There are memes posted by Facebook users throughout Facebook that sarcastically announce that their mortgage or their credit card “now identifies as a student loan”.
These posts on Facebook are ignorant. People with mortgages and with credit card debt have more rights and better options compared to student loan borrowers, including full bankruptcy rights.
Massive student loan debt will only continue to increase if these Facebook posts continue to spread without them being countered with hard facts!
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I wonder how many people who are vehemently opposed to student loan relief and claim that student loan relief hurts the economy and tax payers were quick to accept and cash their free COVID stimulus checks that were sent from the federal government (IRS) in 2020 and 2021 and how many of these critics favored the forgiven of their PPP loans and never condemned it? Some members of Congress had all of their PPP loans forgiven including accrued interest. These same members of Congress are now calling student loan relief “unfair”.
The counter argument to the PPP comparison is that they were forced on businesses that were forced to shut down and limit their services because of the pandemic and that the payments forbade these businesses from opting for bankruptcy and that these businesses never benefited from the loans.
This argument is flawed. I know of many local businesses and many churches that benefited from the PPP loan. The spread of the virus at that point was much more widespread compared to its variants and so closing of businesses and other places was a consequence of the early stages of the pandemic. Businesses are able to file for bankruptcy and even include their PPP loan and have the loan discharged in full if they find their financial situation too burdensome. As the following law group explains:
IS MY PPP OR EIDL LOAN DISCHARGEABLE IN BANKRUPTCY?
If you are a business owner that has received a PPP or EIDL loan and you are facing financial losses beyond your control it may be in your interest to consider bankruptcy. The PPP and EIDL loans are in fact dischargeable during bankruptcy proceedings.
What does dischargeable mean? It meas that you don’t owe the loan anymore, and don’t have to pay it back. The basic benefit of bankruptcy is that it discharges many types of loans so that you can get on with your life.
But PPP loans in many cases have been full forgiven (including accrued interest). Almost $30 billion have been forgiven as of this writing with many applications still being processed.
Unfortunately, student loan borrowers who are in severe and almost irrecoverable economic hardship do not have this same opportunity including bankruptcy filing in spite of the fact that the U.S. Constitution stresses a uniform right to bankruptcy but Congress took this right away only from student loan borrowers.
The Constitution says in Article I, Section 8.,
“. . . To establish uniform Laws on the subject of Bankruptcies throughout the United State.”
But the laws are not “uniform”. How can a person who is in debt not be permitted by law to file for bankruptcy when the Constitution guarantees this as a right.
As Alan Collinge of Student Loan Justice and author of The Student Loan Scam says,
“The Congress of 1976 (and subsequent Congresses through 2005) stripped this protection uniquely from student loans. Today, we see the consequences; a viciously predatory, hyper-inflationary, lending behemoth which has grown to nationally threatening proportions. This is precisely the sort of lending catastrophe that the Founders wished to avoid.
“Lending systems fail from time to time. This has been true dating back to biblical times, and continues to be true to the present day. In the mid-eighties, for example, the S&L crisis saw the failure of a third of U.S. Savings and Loan Institutions, and the dissolution of the Federal Savings and Loan Insurance Corporation (FSLIC).”
He also pointed out in another post,
“After the Revolutionary War was won and the
Constitution was written, the Founders felt that
bankruptcy rights were so important, they place the
creation of a uniform bankruptcy system near the top of the list when enumerating the powers of Congress. Bankruptcy was, in fact, placed ahead of the powers to declare war, to coin currency, to raise an army and a navy, for example!”
The student loan lending system has become a miserable failure but the finger pointing is always pointed at the wrong people (the borrowers) instead of at the government, the schools and the lenders who have purposely bloated loans and penalties that no one - unless he or she wins Mega Millions - will be able to pay.
