Student Loan Reform Bill (Passed)

[Senator Cris]

Student Loan Reform Bill

1. Federal student loans across all categories shall be capped at an aggregate total of $5,000/year for undergraduate students and $10,000/year for graduate students.

2. Student loans shall be retroactively made dischargeable in bankruptcy under circumstances of undue hardship. Undue hardship may be shown if the lendee meets any of the following criteria:
     a. The lendee's debt exceeds 200% of the lendee's income and has done so for at least 12 consecutive months.
     b. The lendee has ongoing expenditures that will continue indefinitely and can demonstrate that these expenditures render the lendee unable to meet the minimum loan payments.
     c. The lendee is, due to circumstances beyond their control, unable to hold or retain gainful employment.

3. These rules will go into effect for the 2016-17 academic year.

Sponsor: PiT

[Unconditional Surrender Truman]

While I'll be considering potential tweaks over the next few days, I agree with this in principle. Student loans by and large take advantage of low and middle-income students and their families and should be limited as much as possible.

That said, I do wonder how we will prevent this bill from hurting students who rely on such loans to pay for college. Perhaps we could institute a tuition cap on public universities?

[Associate Justice PiT]

     While federal student loans are a well-intentioned program to expand access to higher education, they are also largely responsible for the exploding cost of college. Knowing that students can get unsecured loans in basically any amount that are effectively guaranteed, many universities have jacked up tuition. This is especially problematic at the grad level. The average rookie attorney carries a debt load twice their salary, and this is a result of policies in this area.

     This bill attacks the issue in two ways. One, it limits public spending on student loans. Two, it eliminates the non-dischargability of student loans, which has created a situation where there is no risk to the lender and private lenders can and do lend out basically unlimited amounts. These loans are frequently later sold off in SLABS, so even if the student defaults lenders walk away the winner.

     By working on both public and private lending, this bill would bring student debt loads under control. Universities would face pressure to keep tuition down in order to maintain their current enrollment figures, because the "willingness to pay" of students would be limited.

While I'll be considering potential tweaks over the next few days, I agree with this in principle. Student loans by and large take advantage of low and middle-income students and their families and should be limited as much as possible.

That said, I do wonder how we will prevent this bill from hurting students who rely on such loans to pay for college. Perhaps we could institute a tuition cap on public universities?

     A tuition cap on public universities is a fine idea, and I in fact proposed a bill that was later passed in the Southern Legislature that put strict measures into place limiting tuition at public universities in the region. I would support an amendment to this bill that would work along those lines.

[Southern Senator North Carolina Yankee]

I like this bill. The issue came up back in the Spring as I recall as part of a previous bill's debate and the point was made then that the unlimited nature and the ability of universities to essentially charge anything and not be impacted has meant that there is not downard pressure on tuition at all. At the same time there are enormous costs and many reasons to find even more ways to spend and thus it all gets channelled into the form of tuition, which has without surprise skyrocketted.

I also like the bankruptcy changes as well. The idea that they cannot be discharged fails to account for the fact that sometimes things happen like disability or whatnot and that becomes impossible. On top of this you have the normal concerns that necessitate the discharging of private debt in such bankruptcies. Does anyone know why the initial prohibitions on such were put in place to prevent discharging student loand debt?

[Prince of Salem]

Does anyone know why the initial prohibitions on such were put in place to prevent discharging student loand debt?

I'd like to second this question.

[Unconditional Surrender Truman]

I propose the following amendment:

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[Senator Cris]

Senators have 24 hours to object.

[Associate Justice PiT]

     I am concerned that the amendment as written would run into enforceability issues as many public universities are run at the regional level and the courts have established that the Senate cannot simply order them about. I would propose instead:

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[Unconditional Surrender Truman]

Good point - I withdraw my amendment in favor of PiT's.

[Senator Cris]

Senator have 24 hours to object to PiT's amendment.

[Senator Cris]

The amendment has been adopted.

[Fmr President & Senator Polnut]

Not to interrupt - how does this work with the previous reforms?

[Southern Senator North Carolina Yankee]

That concern should certainly be answered.

I was also wondering what all this applied to but PiT's amendment addressed that for the most part.

[Talleyrand]

Why is public school tuition being arbitrarily capped off at $10,000? Do we want to bankrupt our institutions of higher learning???

[Associate Justice PiT]

Not to interrupt - how does this work with the previous reforms?

     This is something that should always be asked, and frequently isn't. Realistically, this is why a legislative reboot is probably a good idea; I don't know how many of us can answer this question.

[Associate Justice PiT]

Why is public school tuition being arbitrarily capped off at $10,000? Do we want to bankrupt our institutions of higher learning???

     Noticed this now, but $10,000 is already high for public university tuition. Considering the bloat of university spending and the increasing direction of such spending towards administration, "student life", and other things of lesser importance, they really don't need to be charging this much; rather they need to be cutting the fat.

     I also notice that a couple of different ideas were running together here. It's not exactly important, but eh.

[Unconditional Surrender Truman]

Why is public school tuition being arbitrarily capped off at $10,000? Do we want to bankrupt our institutions of higher learning???

If we don't cap tuition, limiting federal student loans to $10,000/year equals telling poor kids they can't go to college. As PiT says, most colleges are spending way more than they need to to provide a good education, largely in an effort to kiss up to the U.S. & World News (which basis its colleges rankings in part on how much money institutions spend each year). As someone who recently discovered IRL that I may not be going to college due to exorbitant tuition hikes, I find this morally reprehensible, especially considering how much more employment depends on having a college degree as opposed to 30 years ago.

[Southern Senator North Carolina Yankee]

Indeed, the rapid rise in tuition has only made it more difficult to afford college and has squeezed the middle class and poor the most. It has contributed to the high debt loads that students and former students are carrying around with them. At the same time, to the extent that that we have ate that cost with such loans, as only encouraged the rates to increase still further and further exascerbate the crisis.

[Talleyrand]

In that case, I move for a final vote.

[Unconditional Surrender Truman]

In that case, I move for a final vote.

Seconded.

[Senator Cris]

Considered that we have a new Senator, I think we should let him read the text before to hold a final vote.

If there will not be objections, I'll open a final vote on this tomorrow.

[Senator Cris]

A final vote is now open. Please vote.

[Associate Justice PiT]

     Aye

[Maxwell]

Aye

[Unconditional Surrender Truman]

AYE!