Joel R. Glucksman
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Sen. Warren Invokes for bankruptcy protection for student borrowers
Author: Joel R. Glucksman
Date: May 23, 2014
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During a speech at Suffolk University Law School recently, U.S. Sen. Elizabeth Warren called for an end to government profits on student loan debt, enhanced bankruptcy protections for student borrowers, and penalties for schools whose students default on their loans in large numbers, according to the Boston Globe.
Warren’s long-standing position on student loans – in particular, her past proposals for debt relief and refinancing – have contributed to her popularity among the younger generation and quite possibly to her recent election to national office. She argues that the overall debt burden placed on graduates is slowing the U.S. economy, as first time homeownership and auto loans for the young continue to decline.
“Many senior bankers in the industry are deeply concerned about student loan debt,” Rohit Chopra, the student loan ombudsman for the Consumer Financial Protection Bureau, told the news source. “For a competitive market to work, we need people to be able to not just go to school, but to progress economically. If they can’t do that, there could be real economic repercussions.”
Conventional wisdom holds that it is extremely difficult to discharge student loan debt through the bankruptcy courts. However, a higher-than-expected percentage of those who attempt to discharge such debt in this way are successful, according to Bloomberg Businessweek.
The news source noted that bankruptcy courts have adopted the “Brunner test” for student loan obligations, which requires debtors to meet three requirements in order to discharge their student loan debt, the news source explained. The debtor must be prevented from maintaining a “minimal” standard of living by the debt, must demonstrate a good-faith effort to maximize income and limit expenses and must show that the hardship is likely to continue for most of the repayment period.
While this standard has been widely considered very difficult to meet, Princeton University doctoral candidate Jason Iuliano estimated that 39 percent of debtors seeking to discharge student debt through a bankruptcy since 2007 were successful in a paper published in the American Bankruptcy Law Journal.
If Sen. Warren’s popularity, some of which seems to stem from her populist stance on student loans, is any indication, we may see more politicians taking up the younger generation’s cause in Washington.
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