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The Biden administration wants the Supreme Court to pass on an appeal seeking to ease the way for more borrowers to erase their student-loan debt in bankruptcy, saying the Department of Education is already examining the issue, WSJ Pro Bankruptcy reported. The reasoning was laid out in a court filing Friday by the Justice Department, representing the latest front in efforts from the White House, Congressional Democrats and the U.S. court system to address student-loan debt. An estimated 43 million Americans have federal student loans, the total amount of which has nearly doubled over the past decade to about $1.7 trillion. Student loans are difficult to discharge through a bankruptcy filing. To qualify for a bankruptcy discharge, borrowers must prove they face an “undue hardship” from their student debts, such a stringent standard that few even try. The Supreme Court is considering whether to hear an appeal from a Texas woman seeking to loosen those standards after she filed for bankruptcy at age 60 with about $345,000 in student-loan debt — about half of which represents fees and interest. Thelma McCoy’s lawyers are asking to apply a more forgiving test, used by bankruptcy judges in some states, that would make it easier for those in extreme financial hardship to discharge student loans in bankruptcy.

Up to now, President Joe Biden has resisted calls from the left of his party to cancel up to $50,000 of student loans for most borrowers. But the pressure from leading progressives such as Senators Elizabeth Warren and Bernie Sanders, and more recently from Senate Majority Leader Chuck Schumer, isn’t letting up, according to a Bloomberg News editorial. The president might be tempted to waver. He shouldn’t, according to the editorial. Debt forgiveness on that scale would be very expensive, even by current standards of fiscal liberality. More important, the cost can’t be justified. This kind of relief would mainly help people who don’t need it, and there are better ways of assisting those who do. By one estimate, the cost of Warren-style debt forgiveness would be roughly $1 trillion — on top of the $5 trillion Congress already provided for pandemic relief and the further $2 trillion and more that Biden wants to spend on “infrastructure” (which he’s defined to encompass almost any kind of public outlay). Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Hundreds of thousands of students have borrowed directly from for-profit colleges, which have proliferated in the last decade, the New York Times reported. Unfortunately for the students, these direct-lending programs almost never come with the safeguards guaranteed by federal loans. The colleges can demand payments while students are still in school. They can withhold transcripts for nonpayment. They can impose onerous interest rates, reaching into the double digits. Schools often offer these loans because they’re required by law to have a small portion of their revenue come from sources other than federal financial aid. For-profit schools reap billions from financial aid — grants, loans and other programs that students use to help pay for college — and the legal provisions were put in place to ensure that in an industry mired by scandal and fraudulent behavior, the colleges don’t exist only to harvest federal dollars. Direct lending by for-profit schools boomed during the Great Recession, in part because private lenders stopped or curtailed what they offered, and it has spread steadily since. Without government oversight, for-profit colleges have lent at least $4 billion, and potentially much more that has gone untracked. The colleges plan for many of these loans to go unpaid — a core feature of their business models.