Student loans are the only type of loan in this country to be stripped of standard bankruptcy protections, and the systemic effects of this have been harmful to the public good. We urge all citizens to support the petition to the White House calling for the return of standard bankruptcy protections to all student loans.
While no one wants to file for bankruptcy, this consumer protection is a critical and essential element for any stable, healthy lending system. By removing bankruptcy protections from student loans, Congress enabled a lending environment to take hold where defaulted loans are financially more lucrative than loans which remain in good stead- this is a defining characteristic of a predatory lending system, and cannot be sustained.
This lending environment has essentially turned the lending system against the borrowers, and enabled unchecked inflation, high default rates, poor oversight, egregious loan administration,
clear conflicts of interest to take hold across higher education. All students are being hurt as a result, not just student borrowers. While the real cost to borrowers in terms of the unearned wealth being extracted from them is large, the associated subjective costs associated with this is far larger.
Bankruptcy was removed based on the faulty premise that significant numbers of students were abusing the bankruptcy laws to avoid paying their student loans when in actual fact, far less than 1% of all student loans were discharged in bankruptcy when they were treated the same as all other loans with regards to bankruptcy protections. Furthermore, the bankruptcy laws have been strengthened significantly to prevent fraud and abuse by borrowers.
By returning, at a minimum, standard bankruptcy protections to student loans, the financial interests of the lending system will once again be aligned with the borrowers, instead of against them. This will, in turn, put meaningful regulatory pressure on the universities to provide a high quality educations at low cost, and also compel private lenders to stop exploiting students and their families.
Sign the Petition