Showing posts with label Kirsten Gillibrand. Show all posts
Showing posts with label Kirsten Gillibrand. Show all posts

Friday, April 12, 2019

Democrats are "woke" about Public Service Loan Forgiveness: Senators Kaine and Gillibrand file legislation to overhaul PSLF

The Trump Administration hates the Public Service Loan Forgiveness Program (PSLF). Signed into law by President George W. Bush in 2007, PSLF allows student-loan debtors who work in public-service jobs to have their student loans forgiven if they make 120 student-loan payments in a qualified repayment plan.

The first PSLF participants to have accumulated 120 student-loan payments became eligible for debt relief in 2017--10 years after the program was introduced. As has been widely reported, the Department of Education approved less than 1 percent of the applications for PSLF forgiveness that it had processed as of  September 2018.  In fact, DOE said 70 percent of the applicants were not eligible for PSLF participation.

So far, over one million student-loan borrowers have applied to DOE to have their employment certified as PSLF eligible, and millions more are counting on PSLF for debt relief but haven't applied yet. It's a mess.

And it is especially a mess for people who borrowed $100,000 or more to get a law degree or other graduate degree. According to the American Bar Association, the average debt load for people who attended a private law school is $122,000. For many of the people who accumulated six-figure student-loan debt to finance their graduate studies, PSLF is the only viable option for debt relief.

Betsy DeVos, Trump's Secretary of Education, apparently does not care that her agency has frightened or angered millions of people who are counting on PSLF to manage their student loans. According to a news report, a senior DOE official said that DOE does not support PSLF and would not implement it if it were not legally obligated to do so.

But the Democrats are "woke" about this problem. This week, Senators Tim Kaine and Kirsten Gillibrand introduced a bill to overhaul the PSLF program. Thirteen Democratic senators signed on as co-sponsors, including all the U.S. Senators running for President (Elizabeth Warren, Kamala Harris, Bernie Sanders, Amy Klobuchar and Cory Booker).

The Kaine-Gillibrand proposal defines eligible public-service organizations broadly to include all federal, state, and local government agencies and all charitable organizations that qualify  for tax-exempt status under 501(c)(3) of the tax code. As Jason Delisle pointed out in a 2016 analysis of PSLF, that definition applies to one quarter of the American workforce.

In fact, the bill's definition of public service differs markedly from the one developed by DeVos's DOE. DOE defines a public service organization as one that is primarily involved in public service,thus excluding organizations like the American Bar Association, which is primarily devoted to serving the legal profession, although it engages in some public service work.

The Kaine-Gillibrand bill also specifies that all student-loan debtors qualify for PSLF, regardless of the federal loan program or repayment plan they are in. This provision also expands eligibility for PSLF participation far beyond what the DeVos DOE permits.

I support passage of the Kaine-Gillibrand bill, and I hope it is enacted by Congress. But we should not deceive ourselves about the cost of PSLF. Thousands of people seeking debt relief under PSLF owe $100,000 or more. Most of these people are making income-based monthly payments on their loans that are not large enough to cover accruing interest. Their debt load is increasing month by month as accrued interest gets capitalized and added to their loan balances. If these people's student-loan debts are forgiven after 10 years, the government will essentially be forgiving the entire amount that was borrowed plus a lot more due to the accrued interest that will also be forgiven.

Remember Josh Mitchell's story in Wall Street Journal about Mike Meru, who borrowed $400,000 to go to dental school? Dr. Meru is making payments of about $2,000 a month in an income-based repayment plan, but his debt has grown to $1 million due to accrued interest. If Meru gets a qualified public-service job and holds it for ten years, DOE will forgive the entire $1 million plus additional interest!

This is a huge problem, and the Kaine-Gillibrand bill won't solve it. Under the GRAD Plus program, graduate students can borrow the total cost of their graduate education--tuition, books, and living expenses--no matter what the cost. It is not surprising then that graduate-school tuition prices went up dramatically after the GRAD Plus program was enacted.

If the bill becomes law, the Kaine-Gillibrand proposal will give relief to millions of student-loan borrowers. But the bill is just a stop-gap measure. As I have said, the only solution to the student-loan crisis is bankruptcy relief for honest debtors who can't pay back their student loans.  More than 45 million Americans have outstanding student loans. I think most of them would vote for a presidential candidate who endorses bankruptcy relief for distressed student-loan debtors.




Sunday, February 24, 2019

Congressman John Katko introduces bill to make student loans dischargeable in bankruptcy. Will presidential candidates endorse the bill?

Last month, John Katko, a Republican congressman from New York, filed H.R. 770, a bill that would make student loans dischargeable in bankruptcy like any other consumer debt.

Titled the "Discharge Student Loans in Bankruptcy Act," Katko's bill is quite simple. It merely strikes the "undue hardship" clause from Section 523(a) of the Bankruptcy Code.

Congressman Katko filed the same bill two years ago. When he filed the bill in 2017, it had ten co-sponsors, including Maryland Congressman John Delaney. When Katko refiled the bill last month, he only had two co-sponsors.

If H.R. 770 becomes law, millions of Americans who are overwhelmed by student loans will get relief in the bankruptcy courts. They will have an opportunity to start families and buy homes. They will get the fresh start that bankruptcy is intended to provide.

Let's make Katko's bill the litmus test for everyone who is running for president or is thinking about running. Let's ask them one simple question: Do you support Katko's bill or not?

  • President Donald Trump, do you support H.R. 770?
  • Senator Elizabeth Warren, do you support Katko's bill?
  • Senator Kamala Harris, do you support H.R. 770?
  • Senator Bernie Sanders, do you support Katko's bill?
  • Former Vice President Joe Biden, do you support H.R. 770?
  • Senator Kirsten Gillibrand, do you support Katko's bill?
  • Senator Amy Klobuchar, do you support H.R. 770?
  • Michael Bloomberg, do you support Katko's bill?
  • Beto O'Rourke, do you support H.R. 770?
  • John Delaney, former Maryland congressman who co-sponsored Katko's bankruptcy-relief bill in 2017, you are now running for president. Do you support Congressman Katko's bill?
Our federal legislators are fond of holding committee hearings where they bully witnesses by demanding yes-or-no answers to all their hectoring questions.

Well, here is a question to everyone who wants to be president, and we should demand a yes-or-no answer. Unless a presidential candidate can say "Yes, I support H.R. 770 without qualification," that person is nothing more than a windbag who doesn't care about average Americans and does not deserve our vote.

*****

Note: I am grateful to Phil Uhrich for calling this bill to my attention.  Mr. Uhrich wrote a provocative essay on national politics in 2016 that is still timely.

Representative John Katko (R-NY)