Dear President-Elect Trump,
As you prepare to step from one ivory tower to the next, keep in mind, the hundreds of millions of Americans that have had their jobs shipped out of the country; their education has turned into profit machines for banks and the schools that push costly student loans; and the turmoil around the world forcing others to only “wish” they too, could come to America for their chance at a decent life.
Let’s Talk About Student Loans
For the past five years, I have been working hard to discharge student loans for my clients. I’m one of only a handful of bankruptcy lawyers throughout the country to have done these three times. First, I helped the parents of a college grad eliminate more than $57,000 in a parent-plus federal student loan because one spouse was on the liver transplant list at the time and suffered from severe medical conditions at the time of trial; which gave rise to an Undue Hardship Bankruptcy Discharge of their student loans.
Next, I helped a family who had lost their son to a drug overdose. Prior to his death, these parents had taken their son to a lockdown rehabilitation facility in Utah where they took out a private student loan to pay for their son’s program. The education component however, was high school level as their son was a minor at the time and without a high school diploma or GED. I was able to reopen the bankruptcy case and obtain a discharge of these loans on the grounds they were not a Qualified Education Loan under the law.
Most recently, I was able to obtain a discharge for a client who is totally and permanently disabled. Now, I know that her federal student loans could be administratively discharged, due to her circumstances, but she also had private loans. In this recent case, we agreed to an administrative discharge for her federal loans and the private student loans just simply agreed to a discharge without need of further litigation, after we showed them our proof.
I like your idea, President-Elect Trump, of requiring the educational institutions to share the risk in the lending decisions, but they cannot be rewarded or compensated in any way for pushing these on students. We do a lousy job of explaining the different types of student loans and their impact on the student’s future, based upon the folks I talk to who want to eliminate them. I also like your idea to take the profit out of the lending. I’ll add, let’s take the profits out of the colleges and universities too because that is also a contributing factor.
I think you should team up with Bill and Melinda Gates to see if we can overhaul our entire education system because it does a lousy job of preparing people for the workforce. Where is the Socratic method? Where is it that we teach people to actually think for themselves? Instead, we tell people what they want to hear, in order to sell them something that will cost them more than a house they cannot live in and hold them back forever, in debt. Did you know that I actually spoke with a couple who has nearly $700,000.00 in student loans together? How will that couple ever pay that back? That is undue hardship.
Let’s Discharge More Student Loans in Bankruptcy
Contrary to the popular opinion that student loans are not dischargeable in bankruptcy, I have done it now three times. I need your help in getting the word out that it is possible to discharge student loans in bankruptcy. Can I count on you to help get the truth out? Currently there are two ways to discharge student loans in bankruptcy and here are my suggestions for both theories:
Undue Hardship or Totality of the Circumstances
To me, these theories are the same because they require all the facts and circumstances surrounding the borrower’s inability to repay their student loans. When the amount of debt rises to the level of a mortgage payment for home ownership, that is when student loans are more likely to go unpaid.
This means that the cost of education is too high for the value received, meaning that these graduates are not obtaining jobs that will create enough income to live independent of others and repay the loans within their 10 year normal terms.
The Undue Hardship test turned into a “medical discharge” based on case law five years ago. Now, with the Decena case, we have the disparity of income to debt as a nice barrier to repayment, which creates an undue hardship. You know what else? I believe that when these “for profit” colleges, that rake students over the coals of debt for a culinary arts education that costs more than my law degree, that’s when things get out of hand. I believe that getting a lousy education or obtaining a useless degree also constitutes undue hardship and the loans, both federal and private should be discharged for the students too.
That’s Not a Qualified Education Loan; or Is It?
The only other theory in which student loans can be discharged in bankruptcy is to prove that loan was not a “Qualified Education Loan” under both the Bankruptcy and I.R.S. Codes. Remember that example I cited in the beginning where parents had put their son in that lockdown rehabilitation facility so their son could receive treatment for his addiction? That was not a qualified education loan. I believe that the loans from offshore unaccredited schools also, do not qualify as a student loan.
Back in my day (late 80’s), there were only a handful of colleges that were private and most colleges and universities were traditional as in community colleges. Education was inexpensive and comparable to the income I could receive after graduation. I graduated with a Bachelor of Arts degree in 1989 with only $11,000.00 in student loan debt. Today, I see more than $100,000.00 or more in debt for a similar education with the hopes of obtaining a minimum wage job? How is that helping America?
Any school that has been closed down as a result of any type of fraud upon its students in inducing them to take their education programs and then disciplined by the Department of Education and stripped of their credentials should automatically qualify all federal and private student loans for an administrative discharge by simply filing bankruptcy, or by a simply motion rather than an adversary proceeding, which is cost prohibitive for most borrowers and because so few bankruptcy lawyers handle litigation matters in bankruptcy.
As a public servant in the highest-ranking office of the United States government, you have an important role in the next four years, as President of the United States. I hope you take your business experience and put it to work to make America great again. I know we can’t go back to the 1950’s with pensions and secure retirement. I know we can’t roll back the cost of education, or can we? I know we could bring manufacturing jobs back to middle class America in an environmentally safe way, but who will do it? Even though unemployment is at an all-time low, it doesn’t mean we’re all happy about having to work two, or even three, part-time jobs to make up for the loss of one job.
I wish you the best in your Presidency and request that you do what you said you would for the American people. In the meantime, could you further explain to the folks that are listening, that bankruptcy really is the cheaper, better and faster way to eliminate their debts? It would help your talking over all the bank and credit card company rhetoric, lobbying and marketing to our fellow Americans that make them wince at the thought of bankruptcy because they have been brainwashed into thinking that their credit score is more important than their blood pressure. I need your help here. Can I count on you for that?
Christine A. Kingston, Esq.