The campaign issue that generates the most interest with voters is the Federal Student Loan Program: “Eliminate Student Loan Program. Make existing loans bankruptable.”
Some presidential candidates have positions on the Student Loan Program issue ranging from forgiving all student debt, to forgiving some student debt, to a position involving no change. Some Libertarians take the position that “a contract is a contract” and student loans should be enforced. As far as I know my position—Martin Cowen for Congress—is unique. Martin Cowen advocates abolishing the program entirely and providing that all existing student loan debt shall lose its protected status under Federal bankruptcy law. At present student loan debt is not normally dischargeable in bankruptcy, unlike credit card debt or debts for catastrophic health care events. To bankrupt a student loan one must prove “undue hardship,” a term that is not defined by the bankruptcy code.
What many voters do not know is that the Health Care and Education Reconciliation Act of 2010 took private banks out of the federally guaranteed loan making process and now the U.S. Department of Education is the only lender.
While a discussion of the propriety of bankruptcy laws in a Libertarian utopia is beyond the scope of this essay, my position in general has been that bankruptcy should not be a part of the Libertarian utopia. For that reason, as a lawyer I have never practiced bankruptcy law, on moral grounds.
My focus in arriving at my campaign position on the Student Debt Crisis is fraud.
In a free market no unemployed, no asset young person would be granted even $10,000 in unsecured credit, much less $100,000. This fact is precisely the reason for the Federal Student Loan Program in the first place. Government had to intervene in the free market by guaranteeing these debts in order to induce private banks to make them. (As stated above, the Federal Student Loan Program was completely federalized in 2010.) In other words, the lenders and the government know at the time the loans are made that the students are unlikely to be able to repay the debts.
According to Forbes magazine, in 2016 the average student loan was over $37,000. (Can you imagine loaning $37,000 to an18 year old, even your own child, and expecting to be repaid?) The total owed exceeds $1.52 trillion. The number of student debtors is over 44.2 million people. As of 2018, 2 million students owe more $100,000; 415,000 owe more than $200,000.
These facts represent a massive, immoral fraud upon students.
Martin Cowen’s proposal is simple. Simply change bankruptcy law and treat student loan debt like any other debt: subject to discharge in bankruptcy like a credit card debt or a medical debt.
Why not simply “forgive” all debt? Bankruptcy is a moral issue. Many people will want to pay their debts. Many people can pay their debts. In the case where a student’s life, in her opinion, is made too difficult by her student debt, she should have the option to discharge her Government funded student loans, just like her other debts, in bankruptcy in accordance with federal bankruptcy law as modified by this proposal.
The Federal Student Loan Program has created 44.2 million indentured servants, some of whom will never be released from their bond under present law. The program is immoral in its conception and operation. The Federal Student Loan Program should be repealed and the existing debts made normally dischargeable in bankruptcy.