Bankruptcy of Your Student Loans

Bankruptcy of Your Student Loans

Sunday, March 20, 2016



With Donald Trump continuing to be the front runner in the GOP race to the November 2016 Presidential election, it would be nice to understand his plan for dealing with the student loan crisis.  Nearing 1.3 trillion dollars in outstanding loans, the student debt financial nightmare is one that, if not addressed in the next administration, could well result in a catastrophic collapse, with world-wide consequences.

In searching the internet for the 2016 Presidential candidate's positions on the student loan crisis, there does not seem to be any "new" news!  The news outlets reported on the topic back in 2015 quoting several candidates who spoke publicly on the subject.

From an article in U.S. News & World Report dated October 28, 2015, reporter Betsy Mayotte shared the comments of then candidates Dr. Ben Carson, Hillary Clinton, Bernie Sanders, and Donald Trump.


Both Clinton and Sanders are on record pushing for a form of free education for aspiring students who attend community colleges and increased grants and financial aid packages for students in public colleges, espousing that "No family and no student should have to borrow to pay tuition at a public college or university, and everyone who has student debt should be able to finance it at lower rates."

Clinton's plan is estimated to cost $350 BILLION dollars!  And guess who is going to be billed for that?  Yes, an increased tax (she called it a "tax adjustment") of the wealthy!


In like terms Bernie Sanders has made big news by his stump speeches where he has promised "FREE COLLEGE" for everyone "by requiring public colleges and universities to meet the financial need of the "lowest-income students."
"Under this plan, low-income students would use state, federal and institutional aid to cover tuition, living and other expenses. He would also like to see an increase in federal aid programs, on his campaign website specifically calling to "more than triple the federal work-study program to build valuable career experience that will help them after they graduate." Mayotee

Again we see that Sanders is having the taxpayer receive the bill for education - in this case increasing the tax on what Sanders calls "wall street speculators" 

Hmm... So when the Wall Street Speculators are unable to continue to fund the Department of Education, do they get to file for bankruptcy and have the U.S. Government bail them out  (AGAIN?).

Mayotte's article from October was written last fall when there were many more candidates in the race, and as she stated "Since there are almost too many hopefuls to count right now, we'll just focus on the current top two from each party."  (So Mayotte chose Clinton, Sanders, Carson and Trump in her expose.)


The GOP candidate Carson who has now dropped out of the race, had some pretty interesting views on the subject.  As Mayotte writes in her article:
"Republican candidate Dr. Ben Carson has somewhat of an opposite view. His solution for paying for college comes in the form of existing Pell Grant funding and, as he noted during a 2014 interview, "there is a four letter word that works extremely well, it's called w-o-r-k, work."
In a more recent interview, he expands his position to say that while student loans are OK, their interest rates are not. He says that schools should carry part of the responsibility of student loan debt by paying for the interest on the loans for the students they enroll.
In a more official statement on education, Carson criticizes the federal Department of Education, but unlike other Republican candidates who have called for it to be eliminated, Carson would like to use the department to "monitor our institutions of higher education for extreme political bias and deny federal funding if it exists."
Dr. Ben was in my opinion, a good candidate who's common sense approach to many of the issues should be taken seriously and his statement about the rates of interest being charged is one I can fully agree with here.  I would also agree with Carson's proposal that colleges be the ones who pay that interest....  I say that based on the fact that colleges are raking in millions of dollars in super-high tuition and are paying outlandish salaries and bonuses to their Presidents and Administrators. (Not to mention millions of dollars being spent for sports programs!)


Now last but not least, we have the Trump position. The Donald is not one to mince words which is perhaps why he has become popular with a large portion of the voting public who are sick of Big Government and corruption at the highest levels. One does not have to search very far to find reasons to have those same thoughts in regards to the waste and abuse within the education system.  

While I would love to go on about the corruption that I feel lies at the root of the student loan crisis, I will hold my tongue for now and save those words for another time!

Trump seems to want to speak about this as well, but he too has tamed his rhetoric about the depth of the problem and not come forward with revelations of who really is benefiting from "the student loan BUSINESS".

From an article by Demetrios Sourmaidis wrote September 1, 2015 for Student Debt Relief dot com, Sourmaidis quotes "The Hill.Com"  in which Donald Trump spoke about the role of the Federal Government in education and the profiteering taking place.  Trump is quoted as saying: “That’s probably one of the only things the government shouldn’t make money off (of). I think it’s terrible that one of the only profit centers we have is student loans...."

Like Carson I agree with Trump.  The government is making money off of the student loan business and educational loans are even traded on Wall Street!  Banks pay you 1% and you or your kids pay loan shark rates for their education, only to discover that the promise of a great job based on a college diploma is just a pipe-dream in the year 2016!

Sourmaidis confirms the profiteering by the Feds and the Department of Education by stating:  "As we have reported in the past, the Federal Student Loan programs turned a profit of $41.3 billion in 2013 while many borrowers are struggling to make their financial ends meet."

A $41.3 Billion Dollar Profit?  And that was reported over three years ago - while costs of tuition and rates have continued to their upward spiral, and while college Presidents and administrations are being exposed for exorbitant salaries and all kinds of fraudulent activities and corruption!

Trump could win over many democrats - who according to "The Hill" stated: "Given that the majority of people who take out student loans are democrats- a very reasonable assumption- this opens a huge door for Trump.  25 million people struggling with their student loans, 18 million Democrats/Independents the majority of student debtors...."

The article from The Hill talks about Trumps "unique experience with bankruptcy" and espouses the possibility that Trump would push for changes to the current Bankruptcy laws which make it nearly impossible to discharge student loan debt.  Perhaps Trump would pursue a return to the pre-1978 statute where student loans were dischargeable just like any other unsecured debt?

The Hill's author Alan Collinge puts forth this idea on how Trump could win over some of those disenfranchised and desperate student debt holders.  Speaking about Trump's chance to draw them in he says: 
"(A)nd also because he is not beholden to either the beltway, or the Wall Street crowd, the student loan issue presents an opportunity unique to Trump, one that he could use to demonstrate that the “Invisible hand” of free market capitalism actually can work for the little guy. It would also deliver to him at least 9 million votes from people who would otherwise be disinclined to vote for him- and that is on the low side. Importantly, these would come with no losses from his Republican base. For Trump, this should be a no-brainer.  Its good conservative policy, great politics, and incidentally the right thing to do.

I agree.  Having successfully won a full discharge of nearly $130,000.00 on February 5th of 2016, I know full well the ramifications of being in debt to the student loan industry!  When the Department of Education began to garnish both my small federal retirement annuity and my social security check, and I was living at the poverty level, I knew I had to try and get that debt discharged.

Fortunately I prevailed.  But it was a year in the process and a lot of hard work.  In the end I won because the Bankruptcy law includes a clause called the Undue Hardship Provision.

That is why I am here and write these articles.  I began this blog when I discovered the provision and based on what I was learning I felt that the only way to get free of the student loan debt was that I would be totally broke, homeless and declared impoverished!

While I am still living near the poverty level, I am a strong believer that the winds are about to change, and those who are struggling with huge loan payments and ever increasing debt balances, can be free of that nightmare if they are seeking a fresh start.  I am starting to see that our courts and judges are not being so easily persuaded by the DOE's lawyers, and have in recent cases ruled in favor of the student debtor and against the DOE who have long been pushing their repayment plans.

In the recent case of a fellow, in California, the court discharged nearly $330,000.00 student loan debt under the 3-part Brunner Test, and had this to say about the DOE's attempt to get (the debtor) to agree to an income contingent repayment plan: 
"While the DOE correctly argues that this court must consider (the debtor's) failure to apply for one of its income-based repayment plans, such inaction is insufficient, standing alone, for this court to find against him on this final Brunner factor (particularly where no payment is forecast).... 
Given (the debtor's) other good faith efforts, his failure to pursue an income contingent repayment plan is not damning. An income contingent payment plan is not the functional equivalent of a Chapter 7 discharge, particularly given the possibility that a debtor may face a substantial tax liability when the student debt is forgiven.
(The debtor) has demonstrated by a preponderance of the evidence that he is entitled to discharge his student loan debt.  This court will therefore enter judgment in his favor."  (name of debtor withheld per his request)
Trump's popularity has a lot to do with his appeal to those disenfranchised and hurting Americans who are struggling to make ends meet.  He appeals to those who feel our Government has lost touch with those it claims to represent.  The Washington cartel does not like Trump because he is not part of their "click" and he may be elected - who knows?

Regardless of who is the next POTUS, the fact remains the student loan crisis is something that is desperately in need of help!  Students who are in debt and unable to repay their loans are in need of help.  That is what I am trying to do.... Help those who are in the same boat I was in, emphasis on the WAS!

Thanks for reading my blog.  If I can answer any questions feel free to comment here.  Also be sure and request email notifications of my latest articles here.

God bless America and You!  Best regards, Richard Allan Precht


1 comment:

  1. I saw your reply (quoted & linked below) on Steve's blog, and I responded, but, in case you don't see it (he hasn't approved my post yet, it seems - he's busy with many things & thus may need extra time to approve posts), here's a saved copy/paste of my reply:

    "Thank you for weighing in, Rich.

    I am bookmarking your website (in multiple browsers - just to make sure I don't lose it!). - And, congratulations on your win! You are a team player - thank you for (helping by) sending the predatory lenders the clear message that debt slavery is not cool...

    I saw your recent blog post. Regardless of anyone's political views, I do feel that most would accept my axiom that Donald Trump, whom you discuss, would be amenable to helping students in trouble. Why, some may ask?

    Well, since he got bankruptcy (not him, himself, but his companies - but same-difference), then he can feel our pain - and knows how important it is to have an Economic Second amendment to defend against predatory lending. (I.e., he needed this protection, so I'm sure he understands us - and thus be sympathetic - and, as he has experienced it - empathetic as well.)

    **PS: Ben Carson is a good guy, but when he supports the concept of college loans, this is not good in the 1st place: This induces colleges to jack up prices to match increased borrowing abilities of students. It distorts the Free Market. If tax-payer-backed loans disappeared, and all you had were private loans -- and then you were able to bankrupt them like Credit Cards, lenders and colleges would be **less** inclined to have **super** high tuition: They'd know students could not afford that, and I told Carson as much on his social media and/or via email feedback. We must politely, but firmly, advocate good policy here.**

    In my case, I'm on IBR (Income Based Repayment), and 10% of my discretionary income is 10% of zero - which is **zero**! -- (And even if I start earning more money, 10% of discretionary income - that is, income above basic necessities - is not a lot.) So, were I to win, I might actually be thrown into bankruptcy court, and have to start paying more. But, the needs of the many outweigh the needs of the few - or the one. (Quoting SPOCK from Star Trek: The Wrath of Kahn) - That is, even if it doesn't help *me*, it will help others. (Actually, it *would* help me, if I knew I could reduce the chance of these criminals running free - and posing a threat to myself when they know they keep getting away with crimes ala Predatory Lending, etc.)

    Again, thank you for writing back.

    Gordon Wayne Watts
    Lakeland (between Tampa & Orlando), Fla.///

    RE: [[""Anon Person • 8 hours ago


    Mr. Watts, Perhaps you need to read my case? I won a full discharge of $130K, and it was a precedent setting case using the Department of Education's own July 7th Policy Directive as my defense. I won my case without an attorney and without a trial against the Assistant U.S. Attorney here in the Metro DC area! The U.S Attorney filed a motion to strike my adversary complaint, I filed a motion to object and three days after the motion hearing the U.S. Attorney called me on the phone and said the DOE was going to discharge my loans and remove nearly $30K in penalties and discharge nearly $100K in student loan debt. Another friend in California (who btw is also a lawyer) just won his case and the DOE discharged OVER $300,000.00 in his case! Yes I applaud you for standing up! I am doing the same by writing about undue hardship on my blog www.unduehardship-povertyrequi.... We all can join forces and end this unfair practice if we stand up together! Thank you! Best Regards, Richard Allan Precht
    2 • Reply•Share › ""]]


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