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Suffolk/NCLC Student Loans Symposium

posted by Dalié Jiménez

I had the pleasure of participating in this weekend's very successful Research Symposium on Student Loans organized by Kathleen Engel of Suffolk Law School and Deanne Loonin of the National Consumer Law Center (NCLC) (NCLC, by the way, is looking to hire three attorneys!). In this post I want to mention some of the highlights.

Elizabeth Warren at Suffolk LawThe symposium was not your typical academic conference. Although almost 20 papers were presented during the two days, a number of participants were from industry and nonprofits. Participants also heard from an NCLC client who had actually dealt with student loan issues and come out the other side. This was, as one speaker mentioned, the conference some of us had been waiting for. 

The speakers also included former Slips regular and now senior Massachusetts Senator Elizabeth Warren (pictured at the event). The Senator focused her remarks on her proposal to allow refinancing of student loans (federal and private) at the interest rates Congress approved last summer (3.86% for undergraduate loans and 5.41% for grad unsubsidized loans). She noted that this is just a small step on the road to fixing the problems with the student loan system but since Congress not too long voted to lower future students' interest rates agreeing that they were too high she is hoping this proposal might actually have some political legs.  

While I worry about the effects on the private market of allowing private loans to be refinanced into federal loans, I think this proposal can really help. Private loans can be extremely expensive: the CFPB's study of the nine largest private student lenders found that between 2005-11 lenders originated loans with as a high as a 19% variable interest rate. (CFPB Rpt at 12). Private loans also lack the forebearance, forgiveness, and cancellation upon death protections that federal loans have. Yet despite all of this, they are treated the same in bankruptcy. Students with these loans would benefit tremendously from lower interest rates but, perhaps more importantly, from access to the protections of federal loans. 

A number of speakers presented original empirical work, but some also reflected on some of the reasons there are over $1.2 trillion in student debt outstanding. Jonathan Glater began the conference by reminding us that our current model of loading the risk of borrowing on students and their families disproportionally affects students from the poorest families, including students of color and recent immigrants. Daniela Kraiem reminded us that the metaphor of higher education as a commodity has only recently begun to eclipse debates about what education is and should be. Her talk focused on how this market metaphor has shaped the legal and policy structures around higher education financing. 

On the empirical work front, despite the volume of empirical work presented, it was clear to everyone in the room that we do not have enough information about student loan performance or student loan borrowers. More data is critical. As Rohit Chopra (Student Loan Ombudsman at the CFPB) remarked, regulators (like companies) need to manage down uncertainty and to do that they need data. The last panel at the conference focused on identifying the data we need and the questions we want answered, with the idea that this would allow us to better lobby the appropriate parties to collect or share this data. 


I suspect that for all the bankruptcy experts at the conference, not even one attempt was made to address the most fundamental question that should arise when considering bankruptcy and student loans...

What systemic effects have resulted from the unique and unprecedented removal of bankruptcy protections from student loans?

Just one example of several:

The perverted fiscal incentives where the large lender/servicer/collection conglomerates, the guarantors, and even the federal government make MORE money on defaults than healthy loans should be a critical area of interest/inquiry for any bankruptcy scholar or economist.

Yet, I suspect strongly that this (and similar) topics went wholly ignored by field. Examples of the wholesale removal (for all intents) of bankruptcy protections, statutes of limitations, and other fundamental protections from a lending instrument are vanishingly few (indeed, student loans is the ONLY type of loan I am aware of where this is the case). As such, this should be screaming out to all rigorous researchers as an investigative opportunity not to be ignored.

That it is, nonetheless, being neglected as an avenue of inquiry is beyond astonishing.

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