth Warren proposed several years ago.

2) Eliminate the "undue hardship" rule in the Bankruptcy Code and allow distressed student and parent borrowers to discharge their student-loan debt in bankruptcy like any other nonsecured debt.

2) Abolish the Parent Plus Program altogether.

It is unclear whether Biden's $10,000 debt-relief proposal will benefit Parent Plus borrowers. I hope so.

Nevertheless, even if parents are included in Biden's proposal, $10,000 in debt forgiveness won' be enough to alleviate their suffering. What distressed Parent Plus borrowers really need is bankruptcy relief. 

Unfortunately, bankruptcy relief is not in the political cards.




Saturday, April 11, 2020

Joe Biden's student-loan forgiveness is seriously flawed, but it is a step in the right direction

Joe Biden announced his plan for student-loan forgiveness in a Medium commentary posted a few days ago.  He proposes to forgive all federal student loans for persons who earn up to $125,000 a year and who acquired their loans to attend a community college, a public college or university, or an HBCU (historically black college or university).

Biden's debt forgiveness plan is a step in the right direction, but it is seriously flawed.

First, Biden's plan does nothing for people who racked up student debt to attend for-profit colleges. We've known for a long time that the for-profit college industry has preyed on disadvantaged populations--people from low-income families, minorities, and first-generation college attendees.  On average, students leave their for-profit institutions with more debt than they would have acquired had they attended a public university.

So why not extended student-loan forgiveness to people who took out loans to attend a for-profit institution?

Second, student debtors who enrolled at private universities get no relief under Biden's plan unless they attended a private HBCU. This makes no sense to me at all.

Why should students who studied at Xavier University, a Catholic university in New Orleans, get debt forgiveness, while students who attended Loyola University, another New Orleans Catholic school, receive no relief at all? Are students who attended HBCUs more worthy of assistance than students who attended other colleges and universities? I don't think so.

Finally, Vice President Biden's proposal gives no relief to people who took out private student loans. Let's remember the fact that the so-called Bankruptcy Reform Act of 2005 explicitly made private student-loans virtually nondischargeable in bankruptcy.  Then-Senator Biden supported that bill and voted for it.

Why should a student who took out student loans from Wells Fargo or Sallie Mae be denied debt relief while students who took out federal loans get their student debt completely wiped out?

I support any legislation that brings assistance to overburdened student debtors--including plans proposed by Senator SandersSenator Elizabeth Warren, and former VP Biden.  So Biden's plan, imperfect as it is, has my support.

But wouldn't be simpler and fairer to amend the Bankruptcy Code and allow beaten down debtors to shed their student loans in bankruptcy like any other nonsecured consumer debt--regardless of where they went to college?

After all, the bankruptcy judges have the authority and the expertise to reject bankruptcy claims that are fraudulent or brought by people who have the financial means to pay back their lawful debts.

In my view, Biden's student loan relief plan is not well thought out. If implemented, it will ignite bitter resentment from people who are burdened by college loans taken out to attend private universities or for-profit colleges. And it will undoubtedly offend people who took out private student loans that are nondischargeable in bankruptcy because of a law Joe Biden helped enact back in 2005.

Joe Biden wants to forgive your student loans if you attended this Catholic university but not if you attended another Catholic school located in the same city.