Friday, September 25, 2009

Part I: House Judiciary Subcommittee Hearing on discharging private loan debt through bankruptcy

Rubbing elbows/Wearing a new hat: Why we must take this to the Hill and how I've become the FSLDM fundraiser!

The House Judiciary Subcommittee held a hearing a few days ago about the possibility of introducing legislation that would allow borrowers to discharge private loan debt in bankruptcy. As many of you were already aware, your fierce advocate was in attendance. Being there as the Promotional Writer and Director of Marketing was critical for FSLDM. It's just one of the many reasons why I'm urging everyone to donate money to help the cause. In order to get this movement off the internet and onto the Hill, we need more  resources that will allow me to be present for hearings like this one. (And just to respond to any potential critics, I have been paying out of pocket to be a part of these events, and I'm struggling to make ends meet as a result of my student loan debt, too. In addition, I am seeking other forms of funding, i.e., corporate sponsorship and grants).

In any event, it was a successful day for raising awareness about our cause. The first panel had one witness, Congressman Danny K. Davis (D-7th District of Illinois). After he testified, I caught him leaving the room. He was with Dr. Jill Hunter-Williams. Dr. Hunter-Williams is a Legislative Director and the main contact in his office for issues relating to Higher Education and the student loan crisis. (I'll provide analysis and a description of Davis's testimony in the second part of this discussion). Congressman Davis was polite, but we did not talk long. Nevertheless, it was long enough for me to let him know who I was representing ("a group of over 229,000 supporters," I said proudly).

There were several other connections I made. Most notably - because of political ties - was my talk with Lauren Asher, the President of The Institute for College Access and Success (aka Ms. Asher testified as a witness on the second panel, and tried to persuade the Subcommittee to understand how there are many people struggling to pay their private student loans. I've sent letters to Ms. Asher on behalf of a few students, who I believe were grossly misled by their Financial Aid Offices. While she and I discussed those specific situations briefly, we spent more time discussing the larger problems related to the student lending crisis. is a critical group with which to be in contact for three reasons:

(a) First, the founder of TICAS is Robert Shireman, who is now the Deputy Undersecretary of Education. In this role he is the senior adviser to Sec. Arne Duncan. That means TICAS has a direct line into the Obama Administration. (This reason alone was why I needed to attend in order to introduce myself to Ms. Asher. She knew I was coming as result of my success in reaching out to her colleague a few weeks ago).

(b) "The Project on Student Loan Debt" is one area of focus for their organization. They are therefore sympathetic to our cause and its supporters.

(c) Also, Ms. Asher if frequently cited in articles about student loan debt (here, here, and here , and those are just a few examples out of many more where she's quoted as a reliable media source). Unlike the College Board, they were not previously lenders and do not have any earlier or current ties to Sallie Mae.

FSLDM has a different take on how the student lending crisis ought to be solved, and Ms. Asher and I spoke frankly about that fact. However, our motivations are based upon a shared objective: TICAS and FSLDM both have an sincere interest in the well-being of students and graduates.(Incidentally, Ms. Asher is gracious and warm, as are her colleagues who attended the hearing with her. Indeed, all of them were enormously polite, friendly, and professional).

In addition to speaking with Ms. Asher, I also introduced myself  - and our group - to two people who work in the Division of Affordable Higher Education at U.S. PIRG. PIRG is another good ally, and I look forward to building stronger relationships with this organization. But . . . and at the risk of sounding like a harp  (!!), we desperately need donations for me to continue fostering these relationships and finding new points of contact. 

There were also several student organizations in attendance, and I was able to meet Ms. Tiffany Munsell, the National Chair for the National Black Law Students Association, and Angela Peoples, who is the Legislative Director for United States Student Association. Our concerns intersect, and we were able to discuss possible ways of building an interconnected coalition of sorts.

While these individuals and their organizations may have different aims, we all agree that:

(1) There is a student lending crisis, and it can't be ignored
(2) Something needs to be done ASAP to help student borrowers drowning in student loan debt

All of these interactions were productive, and made me realize yet again that we are not the only ones concerned about the well-being of students and graduates. While our Facebook Page, "Cancel Student Loan Debt to Stimulate the Economy, this blog, and Robert's website all demonstrate how many people are struggling with student loan debt, face-to-face interaction with like-minded individuals goes a long way. It inspires me to continue fighting, and reminds me that this problem is not contained within the technological boundaries of the internet. We were able to share similar stories, those troubling tales of countless people who can't find jobs, have resorted to taking the degrees they've obtained off their resume just to find a low-wage job, and so forth. Nixing advanced degrees is an emotionally difficult thing to do. After all, if you have a J.D., or a Master's, etc., you worked very hard to earn that degree. The last thing you wish to do is scratch it off your CV. But many are realizing that these degrees are hurting them in this current job market. That in and of itself demonstrates what a disastrous situation we are in.

What's even more emotionally hard? Declaring bankruptcy. The subcommittee members who treated such a decision as being easy and easily done are clearly unaware of just how difficult it is to do such a thing. (For most people there is a lot of anguish that goes along with making that type of decision). There also was an indication that a few of them perceive students through a rather distorted lens. Those who were against measures that would make private student loan debt dischargeable in bankruptcy have a problematic understanding of American college students. First, they seem to assume that they are all a bunch of young whipper-snappers. While the majority of students attending higher education institutions may be between the ages of 18-22, it's a well known fact that the non-traditional student population is growing by leaps and bounds. If I were to speak directly with some of the members on the House Judiciary Subcommittee, I would suggest - funnily! funnily! - that they stop believing Animal House is somehow representative of the way college students live (i.e., just to party and raise hell). The image of an irresponsible beer-swilling student is in many ways flat wrong. Of course it would be absurd to argue that students do not have parties, drink, etc. (some do these things far too regularly than others). But it's also important to be reminded of the fact that many college students are responsible, have at least 1 job if not 2 (so they can cover basic needs), and study hard.

Finally, a few people have been writing me messages via Facebook, urging me to change the way I have been speaking about bankruptcy vis-a-vis this present discussion. One person encouraged me to describe it as a "fresh start." I refuse to use that type of language. In fact, that is the worst rhetoric I could use. Why? Because those politicians who would be wary of such legislation, i.e., that would enable students to include private student loans in bankruptcy, would see that type of assertion as a way to justify their opposing stance.

Next up . . . more specifics on who testified, what they said, and why bankruptcy is a bad option and does not equal a fresh start.

Stay tuned.


Karen said...

Thanks for all this hard work. I believe we are miles ahead of many other "new" movements in engaging in honest and civil discussions. I don't believe every single one of us will agree on every single point, but turning higher education back into the path to better jobs and away from the hole of debtor's prison is a very worthy cause. I'm going to re-tweet your post now.

C. Cryn Johannsen said...

@ Karen - thanks for the R/T. I agree that we may not agree on all points, but open,civil dialogue helps see different perspectives on this hotly debated topic.

Rob Applebaum said...

Great Job, Cryn. I knew there was a reason I joined forces with you and asked you to be FSLD's eyes and ears on the Hill!

I also very much appreciate your comments about bankruptcy. While I believe it is a great injustice that standard consumer protections were affirmatively stripped away from educational loans, carving out a nonsensical exception to the ability to declare bankruptcy, I agree that restoration of such protections is secondary to actually fixing what's wrong with the educational lending industry in the first place.

Restoring bankruptcy protections only, without doing anything else, would be like putting a band-aid on a gunshot wound. Further, to the extent the larger conversation focuses solely on student borrower's inability to file for bankruptcy, those whose minds we need to change will be left with a skewed interpretation of what we as a group (the indentured educated poor) really want. Few of us WANT to march to the courthouse to declare bankruptcy - that would create a slew of additional problems in addition to the ones we already face on a daily basis. I think it also leaves the impression that we don't want to pay back what we agreed to borrow, which simply isn't the case. We just don't want to be buried in unmanageable fees, compounding interest, penalties and a lifetime of intractable debt as a result thereof. Few of us would ever want to seek a "fresh start" in the first place were it not for those unfair lending practices which primarily prey upon the ignorance of 17-22 year olds.

Finally, a small dose of reality needs to be injected into this conversation. Bankruptcy is no picnic and it should never be anyone's primary goal in terms of debt management. A bankruptcy filing stays with you for years, making it more difficult, if not impossible, to buy a house or car, obtain a new job, and certainly to obtain credit. Those whose minds need changing need to be made aware of the fact that, in addition to having the RIGHT to declare bankruptcy, you also need to PROVE an inability to pay should you ever find yourself in the Bankruptcy court. Thus, it's not as if there will be a slew of people banging down the courthouse doors just to get rid of debt they'd rather not have should this right ever be restored. That's simply not reflective of reality.

That is all for now. Great work!

Spekkio said...

Great work, Ms. Johannsen.

RE: Fresh start - I couldn't agree more with your position on this. After all, calling bankruptcy a "fresh start" ignores the fact that declaring bankruptcy kills your credit rating for years.

Case in point: my girlfriend's mother had to declare bankruptcy as part of her divorce proceedings from her last husband. He'd gone off the deep end and posed a threat to her safety, so she finally got the hell out of Dodge. But the only way to totally sever ties with him was to declare bankruptcy. Before doing so, she had an excellent credit rating, owned her own car, and was paying a mortgage on a nice mobile home. (I know that doesn't sound glamorous, but it was a very nice home.) Now her credit is shot. Fresh start? I don't think so, Tim.

Aimee said...

Cryn, keep resisting changing the language you use.

I was recently forced to declare bankruptcy, and it's anything other than a fresh start. It's a gut-wrenching process that leaves one ashamed and devastated. I'm embarrassed to admit it even in the relative anonymity of netspace... Painting it as a positive, sunny thing for those in debt is terribly dishonest, and plays into the negative stereotypes many hold regarding them.

Additionally, a change in bankruptcy law won't help the many who have declared in recent years and still struggle with their educational debt, unless that's addressed in the legislation. Even then, those who take advantage of a new law would still need court and attorney's fees...

Chris Rebollido said...

Thanks for being on the front line for us!!! I was very interested in what was going to happen out there since it could have a huge bearing on how I handle my future.

I don't think it's a "fresh start" either, but when weighed with the downside, Bankruptcy seems like a reasonable choice.

Right now I'm 26 and shouldering $191,000 in student loans. I realize that at 17 when I started school I was pretty naive in taking out these private loans, however, despite attempts to pay, it's seemingly impossible. The monthly intrest payments alone are $1300 and after being laid off a year ago and unable to find employment (in my field or any other for that matter), I'm paying an added $8000 to the principle every 6 months to be in forebearance. It's insane.

That being said when I consider the evils of bankruptcy, they pale in comparison to the life long debt I have ahead of me. My credit score is shot already due to an inability to pay any other bills since the loan sucks up my funds, and my debt to income ratio is so staggering that even when my credit score was good and I was employed. I am unable to qualify for even a $3000 personal loan for a new-to-me used car.

Anyway, not saying I've got it worse then others, but just that I know there are people in a simliar situation that need a way to combat these predatory private student loans that in my eyes have essentially "destroyed" the future. I think that any improvment in allowing private loans at the least to be discharged really needs to happen...

Andrew J. Blair, EIT, MS ETM (Student) said...


Excellent report, and very encouraging. Thank you!

I believe very much in your statement regarding advanced degrees hurting ex-grad students in the current job market.

In America large corporations thru small businesses value people that they can subjugate more than they do people who possess critical thinking skills. Companies want someone who is programmable, not someone who wants to learn and excel, or improve the organization for which they work. This attitude is contrary to best management practices (see learning organizations - Peter M. Senge).

We (recent graduate students - irrespective of age) paid to gain those skills which are abrasive to incumbent baby-boomers who want nothing more than to retire fat and happy, just like they were planning to retire before they lost all their money in risky investments. But now they must "work" longer to retire at the same level they had planned. Now the baby-boomers are in fierce competition with themselves, and others outside of their demographic, to 1. keep their jobs, 2. do as little work as possible, 3. make as much money as possible before they retire.

So, our generation(s) must now bear the weight of having to compete with a glut of older workers who are in many ways obsolete in their productivity by default of an unwillingness to learn from younger people who they may consider to be a threat to their positions of authority (and perceived superiority). We must also pay back our over speculated student debt.

We recent graduates of more advanced degrees who are younger seek innovation and efficiency out of a real economic necessity; to pay back our student loans in a timely equitable manner. We also seek the leverage to take our own risks with our own ventures, just like the baby-boomers have. Right now with a disproportionate burden of debt we cannot pay off more quickly we do not have the freedom to organize and innovate, particularly for start-up type ventures. This hurts America. We need the leverage to take risks to innovate. Right now we can only follow orders; orders which are leading us in a direction of dilution, without a clear vision for the future. Let them put our money back into our mouths where it belongs. We've over-speculated on the value of our student loans because of promises of a chance of higher wages which are less likely to obtain.

6p00e5504d41de8834 said...

You might not think bankruptcy is a "fresh start," but if you ever want to see a change to the law, you better start using that language. Talking about "walking away," "getting rid of" and even "discharging" student loans is politically wrong footed. There is a reason bankruptcy lawyers talk about it as a "fresh start," that's because its focus group tested language that focuses on its redemptive power, not painting it as a "get out jail free card."

C. Cryn Johannsen said...

@ 6Pooe5504De8843 -

It's not politically wrong-footed in the least. And to describe it as a fresh start seems a convenient way for bankruptcy lawyers to promote their own role. As a matter of fact that language you criticize me for using is actually what some of our so-called political opponents were using, and I'm not for this legislation anyway.

I'm for TOTAL forgiveness of loans. That's been my stance all along. I don't think of it as a "get out of jail free card," and I think that's pretty clear in my post.

Anonymous said...

In discussing bankruptcy protections for student loans, it is important to note the reasons for bankruptcy protections are two fold. Certainly, providing a fresh start for those whose debts have become insurmountable is one reason, but a more compelling reason to congress should be that bankruptcy provides a critical mechanism for guaranteeing that the lending system behaves appropriately.

We have seen that be by taking bankruptcy protections away, the lenders have migrated towards predatory lending practices. The guarantors have clearly engaged in predatory collection practices, and the Department of Education (with no "skin in the game"), has not provided the oversight necessary to ensure that the colleges provide a quality education at a reasonable cost, and in a minimal length of time.

It is these systemic failures that need to be pointed out in discussions about bankruptcy. If you only talk about the benefits of bankruptcy for students, it only conjures paternalistic, negative responses. This is about promoting good government, not rewarding bad borrowers.

-Alan Collinge, StudentLoanJustice.Org

Liz said...

I was so thrilled to see the student loan plan in Obama's platform last year. You put it well: It feels good to know that people in power get it, and want to solve the problem.

Anonymous said...

Thanks so much for bringing attention to the private student loan industry! However, the comments about bankruptcy being a fresh start is only available to a few people out there. Both my husband and I are in serious debt due to job loss and some medical issues. We both went back to school to get graduate degrees in order to "make more money" to pay off our debt, but instead incurred A LOT of private loans which were too easy to obtain in my opinion. We should have never been given these loans in retrospect!

Now we are looking at filing bankruptcy for the "fresh start", but cannot because the unsecured debt limit of $336,900 for Chapter 13's is too low for us due to our student loans (our loans are up to over $400,000 and growing each day). Well, what about Chapter 7? Well, no we can't do that either since we do not pass the means test because we "make too much money". Ha ha! If we made that much much, you would think we could pay our $4500/month student loan payments. So, like others we are in limbo. Perhaps if we start saving now, we can save up the $30,000 it will cost to file Chapter 11 bankruptcy which is used for businesses...yes, that is our only option.

Something needs to be done about private loans. They should be approved by schools, there should be a limit as to how much you can take out, etc etc if they are to be considered student loans. They are just bank loans, like credit cards since they have no forbearance or deferment options and cannot be escaped even in death. I wonder who will pay for my private loans after I die? My kids? My neighbor? My dog? I feel like my situation is hopeless as I cannot even file bankruptcy due to my student loan debt.

Anonymous said...

For the above post, that is completely in the world do these people ever expect you to pay that much money...we need real change now. I am so sorry for your situation. I absolutely believe after reading your story and Chris's that bankruptcy, while it may not be the fresh start people are looking for is way better than your current situation. I would wish that all student loans, private or federal had that option.