09 May Wall Street Banks Get Lower Rates Than Student Loans AND Can Bankrupt Their Loans From The Government…Fair?
Bankruptcy remains a source of financial relief for most borrowers. Most debts are discharged in bankruptcy and folks receive a “fresh start”. However, there is one huge exception that is not discharged automatically in any bankruptcy. Student loans. both government and private loans, are not discharged in bankruptcy without effort. Student loans are generally not discharged in bankruptcy cases unless the student can prove that the loans cannot be repaid without undue hardship. Providing undue hardship would seem to be easy in a bankruptcy case — after all, bankruptcy means broke, right? Unfortunately, bankrupt student loan debtors who bring their cases before the court find that bankruptcy courts rarely find that loans should be discharged for undue hardship. It’s a tough standard to meet. Here at Bankruptcy Law Network, our members have discussed the problem of student loan surviving bankruptcy many times, in articles by Kent Anderson, Craig Andresen, Jonathan Ginsberg. While there have been attempts to pass laws which would change how the government deals with student loans, post bankruptcy, student loans generally continue to cause problems for most debtors. Since bankruptcy generally doesn’t get discharge student loans, maybe there is another way to handle the financial stress…meet Elizabeth Warren.
Before being elected as the Democratic Senator from Massechusetts, Elizabeth Warren served as the interim potential head of the Consumer Financial Protection Bureau but her permanent appointment was blocked by partisan politics. Undeterred, Elizabeth Warren ran for Senate shortly thereafter. Warren now serves on the Senate Banking Committee. Under her leadership, touch questions have been asked of those who regulate the banking industry. For example, she asked those regulators appearing before the Senate Banking Committee a question they found hard to answer: when was the last time a Wall Street bank was taken to trial for violations of banking regulations. (The answer was never, by the way.)
Now, Elizabeth Warren has introduced her first piece of legislation: “The Bank on Students Loan Fairness Act“. Ms. Warren proposes a radical change: to give individuals the same interest rate that the big Wall Street banks obtain, an interest rate of about .75% on loans they obtain from the government. The interest rate for Stafford (government backed) student loans is currently set at 3.4% and is set to double to 6.8 percent in July.
As Warren explains, this student loan problem is a quiet but growing problem. She explains that taxpayers are investing in the big banks and that taxpayers should invest in our students. America should not be “drowning our students in debt while we give a great deal to the banks.” She points out that economists have stated that defaulted student debt poises a problem and barrier to the recovery of our economy. She concluded with a call to action and a reminder that students have only their voices, not lobbyists, to ask Congress for equal treatment.
Why should our government make it so easy for Wall Street to skip out on debt while requiring students, our future, to jump hurdles and hire attorneys to obtain financial relief?
Ms. Warren, a former Harvard law professor, understands the financial pressure faced by most Americans as she came from a working-class background, becoming a waitress at age 13 (after beginning as a babysitter at age 9). Ms. Warren has authored 9 books, including two best sellers.
@Consumer Financial Protection Bureau photo
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