There's very little bankruptcy law can do to help people with student loans. But as a bankruptcy lawyer, I can at least give people good advice.
Since 2017, I started steering people who seemed eligible to Public Service Student Loan Debt Forgiveness. Back then, hardly anyone I talked to had heard of it. The last year or so, most people I mentioned it to knew about it and were in.
Just Wednesday, Nina told me, her student loans had been forgiven. For me, that's a first.
To get approved, you first have to be in public service. (That's mainly government or a hospital, but it's estimated that 25% of jobs in the US can count as public services jobs.) Next you have to make your payments for ten years. (Doesn't have to be ten years in a row. Just a total of 120 payments.) The program was signed into law by President George Bush in 2007. So in theory, eligible people who signed up right away could have been approved starting in 2017--four years ago.
In that first year, 28,000 people applied for forgiveness, thinking they had completed the program Exactly 96 out of the 28,000 got approved.
For the first four years, more than 98% of the people who applied got rejected. (This is 98% rejection of the people who knew about the program and thought they had completed it!).
Joe Biden to the Rescue
Last October, the Department of Education changed the regulations. They said that 550,000 people who had been turned down would now be eligible. I'm guessing Nina is one of these.
Bankruptcy for Student Loans Is Still Needed
It's nice to have this program that targets people who work in government, or hospitals or other public service. We want good people to take those jobs.
Still there are lots of jobs that are important to the country that don't count as public service for that program. Running telephone wires. Repairing cars. Caring for the elderly in nursing homes. Stocking grocery shelves. Face it, many people who completed college and held a government job for at least ten years are pretty well off. (Even with her student loans cancelled, Nina is still in a tough sport. Mainly because her husband disappeared, leaving her with two kids.)
Every week I talk to people who will die in debt to their student loans. No way to pay; and no way to clear them. The 2020 Democratic Party Platform proposed to treat student loans like any other debt. Eligible for bankruptcy if you can't pay. In this closely divided Congress, any reform needs Republican support. Very few Republicans are willing to get on board. The most visible Republican supporter of student loan bankruptcy reform, Rep John Katko, (R-NY), has announced he's leaving Congress as the end of the year.
I'm excited for Nina. And for the half million people President Biden has helped be eligible for student loan forgiveness. But there are millions of Americans far worse off than Nina, whose financial lives are crippled--for a lifetime--because they cannot use bankruptcy, or something, to get out from under their student loans.
Running telephone wires is an important job. But people who run telephone wires, stock grocery shelves, or care for the elderly in nursing homes aren't eligible for the student loan debt forgiveness that people working for government can get.