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Last Fall, North Carolina Representative Virginia Foxx said that she was “looking out for the taxpayers” by opposing the return of standard bankruptcy protections to student loans. Apparently, “looking out for the taxpayers” is now Washington-speak for “growing the government”.
The fact of the matter is that the government has been profiting tremendously on the student loan program. In 2012, it was reported that the Department of Education was booking some $50 billion in profits from the lending program. What is more, the Department- unlike every other government agency administering every other type of loan- has been making a profit, not a loss, on defaulted student loans. Where credit card companies are thrilled to get back ten cents on the dollar for a defaulted loan, Uncle Sam is actually turning a profit! This is a defining hallmark of a predatory lending system and the perverted fiscal incentives this has caused is directly responsible for the massive increase in student loan debt that we have seen over the past couple of decades.
The Department of Education is the envy of the beltway with its wildly profitable and risk-free student loan system. While Adam Smith and other free-market economists may be rolling in their graves, the unelected bureaucrats inside the Office of Federal Student Aid, and also the Treasury Department, absolutely love it.
Make no mistake, the Department of Education and its “Financial Partners” on Wall Street are fighting furiously behind the scenes to keep bankruptcy gone from student loans. They know that it is the absence of bankruptcy, as well as statutes of limitations and other bedrock protections that allows this sort of profitability. They wanted nothing to threaten their state-sponsored predatory cash cow. And Virginia Foxx is their #1 champion on the Hill.
Meanwhile, the students and their families suffer. An astonishing $1 Trillion has been added to the nation’s student debt tab in the past decade or so, people are defaulting by the millions, lives are being shattered, and some are even fleeing the country or committing suicide. This inescapable, lifelong debt is hounding people to their graves…literally! Many of these people live in North Carolina.
This is the worst kind of big-government, and what the Founders wanted to guard against when they wrote the Constitution. They demanded a uniform bankruptcy code ahead of the power to declare war and raise an army when they gave Congress its powers, but apparently, Virginia Foxx doesn’t care about any of that. She doesn’t believe the government should have to play by the same rules as all other lenders.
I wonder if Virginia Foxx’s constituents know that she is a ringer for big-government, and working hard to continue to inflict this predatory lending system upon them? Of the 726,000 people in her district, I estimate that roughly 300,000 have been to college, and 200,000 of these had to take out loans to go. It is likely that over 100,000 people in her district are currently holding student loans, and most of these people vote. What is worst, a majority of these folks are currently unable to make payments on the debt, and they are seeing their balances increase wildly. They are lying awake at night on account of this predatory debt, and they have Virginia Foxx- more than most other members of Congress- to thank for it!
How someone claiming to be fighting for smaller government could be so dishonest, and cruel to their constituents is beyond me. How someone could buck the sound wisdom of conservatives like Jeb Bush, the Cato Institute, and others in fighting to keep bankruptcy gone from student loans is absolutely baffling. How she could have so effectively pulled this off against her own constituents is another great mystery.
Virginia Foxx should join true conservatives in Congress like John Katko in fighting for HR 2366, a bill that would at long last level the playing field on student loans by returning standard bankruptcy protections to the debt. I really do not think that she can keep up this fake conservative charade much longer, nor should she.
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For more from Alan Collinge, Founder of StudentLoanJustice.org, click here.
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Photo credit: Getty Images
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I’ve yet to hear an argument why there should be bankruptcy protections in place for credit card debt but not student loans. If ever their was a consumer debt where bankruptcy protections were appropriate, it is student loans.
If you absolutely need a loan, see the loan shark on the corner, or go to the US Congress. They’re loan sharks, too.
Restoring bankruptcy protections to student loan debtors is the decent and democratic thing to do — and it’s critical to economic growth and stability. Millions of people and families are struggling under the weight of these loans. The effect of the $1.4 trillion student loan debt is holding back other markets and creating a class of humiliated serfs. So many of these student loan debtors did not understand the terms of the loans or the massive powers of the Department of Education to compound the debt and to compel repayment from multiple sources of income, including tax returns, disability checks,… Read more »