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Debt Relief on Day One

posted by Alan White

In a comprehensive review of existing student loan cancellation laws, Demos, the Student Borrower Protection Center, and the UCI Student Loan Law Initiative have compiled an impressive report and road map for the incoming Administration. The roadmap authors review the closed school, false certification, and disability discharges, public service loan forgiveness, income-driven repayment loan cancellation, borrower defenses to repayment, and protections for servicemembers and veterans, all of which have been sabotaged by Secretary Devos, and all of which could be marshaled to cancel millions of student loan debts. 

To be clear, these are existing debt cancellation programs enacted by past Congresses, and signed by past Presidents Republican and Democrat. Their full implementation would result in billions of dollars in debt relief to disproportionately low-income and minority workers and their families. While I remain skeptical of the ability of any Education Secretary to deliver on these programs given the contracting-out model under which federal loans are administered, and sympathetic to proposals for across-the-board loan cancellation, this detailed road map helps us imagine a new way forward.

Comments

President Biden could also immediately issue an executive order directing the Department of Education not to oppose undue hardship petitions in bankruptcy, either universally or by stating defined safe harbors, including for the disabled, those with limited retirement income, people caring for ill relatives, or those with below median income. NACBA and NCCL have previously recommended this approach (and I can provide that letter if helpful.) This provides broader relief for those that desperately need it, while sorting out those that have the ability to repay.

Several Slipsters have also endorsed this approach, Ed. see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3183893.

Specifically, they (along with several others, including me) called on ED "to allow a no-contest discharge when the debtor’s income is less than 150 percent of the federal poverty level and at least one of the following:

(1) the debtor’s household income has been at or below the federal poverty level for the last four years;
(2) the debtor receives disability benefits under the Social Security Act;
(3) the debtor receives disability benefits because of military service;
(4) the debtor’s income is derived solely from retirement benefits;
(5) the debtor is a caregiver of an adult or child as defined in the Lifetime Respite Care Act;
(6) the debtor is a family caregiver of an eligible veteran;
(7) the debtor did not receive a degree from the institution, or the institution closed;
(8) the debtor’s student loan balance is less than $5,000;
(9) the debtor made at least three hundred monthly payments (twenty-five years’ worth) towards their student loans, regardless of whether those payments were made continuously; or
(10) the debtor is over the age of sixty-seven."

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3366707

Thanks for this important post. The link that you included in your first paragraph is broken. I went to the Demos website to access the report.....

https://protectborrowers.org/wp-content/uploads/2020/12/Delivering-on-Debt-Relief.pdf

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