Since Ive been furloughed from my job, eagerly awaiting a callback that has been set and then delayed 4 times now, Ive had some time to think about lots of things, including my student loans. I was recently informed that my claim for debt relief was denied (Im filing an appeal, but…)
So here’s an idea I had, and I wanted to see what other people thought of it. As we all know, debt incurred via Federal loans is not dischargeable through Chapter 7 bankruptcy. Im not going to go into the reasons why I think this is wrong, or how ludicrous it is that you ccan default on an FHA home loan for many times the amount of most folks student debts and thats somehow okay or the arguments for or against this prohibition in the bankruptcy laws. These have all been argued many times on the internet and theres no reason to go over it all again here.
So - here is my proposal - make it so student debt is able to be included in a Chapter 7. BUT (because I am not asking for something for nothing,a nd if it were the case that everyone would just file Chapter 7 on their graduation day if it were possible) there needs to be a trade off. In that case - why not put a caveat on it so that if you do choose to include your Federal loans in a Chater 7, then you also have to agree to forefit your tax returns for the remainder of your career?
This would then make it a bit more of an interesting proposition for the government as they would not simply have to write down all of the discharged debt (they’d be getting it, and in many case, even more, in time). It would also be a choice for borrowers, as some might think theyd be better off in the long run paying their loans and keeping their returns.
Like I said, this is a seed of a nugget of a spark of an idea I had, not fully fleshed out. There’d obviously be some nuace to be worked out in the details, but, brad strokes wise - does anyone else think this might be an idea, or even a jumping off point for another (better) idea?
I dont think theres ever any way the government is just going to wipe the student debt slate clean for millions of borrowers and billions of dollars without some sort of benefit. Maybe you could even include future SS payments as part of the deal (i.e. - you pay into SS but dont get a check after 65)? I think, for some borrowers, even if this meant giving the government more back (in the long term) than what you owe, this might be a better course of action, mainly because of the benefit it would have on their credit profiles. Sure, a borrower would be sacrificing their returns (and potentially future SS payments) but it could save them thousands of dollars, not just in loan payments, but indirectly via more cometitive interest rates and easier access to credit. Another bonus is that if more people have better credit, thats better for the economy as there are more people who can qualify for loans for houses, cars etc (not to mention, theyd be getting lower rates, which keeps payments down, which could also help avoid even more defaults, reposessions, foreclosures ect on THOSE loans.
SO, maybe Im crazy. It wont hurt my feelings if you tell me so. What I want to see is if folks think this is an idea worth investigating or if Im way off base. I enjoy adult, rational, level headed discourse and am in no way just looking for an audiece only comprised of people who agree with me
Thank you for your consideration