Complaints of an Angry Student Debtor

Alan Collinge has been writing and organizing against student debt for several years. His blog is called Student Loan Justice, and his recent comments include:

Concerns Over Federal Student Loan Policies

“On Trump’s watch, it is obvious that we’ll go back to the ‘bad old days’ — where the Department will get back to disqualifying the overwhelming majority of borrowers out of the IDRs, and processing of loan cancellations will come to a grinding halt.

Trump just injects more chaos into the fray by falsely claiming to be shutting down the Department of Education, or moving the administration of the loans to the SBA.

The Department of Education clearly has no desire or intention of actually cancelling any loans if a reason can be found not to, and this has always been true. The bad faith with which the Department runs this lending program has been obvious for decades.

This problem would solve itself with the return of standard, constitutionally enshrined bankruptcy rights. With the threat of bankruptcy returned to federal student loans, this bad-faith and cruel administration of the lending program will be forced to end at long last.

Just the threat of bankruptcy — without anyone actually having to file — would compel the Department of Education to clean up it’s act.”

The Potential Tax Consequences of Loan Cancellation

At this point, Alan adds:

The law still ensures that borrowers have a right to cancellation. However, that promise is going to come with a major catch — specifically, a “tax bomb” that could double or even triple families’ tax bills this year alone.

The Protect Borrowers Group estimates that the tax bomb will likely hit 2 to 3 million Americans over the next decade.

We calculated that a family receiving the average national IDR cancellation amount ($49,697) would be on the hook for almost $11,000 in additional taxes and lost credits.

Federal Action Could End This Nightmare

The government could, if it chose to do so, simply forgive the majority of student debt.

Yes, there would be negative consequences — a one-time increase in the national debt of about $1.5 trillion.

But the current federal government adds about $2 trillion in debt every single year, and it is hard to find any Americans who are harmed by this.

Other lending systems fail from time to time, sometimes spectacularly. Consider the savings and loan crisis of the 1980s and the subprime mortgage crisis of the 2000s. Those failures were acknowledged and addressed.

What Needs to Happen?

Standard, constitutionally enshrined bankruptcy rights must be restored to student debt, and the President should stand ready to cancel very broad, deep swaths of that debt.

The Founders called for uniform bankruptcy rights for a very good reason. Tyrannical loan scams like the federal student loan program have become precisely what they wanted to avoid.

Reality is a stubborn thing: The loans will not be paid; the loans will be cancelled. The sooner this is acknowledged, the sooner we can move forward and replace this failed loan system.