Bureaucrats Says 'No' to Student Loan Bankruptcy Relief for the Private Sector and Retirees But 'Yes' to Student Loan Debt Relief for Themselves
The Department of Education filed a motion urging a bankruptcy court not to provide relief for a 65-year-old man with more than $220,000 in federal student loans, saying he still has plenty of opportunities to find work and pay them off. Right now, it is still difficult for many people to meet their living expenses and stay current on paying off their student loan debt. Quite a few who have graduated over the last five to ten years are struggling just as much as when they graduated from college. However, employees working in the public service sector in October 2017 can begin the process to have their loans discharged, i.e. forgiven, if they meet the basic qualifications for the Public Service Loan Forgiveness Program.
October. 21, 2015
UPI - The Obama
administration moved to block a bankruptcy court from erasing federal
student loan debt, saying such an allowance would jeopardize the fiscal
stability of the loan program.
U.S. Department of Education attorneys, intervening in the case of a
65-year-old man seeking to erase his student loans in bankruptcy, filed a
motion urging the court to stand firm with borrowers who claim they are
in a dire financial situation.
Attorneys argued that Robert Murphy of Massachusetts, unemployed and of retirement age, has plenty of chances to go back to work or hit the jackpot [bureaucrats say he should continue to work well after the average retirement age of federal employees with
three-tier retirement plans].
No student debtors should get a break unless there is a "certainty of
hopelessness" with circumstances that have a "total incapacity" to
change, court documents said said.
"An individual's economic circumstances may change over time,"
attorneys said. "Improvements in the national economy may offer new
employment prospects, changes in family circumstances may reduce the
number of the debtor's dependents, a spouse may enter or reenter the
workforce, or the debtor may benefit from an inheritance or other
windfall."
Murphy requested the First Circuit Court of Appeals discharge several
Parent Plus student loans, backed by the Department of Education, he
took out for his children. Murphy is asking the court to define what
"undue hardship" means when it comes to repaying student loan debt. A
win for Murphy could change the way U.S. bankruptcy courts handle outstanding student loan debt.
Murphy lost his $165,000-a-year job as president of a manufacturing
company in 2002. While looking for work in the past 13 years, he's dried
up his retirement savings and his home was recently foreclosed. Murphy
estimates if he were to find a $50,000-a-year job now and pay until he
turns 77, the balance of his loans would still grow to $500,000 with
interest.
Court records show Murphy took out twelve loans between 2001 and 2007, totaling $220,765.
The Department of Education's filing stands in sharp contrast to the
Obama administration's previous support for bankruptcy protection for
those with private student loans, in direct opposition to part of a 2005
law championed by Vice President Joe Biden.
Beginning in the 1970s, lawmakers began changing bankruptcy laws to
edge out student loans from release. In 2005, Biden, then a U.S. senator
from Delaware, helped secure legislation that would permanently bar both public and private student loans from bankruptcy protection.
In early October, the administration announced it wants to rescind
the law for private education loans, saying there are fewer consumer
protections than with federal loans.
"There are strong grounds for maintaining different standards for
federal student loans," the Education Department said. "Federal loans
are not underwritten, have generous terms and protections, and the
payments can be limited based on income. Private student loans, by
contrast, are underwritten and most do not have a built in income-
driven repayment plan."
Education debt has become a leading talking point for candidates
seeking Republican and Democratic nominations for president. If Biden
decides to make a bid for the Democratic nomination, his work on
bankruptcy laws and student loans could open even more debate.
Nationally, student loans are the second-largest class of U.S.
consumer debt behind mortgages. Since 2006, student debt has more than
doubled from less than $600 billion to more than $1.2 trillion. The
average balance is about $30,000.
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