This resolution addresses the [law school debt] problem by calling upon Congress, the Executive Branch and/or Commercial Lenders to convert private debt into federal loans, which offer more flexible repayment options; and identify federal funding to cover interest payments for graduates who defer loans because of economic hardship. It also calls for more flexible repayment terms for federal law student loans. [Emphasis LSTB].
In short, asking private lenders to take a haircut on loans that have a good chance of not getting paid back without any long-term relief for students.
This summer, the House of Delegates has risen to the challenge again with Resolution 111A. It proclaims:
RESOLVED, That the American Bar Association urges Congress to enact legislation that assists individuals who are experiencing financial hardship due to excessive levels of student loan debt but are not covered by the provisions of the student loan overhaul passed into law on March 30, 2010.
The law the ABA is referring to is the Health Care and Education Reconciliation Act of 2010, the health care reform. Aside from enraging Republicans, the law notably dismantles the FFEL system in which the government subsidized banks making student loans on its terms and instead transforms the Department of Education into a massive near-monopoly student loan lender (the Direct Lending program). Now the government lends out about $135-50 billion in new student loans every year, including Grad PLUS loans to law students that cover total attendance costs at whatever price law schools decide to raise tuition to any given year, and the ABA House of Delegates still can’t connect the dots between “excessive levels of student loan debt” and the legislature that enacts laws permitting its accumulation.
Like last year’s resolution, the ABA futilely seeks to change the terms of private student loans, and it does nothing for people who’ve taken out government loans that’re ineligible for IBR, e.g. Parent PLUS loans. The remainder of the resolution beseeches the same commercial banks that wrote the 2005 bankruptcy reform rendering private student loans nondischargeable in bankruptcy to voluntarily take another student loan haircut by offering their own income-based repayment programs. Banks do nothing voluntarily.
Like last year, the word “bankruptcy” does not appear in the resolution, and it couldn’t even bother to acknowledge to Private Student Loan Bankruptcy Fairness Act/Fairness for Struggling Students Act that’s stalled in Congress. The ABA simply lacks the courage to admit that universities capture student loan increases and raise tuition accordingly, an admission that would condemn the law schools’ practices worse than the transparency resolution accompanying 111A. Unsurprisingly, the ABA still haplessly champions universities’ goal of perpetual, unaccountable wealth transfer with only token support for student debtors and taxpayers.