Thanks to reforms in the regulations that dealt with personal debt obligations going back to 1978, student loans were for the most part exempted from discharge in the event of individual bankruptcy. And these restrictions were strengthened even more under President Bush when he signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
But as the tenor and frequency of today’s political climate shifts towards some type of accommodation for the millions of millennials who are now stuck with tens and hundreds of thousands of dollars in student loan debts, President Obama on April 12 announced that his administration is going to provide an out for nearly 400,000 indebted students and graduates who may be unable to pay their debts due to a disability.
And this jubilee program being introduced by the Department of Education could permanently discharge over $7.7 billion in student loan debts in a market where Americans owe more than $1 trillion in total obligations.
Hundreds of thousands of student loan borrowers will now have an easier path to getting their loans discharged, the Obama administration announced Tuesday.
The Department of Education will send letters to 387,000 people they’ve identified as being eligible for a total and permanent disability discharge, a designation that allows federal student loan borrowers who can’t work because of a disability to have their loans forgiven. The borrowers identified by the Department won’t have to go through the typical application process for receiving a disability discharge, which requires sending in documented proof of their disability. Instead, the borrower will simply have to sign and return the completed application enclosed in the letter.
If every borrower identified by the Department decides to have his or her debt forgiven, the government will end up discharging more than $7.7 billion in debt, according to the Department. – Marketwatch
Ironically, free education and dismissal of student loans is a primary platform for another Democratic hopeful who is seeking to replace Barack Obama in the White House next year. And as appealing to millennial voters with the promise of ‘free stuff’ seems to be a major platform for Vermont Senator Bernie Sander’s Presidential bid, Barack Obama’s new program is much more limited in scope, and appears to carry on the tradition of economic division his tenure in office has been known for.
Ever since the government co-opted the student loan industry back in 2010, the cost of education has skyrocketed because access to money became increasingly easier. And six years later, millions of young adults are now burdened with debt obligations that will take them decades to repay, facing an economy that has never fully recovered, and which in the past would have provided them the jobs needed to be able to dutifully discharge what they owe.