Do I have to pay or will it be okay? Understand the conflict over student loan relief. | Fox Rothschild LLP
Millennials. Everyone has an opinion, especially us. We have “right”, “spoiled” and “lazy” for some; “Diverse”, “educated” and “confident” in others. Try this: “resilient”.
Millennials came through the boom of the 90s right in the dot-com bust. We watched the fall of the World Trade Center on live television. We have endured (and have continued to endure) over 20 years of conflict on foreign soil – the best of us serving, fighting and all too often sacrificing ourselves terribly. We kept our spirits up as New Orleans met the Atlantic. We have chosen the hope of “Yes we can! while our economic future has bent like special houses built at low cost.
We persevered. We made our concerts work. Many of the lucky ones have made their way to ordinary careers. We saved up for our own accommodation, started getting married, started having kids (on purpose), and became adults up to 401k. Of course, almost all of us missed the post-recession bull market. Yes, we were most often at the mercy of rapidly rising property values. But by the end of the decade, things were improving. So what . . . hello COVID-19. (Nice to meet you too, Armed Insurgency.)
In this sobering context, you might say that the new “lost generation” of 72 million Millennial Americans have seen some things. The effects are shown:
“Millennials entered the workforce during the worst recession since the Great Depression. Burdened with debt, unable to accumulate wealth, and stuck in dead-end, low-income jobs, they never got the financial security that their parents, grandparents, or even older siblings enjoyed. [. . . .]
They have smaller savings accounts than previous generations. They have less money invested. They have fewer homes to refinance, rent, or sell. They earn less money and are less likely to receive benefits such as paid sick leave. They have over half a trillion dollars in student loan debt to pay off, along with high rents and child care payments that continue to be owed.
Better yet, Millennials “are now entering their peak earning years in the midst of an economic cataclysm worse than the Great Recession, almost guaranteeing that they will be the first generation in modern American history to end up poorer than their parents.” “.
Quebec election. Enter the politicians.
As the fight for the Democratic nomination escalated in the summer of 2019, proposals to address rising student loan balances among millennial voters also intensified. Senator Elizabeth Warren led the way with an initial proposal to write off $ 50,000 in student loan debt for anyone with an annual household income of $ 100,000 or less, to be reduced by $ 1 to $ 3 for households with incomes between $ 100,000 and $ 250,000. Senator Bernie Sanders has raised the bar by proposing to write off all federal student loan debts at a cost of $ 1.6 billion. Then-presidential candidate Biden approved a more limited cancellation plan of $ 10,000 per borrower.
Fast forward to 2021 and student loan relief has shifted from the realm of probably empty campaign pledge to full-fledged politics. Many left-wing city dwellers – increasingly college graduates – expect swift action after Democrats took control of the Senate in January. Although emboldened, party leaders remain divided over how much relief to offer, when, for whom, and how.
The lack of clarity manifests itself with negative consequences. More and more borrowers on purpose not to repay their student loans which they hope will disappear. Some may forgo the option of refinancing their loans at historically low interest rates. Others face difficult, necessarily ill-informed decisions about how best to allocate scarce resources in the event of a pandemic.
This multi-part series for the Lone Star Bench and Blog hopes to help those who navigate the uncertainty surrounding their student loans or those of their clients.
The first part will offer an introduction to student loans and a quick guide to the main relief proposals. The second entry will examine the ongoing conflict between policymakers over whether and how to cancel student loans. Later, we will analyze the possible means, likelihood and potential impact of the main student loan cancellation proposals. Finally, we’ll look at other possibilities for student loan relief, focusing on potential changes to the bankruptcy code and related guidelines.