I don't often agree with the Wall Street Journal's opinion articles, but one written by Glenn Harlan Reynolds dated June 28, 2013 is quite thoughtful.

As I've thought for years, the article explains that one of the reasons the U.S. has such a bloated amount of student loan debt is that the government made so much debt available- and tuitions skyrocketed as an unintended consequence. Mr. Reynolds goes on to explain that college costs need to be brought under control, instead of being allowed to inflate at an annual rate of 7.45% from 1978-2011, which far exceeds the rate of inflation of everything else.

One of the ways to do that, according to Mr. Reynolds, is to remove the incentives for schools to accept the money, because now they are not responsible for the student's outcomes. Whether the student flunks out, or never gets a job by reason of the education, the school still wins, because it gets the money up front. He suggests capping the money that a student can receive, or index federal aid to the consumer price index.

But he also says that he favors allowing students to discharge their student loan debts in bankruptcy "after a reasonable time- say five to seven years, maybe even 10," with the schools having to repay the loan guarantors (often taxpayers) part of the loan balance.

Outstanding idea, Mr. Reynolds. That was the law when I started as an attorney. All student loans were dischargeable so long as the student had been in repayment 5 years. Even if it was 7, or even 10, it would be far better than now, when a student loan borrower can graduate with $50,000 or $100,000 or more in debt, with little hope of ever paying it off.

It's time to do something about this mess. Young people should not be completely "covered up" with student loan debt just to get an education, such that they cannot participate in the economy and buy houses and start families, the usual things that they should be doing after college graduation. I guess it is too much to expect Congress to pass such a common sense proposal, but it is a welcome sign when the Wall Street Journal starts advocating it.

What do you think about this issue? Should we allows student loans to be discharged in bankruptcy? Please post your comments below.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
Just like C.L., I will remain as the pseudonym of D.F. where my real identity will stay hidden, but the shame stay remains the same. Just like C.L., I took out student loans to get become well-educated, but the economic conditions in the last five years lead me & my family into bankruptcy. This is something that we would have never guessed would have happened to us. But, after the cards of the economy crumbled, we fought to save what we worked for (of course, with Mr. Black's help), and we did the best that we could since then to recover economically. Yet, my wife and I will never pay back our student loans in full. It is impossible now. Our debt is around $185k (plus), so we will be indentured servants the rest of our lives to companies that don't try to work with you. Trust me: we tried before our Chapter 13 case, and it was useless. They will only take the summation of the payments that you have missed. So, say you have 7 different student loan companies, then each one wants the same amount on a monthly basis as before times months missed. So, say one has a $300 payment and you miss 6 months, then that becomes $1800 that you are behind. So, multiply that times 7 companies, and the calls are relentless. From what I can tell now, we will just have to live our lives in perpetual Chapter 13's the rest of our lives to even try to get out of this momentual burden. Thanks for listening.
by D F Again January 15, 2014 at 04:05 PM
I agree that student loan debt has become excessive in our economy. It is funny how the government always talks about how important getting a good education is, then everyone rushes to get the best educations possible. Yet, it takes excessive time, dedication, years, and the right career to earn enough to pay back large student loans (e.g., public grad-schools, normal law degrees, doctoral degrees, and even Ivy League undergrads). Most students with excessive student loans will default shortly after the repayment period begins, whether they have the "fancy degrees" or not. College costs are exorbitant for the amount of income that can be derived from those degrees. For too long, student loan lender is not based on eventual earnings but just based on the fact that student stay long-term debtors and the government finances & allows all of this to occur.
by C L August 11, 2013 at 03:35 AM
I really do believe something needs to occur regarding student loans. Many students took them out in "good faith", but the economy changed on all of us. Many students are strapped with excessive student loan debts that can not be discharged or even really EFFECTED by bankruptcies. So, good, hard-working students through no fault of their own are sent through the bankruptcy system and have no relief ever for debts that just grow and grow and grow. If interest rates were favorable (e.g., 2%, 3%, 4%) then maybe they would be affordable, but many student loans are locked at 6.8% (federal) and higher (like 9%+) for private. Good luck paying that off in this economy with depressed wages.
by D F August 11, 2013 at 03:29 AM
Brilliant idea!
by Andrea June 30, 2013 at 08:28 AM
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