By Josh Kilroy
With Labor Day now behind us, attention will shift away from the frolicking of summer to the realities of the new school year. Many former college students are facing a grim reality. Starting September 1st, interest has again started accumulating on outstanding student loans, ending the pandemic era pause that brought relief to forty-five million Americans and their families.
In October, payments will once again resume.
The student loan crisis is yet another issue that is trapped in the web of our polarized politics. Some people feel that a loan is a loan and should always be repaid in full. They seem to imagine those who can’t repay their loans as lazy drifters who studied Gender Studies in college, more in need of a swift kick in the pants than any sympathy.
On the other hand, many student loan borrowers feel trapped and betrayed by a system that pits naïve eighteen-year-olds against voracious university administrators and Wall Streets power players in a game that is thoroughly rigged. For them, the student loan crisis is a systemic problem that requires a federal solution.
Both have a point. Loans should be repaid, barring exceptional circumstances. That’s a core American value.
But it is also the case that corporate student loan lenders and university presidents have a long history of spending huge sums of money lobbying politicians for rules that are very favorable to them. Universities inflated their tuition, then persuaded Congress to let students borrow more money. Wall Street used its clout to persuade their allies in Congress to make it impossible for former students to discharge their loans in bankruptcy.
Universities and lenders made billions with no accountability.
While affixing blame is important for understanding the problem, it is of little help in solving it. The underlying problem that cannot be denied is that most of the borrowers simply don’t have the money to fully repay their loans. This isn’t about spending money on luxuries instead of repaying their loans. It’s about choosing between paying their rent or their loans.
Two groups are in particular trouble. The first group consists of students who took out loans but never got a degree: some 40% of borrowers. Some had to drop out for family reasons, some could no longer afford school, but whatever the reason, they are stuck with the loans… but without the credential needed for most good-paying jobs. All the finger-wagging in the world is not going to produce the money needed to repay their loans.
The second group are senior citizens. There are 3.5million senior citizens who owe $125 billion in student loans. On average, they owe more than $30,000 each. Most of them are retired and living on Social Security. In some cases, their Social Security checks are being garnished. This is both cruel and absurd. Squeezing a senior citizen for $300 a month when they owe $30,000 doesn’t pay down the debt. With interest, the debt only gets bigger.
Most of these seniors went back to school mid-career for an additional credential so they could earn more money. Between the slow economy of the early 2000s, the Great Recession of 2008, and the pandemic, their investment failed to pay off. Forty percent of them have already defaulted on their loans. Torturing them in old age doesn’t accomplish anything but to diminish people who worked their whole lives, raised families, and served their communities.
What is the path forward that both affirms the value of repaying personal debt while showing compassion for people whose lives didn’t go as planned?
At Americans for Fair Debt Relief, we advocate for two policies to alleviate this crisis.
One, allow student loan borrowers to discharge their debts in regular bankruptcy court after ten years of good faith attempts at repayment. Senators Dick Durbin and John Cornyn proposed legislation in 2021 that would do exactly this. Passing this bill would provide relief to millions of people while providing accountability and honoring those whose thrift and judgement allowed them to avoid the pitfalls of student loans.
Two, we should fully forgive the loans owed by senior citizens. We are never going to collect that money; forgiving the debt allows them to spend their final years focused on their grandchildren.
Together, these policies would assert the importance of personal responsibility while showing compassion for Americans who need the help.
Josh Kilroy is the founder of Americans for Fair Debt Relief.
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