Republicans should bring back college debt bankruptcy


Over the past few years, Democrats have worked to erase student loan debt at taxpayer expense. On August 24, President Biden finally bowed to pressure and announced that he would unilaterally “forgive” up to $20,000 in debt to certain borrowers.

Republican candidates usually have little to say on the subject other than rejecting the government’s handout, but the crippling debt problem remains for many Gen-Zers, Millennials, and Gen-Xers. Republicans may well lose winnable votes on this issue, and if no plan is offered, we can expect the Democrats to eventually win.

What should Republicans do to deal with the student loan crisis? It’s very simple: reinstate student debt bankruptcy for those who can’t repay their loans after years of good faith efforts and demand that colleges repay half of their students’ paid debt.

Almost every college in the country accepts federal money, and if they want to continue receiving that funding, colleges should be willing to help clean up the mess so many of them have helped create.

Fifty years ago, college debt was easily discharged in the event of bankruptcy; but since then, Congress and the courts have made it increasingly difficult to pay off student debt. It is high time to turn back.

How big is the student debt crisis? Nearly 48 million Americans owe money on student loans; more than 45 million of them owe the federal government. A US News Poll at the start of the year revealed that 37% could not afford to repay these loans. Another 27% said they could barely afford to make their payments. If this survey is correct, more than 15 million borrowers cannot repay their loans and 9 million can barely pay their loans.

In addition to helping individual borrowers, student debt bankruptcy would benefit American society. The US News poll also found that 37% of those with student debt put off buying a home, 32% put off saving for retirement, 19% put off starting a family, and 18% put off wedding.

Once debt-free, these university graduates would have an easier time settling down, starting and raising a family, buying a house or starting a business. All of these results benefit society as a whole and increase the likelihood of a person holding conservative views.

Why should colleges be required to repay some of their students’ paid debt? In addition to the fact that colleges have largely profited from the student debt crisis, they have also kept crucial information about students and parents. For example, most colleges do not disclose the average salary earned by graduates of the institution’s various degree programs. In addition, colleges regularly issue intentionally confusing Financial aid award letters that make it difficult to discern how much a year of college costs and how much of the aid consists of loans that need to be repaid. So it shouldn’t be at all surprising that young people make bad choices based on incomplete data.

Allowing people with crippling student debt to pay off that debt in the event of bankruptcy and holding colleges accountable for their student outcomes would transform higher education. If colleges knew they would be required to repay their students’ discharged debt, they would quickly change their ways. They would likely cut back or drop degree programs that offer few job opportunities and focus on preparing students for the real world.

Colleges would also be incentivized to cut bureaucracies, cut costs, and work harder to ensure their students find suitable jobs after graduation. In other words, bankruptcy for college debt with a clawback provision would help align the financial interests of colleges and their students.

Biden’s plan, by contrast, simply rewards college greed and lavishness and decouples the cost of a college degree from its economic value. That colleges have failed to produce graduates who can earn enough to repay their loans is of no consequence; colleges get paid anyway.

Colleges now have no incentive to reassess spending and reduce tuition, as they would if they were responsible for some of the student debt in the event of bankruptcy. Instead, colleges may continue to eagerly accept the federal loan dip and spend lavishly on projects, programs, buildings, administrators, and equipment that have little or nothing to do with the provision of quality education. Colleges can continue with degree programs that produce graduates who cannot repay their loans.

Before Biden’s move, colleges and students may have worked only on the assumption that the federal government would eventually cancel student debt. Now they know. The precedent is now set for the next student loan crisis – a foregone conclusion as long as the federal government remains in the student loan business. The federal government will not re-evaluate its lending habits like a private bank would. It will just continue to lend, as before, until the next student loan crisis hits.

Nor will Biden’s plan give students or employers reason to reconsider the economic value of a college education over alternatives such as job training, on-the-job training or starting a business. small business after high school.

To help solve the student debt crisis, transform higher education, cut tuition fees, and improve conservatives’ electoral prospects, Republicans should support student debt forgiveness in bankruptcy with a clawback provision. which requires colleges to repay half of their alumni’s discharged debt. Gambling and credit card debt incurred by middle-aged adults are routinely discharged in bankruptcy. Why shouldn’t college debt be treated the same way?

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