It truly is absurd when you hear people moralizing that people should pay their student debt when virtually every other debt class can be discharged through bankruptcy. You can go to Las Vegas, run up $50,000 in credit card debt for a wild night, and if you are unable to pay it back, no problem. Sure, your credit is ruined but no one is going to garnish your wages. Can’t pay your mortgage? Foreclosure. Can’t pay your auto loan? Repossession. Can’t pay your student debt? Lifelong debtors’ prison for you. Student debt is the largest non-housing relateddebt class in the US. It makes sense that bankruptcy should be an option here. There is one problem, however. Most of the debt is government backed meaning the bill is going to be taken on by the government (aka the people). This is something that should have been done over a decade ago when total student debt was $200 billion, not $1.2 trillion like it is today. However, rising delinquencies show something needs to be done here.
The push for discharging student debt
There is now serious talk to get student debt discharged via the bankruptcy process. Good timing for the 2016 election given a massive number of Americans now carry student debt:
‘(WSJ) WASHINGTON – The White House is weighing steps to make it easier for Americans to expunge certain student loans through bankruptcy, opening the door for student debt made by private lenders to be treated on par with credit-card debt and mortgages.
This post was published at MyBudget360 on March 15, 2015.
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