Some Republicans are exploring a new position on student loan debt
Some Republicans are exploring a new position on student loan debt
Some prominent Republicans are changing their tune when it comes to the economy. They’re still social conservatives, but they’re veering away from the party’s traditional laissez-faire take on business and embracing ideas from a new conservative group called American Compass.
One of them? Allowing student loans to be wiped away during bankruptcy.
Oren Cass is not your father’s Republican. Especially when he’s talking about how student loan debt is treated in bankruptcy.
“We try to set it aside and say this is special and thou shalt forever be buried under any debt you take on,” he explains.
Cass sounds like a Democrat there. But he was an adviser in Mitt Romney’s 2012 presidential campaign. He founded American Compass in 2020. It’s a think tank dedicated to encouraging Republicans to take a new look at capitalism. For example, treating student loans like any other debt and allowing them to be discharged during bankruptcy.
Right now they can’t be, and that was disastrous for 47-year-old Anjal Bracy. She enrolled in the University of Phoenix, a for-profit school, majoring in human resources while working full time. Then she lost her job and had to drop out.
“It’s frustrating to have that debt and not have, you know, something to show for it,” she says.
To have your student loan debt discharged by a judge, you have to prove it’s causing you “undue hardship.” Bracy didn’t meet that standard, even though her student debt is greater than her yearly income.
It’s virtually impossible for anyone to meet that standard, which led the Department of Justice to simplify it last year. Bipartisan Senate legislation to overhaul the bankruptcy code on student loans didn’t go anywhere two years ago. But Cass calls it a step in the right direction.
“That really strikes the sweet spot of how conservatives would want to approach this sort of issue,” he says. Maybe — although even Cass admits, “the House is a tough nut to crack on any policy initiative these days.”
Especially when lobbyists from universities and the student loan business show up. According to the campaign finance tracking site OpenSecrets, three companies that collect on or service student loans have spent more than $9 million lobbying Congress since 2021. Scott Buchanan heads their trade group, the Student Loan Servicing Alliance.
“How do we create a product that makes sense for borrowers, meets them where they are, but also that we don’t create potential for issues where people abuse the system?” said Buchanan.
Cass doesn’t think student borrowers would do that. “Bankruptcy isn’t some get out of jail free card. Bankruptcy is an incredibly painful process,” he said.
But the financial industry spent years lobbying to make bankruptcy law tougher on student debtors, and it’s not in a hurry to change things.
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