A new report on the troubling amount of money most college students must borrow was released at the end of February, 2012. Compounding the hurdles for many young people seeking a college education is the double burden of dropping out and being in debt. What career prospects do you have when you only have half a degree, but an enormous amount of money you owe and no way to repay it? A high-paying job seems ever more out of reach.
The difficulties stem from many causes. Tuition is too high. Pell grants, which need not be repaid like a loan must, are limited in number and capped at levels that barely make a dent even in state tuitions. State budgets to fund community college and four-year colleges in California’s state system have been slashed by the legislature, resulting in higher tuition and reductions in the classes offered, slowing a student’s ability to graduate on time.
And if you can’t repay your loans, personal bankruptcy is the spectre that hangs over your head. But here’s the hitch: changes in personal bankruptcy law have made it harder to discharge student loan debt. Finaid.org explains how federally-guaranteed student loans, as well as private loans, can only be discharged if a bankruptcy judge accepts your petition for undue hardship:
Thus FFELP and FDSLP loans, and education loans funded or guaranteed by private nonprofit organizations, are automatically nondischargeable in a bankruptcy proceeding. The only cases in which they can be discharged through bankruptcy are:
- if the borrower files an undue hardship petition
and then it is up to the judge to decide whether the loan can actually be discharged. (The Higher Education Amendments of 1998 repealed the provision that allowed for the discharge of education loans that had been in repayment for 7 years. This affects all bankruptcy proceedings initiated after October 7, 1998, regardless of whether they involve loans incurred before that date.)
Most likely you weren’t of voting age in 1998 when the law changed, but now it has impact on you. And to reverse or change it will also take political will and legislative action.
Here are five ways your vote could help remove the barriers to a college degree and keep it within reach of middle class families:
- Tuition too high? Find out who your State Assemblymember and State Senator are, and urge them to vote for California’s Middle Class College Scholarhsip Act to cut state higher ed tuition by 2/3. (Michigan also has a similar law that closes a corporate tax loophole to fund higher ed.)
- Keep interest rates on student loans low — Congress is debating whether to double interest rates on student loans
- Let your state legislator (Assembly + State Senate) know that you want a state budget that raises revenue for K-12/higher ed and stabilizes funding at adequate levels
- Keep your eye on federal discussions of the budget where Pell grant funding and limits are up for renewal — ask your Congressional representative to raise Pell grants from $5550 to $6000 and keep them funded
- The big kahuna: repeal the Higher Education Amendments of 1998 that made student loan debt so difficult to discharge