May, 2020
Washington – In the next coronavirus bill, Congress should take the opportunity to clean up the nation's student-loan mess that is ruining the lives of countless individuals and is a millstone around the neck of the economy in a pandemic. This also essential for the future of colleges and universities.
Three recommendations:
• Restore bankruptcy protection to student-loan borrowers for both federal and private student loans. Mortgage, auto, credit card, and other such borrowers have bankruptcy protection, which serves to balance the rights of debtors and creditors. Bipartisan legislation has been introduced in both houses of Congress to accomplish this, the Student Borrower Bankruptcy Protection Act of 2019 (S. 1414 and H.R. 2648).
• Restore confidence in federal student loan programs by cleaning up mismanagement, especially in the Public Service Loan Forgiveness program and in so-called Borrower Defense procedures. Congress should look at creating a Special Master for the purpose, inasmuch as Secretary DeVos has demonstrated that she will never administer these programs properly. One possibility is to create a Special Master within the United States Court of Federal Claims with powers to act under 20 U.S. C. 1082 to take the necessary steps.
• Provide debt relief to those who, in the 21st century, have been hit with tuition bills much higher than previous generations. This could be done through a targeted federal tax credit, means-tested and refundable, available both to those with student-loan debt and to those who worked through college to avoid debt, so as to overcome the "equity" objection often raised to defeat student-loan cancellation efforts.
Measures like these are essential to coronavirus pandemic recovery. Although each can stand on its own as good economic policy, right now they are also crucial to the overall U.S. higher education effort. If there is no confidence in the nation's student-loan system, cash-strapped colleges will collapse in numbers never seen before.
Which is another reason these measures are necessary in the next coronavirus bill.
