The end of last week came with some encouraging news. Before I am taken to task, however, for praising this next piece of legislation, let me be clear: I think that there ought to be other options for student loan debtors. Nevertheless, I was enormously encouraged to learn that Sens. Durbin and Cohen have introduced a bill that would allow people to once again discharge their student loan debts through bankruptcy. Of course, I think that this solution is not the best one. I insist, however, this former ability to discharge student loan debt ought to be reinstated, and for one critical reason: right now lenders have total power over borrowers. That's to say, of course, that we're talking about private debt. It's never been permissible to include Federal Loans in bankruptcy. But thanks to Bush, he - along with Congress - took this ability away from student loan borrowers. If one has the ability to include private student loan debt in bankruptcy, it provides those who have no power whatsoever some sort of leverage - that's critical to me, and that's why I am in support of this legislation. Moreover, I was in attendance during the first hearing that Rep. Cohen had on this issue in the Fall of 2009, so I am pleased to see that his office is finally picking up on it again. It's been long enough, and that makes me think now that that hearing was not just for show.
Additionally, I don't think that everyone who owes mountains of student loan debt would immediately run to their nearest bankruptcy attorney either. It's presumptuous to think that most debtors would do such a thing. Besides, if we think it's all right to let institutions and big business walk away from their debt, why do we think that an individual who must make this decision must automatically be some sort of deadbeat? They aren't. The decision to declare bankruptcy is a painful one, and the long-term ramifications on one's credit, not to mention moral sense of well-being, is far reaching.
Nevertheless, it is perhaps an indication that SAFRA is only the beginning of more changes, and that's why I find this news promising. As many of you know, I wasn't pleased with SAFRA (read here). So, this news is good, and I'll leave it at that, because there's even better news to share, if you ask me.
On a side note, I try to stay on East Coast time. There are several reasons for this. For starters, I teach until 10 P.M. in South Korea, so staying up quite late is not particularly burdensome (for the most part). In addition, I like to stay in touch with offices in D.C. and so forth. It's important I am operating during periods of time when Senators' offices, for instance, are open. So, and not to get too personal, that means my sleep schedule is quite different than it had been in Washington, D.C., i.e., I don't get up as early as I had. In any event, I woke in a fog to grab a drink of water in my kitchen this past weekend, a kitchen which is about 3 feet from my "bedroom," and, of course (!), I needed to also check my email. I mean, even though it was the proverbial middle of the night wakefulness, you never know as an advocate who might need some sort of quick response (my email is jam-packed with urgent requests and I try to respond as quickly as possible). In any event, I scanned the hundreds of unopened emails and zoomed in on one with this subject header: "Your email to Secretary Duncan."
I had a hunch that this email wouldn't be a form letter, and that turned out to be quite true. The email told me that the Dept of Education (i.e. Sec. Duncan and Deputy Undersecretary Shireman) were aware of who I am and what I do. In addition, the note stated, "I understand you’ve had responses from the White House and others about your suggestions for the student loan programs, and I know Mr. Shireman and his staff are familiar with your ongoing interest and advocacy." (Mr. Shireman's office was cc-ed on this message).
The email had additional remarks, but this one was worthy of quoting.
The lines of communication with the Department of Education have finally been established, and I am hopeful that they will listen to the more problematic cases closely. In the meantime, we must push ahead with your second letter writing campaign. That's next on my "to-do" list. However, I wanted to relay this information first.
We're finally getting somewhere!
This is an encouraging sign. Let's do as much as we can to get this bill passed.
Wow! Thanks, keep up the great work.
You're more than welcome. I will, and I am . . . next up, second letter writing campaign to the White House. Then, we're moving onto calling campaigns.
YAY! I agree with you Cryn. One of the most important things that may come of the bankruptcy bill would be that private student lenders would have the motivation to work with student-debtors to lower payments and payment plans and begin to offer "settlements" of the debt just like all other non-secured private lenders do. As it is now, private student lenders have virtually NO incentive to work with us to make payments manageable.
Yes, Sallie Mae needs checks and balances just like Wall Street. They are both out of control.
A word of caution to all private loan holders. There is also legislation in the works to allow private loans to switch to federal loans. If people do this they will loose their right to file bankruptcy if this bill goes through... so choose carefully folks.
Thanks for posting, Anonymous. I am a bit flummoxed, however, by your claim about the private debt swap proposal. I have talked with the Education Staffers in Sherrod Brown's office, and I don't it's that sneaky. Why do you suggest that that's the case?
I was saying that there are TWO bills out there pertaining to private loans... choose one and you might loose your ability to file bankruptcy; choose the other and you will be stuck with a private loan forever. The problem is that both bills are in the works and depending on which comes through first people might makes some decisions that they may live to regret.
Dona - thanks for the follow-up. I am fully aware of the private debt swap proposal, because I've been in touch with the Ed. Staffer on several occasions to discuss the progress of this bill. I was just asking for clarification on why you said that.
Its a tough decision to make.. fortunately or unfortunately for me, I have federal loans and wont have to make that decision.
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