Love 'em or hate 'em, student-loan debtors owe a debt of gratitude to Bernie Sanders and Elizabeth Warren for putting the student-loan crisis on the front burner of national politics. Liz proposes to forgive the first $50,000 of student debt if she is elected President. Bernie says--what the hell--let's forgive it all. That's $1.6 trillion!
Meanwhile, as the Democrats offer to help college borrowers, Trump’s Department of Education (DOE), led by Education Secretary Betsy DeVos, is doing everything it can to alienate a very large constituency--45 million student-loan debtors.
But last month, the Trumpers became "woke" to the student-loan catastrophe. As reported by the Wall Street Journal's Josh Mitchell and Andrew Restuccia, the Trump administration is considering some relief options, including allowing borrowers to shed their student-loan debt in bankruptcy.
According to the WSJ, the Trump administration is mulling a policy adjustment whereby DOE "would essentially decline to contest borrowers’ requests before [bankruptcy] judges to have their student loans canceled.” The beauty of this proposal is Trump could make this adjustment without congressional approval.
Better than that, Trump could claim that he is only following the policy announced by the Obama administration in 2015 when DOE's Lynn Mahaffie said in a letter that DOE would not oppose bankruptcy relief for student borrowers if it did not make economic sense to do so.
Of course, DOE never followed that policy. Instead, it has allowed Educational Credit Management Corporation to oppose virtually every student debtor’s petition to shed student-loan debt in the bankruptcy courts. And this has been DOE’s practice under both the Obama and the Trump administration.
All President Trump needs to do to grant significant relief to college debtors is tell ECMC to fire its battalions of lawyers and file formal non-opposition documents when worthy student debtors seek to discharge their student loans in bankruptcy.
Undoubtedly, a few unscrupulous people would try to use the bankruptcy courts to shed debt they have the means to repay and which they should repay. But filing a fraudulent bankruptcy claim is a federal crime, and the bankruptcy judges know how to sniff out deceitful claims.
If Trump were to follow through with this proposal, we will need a lot more bankruptcy judges because millions of people would be entitled to bankruptcy relief. Where will we get the money? Let’s take the cash that DOE is funneling to ECMC and its lawyers and use it to hire some judges.
Pretty simple really.