According to Urban Dictionary, “The Emperor Wears No Clothes,” is a phrase “often used in political or social contexts for any obvious truth denied by the majority despite the evidence of their eyes, especially when proclaimed by the government.”
This metaphor came to mind as I read the adversary complaint filed in Love v. U.S. Department of Education. Rodger Love is asking a Kansas bankruptcy court to discharge his student loans–both federal and private.
As Mr. Love said in his complaint, he “has no hope of paying back the loans, and they have created a noose around [his] neck for the remainder of his economically productive years.”
Mr. Love is clearly right. He is 47 years old. Although he is employed full-time, he “does not anticipate receiving substantial raises or promotions in the future.” Nevertheless, Love is saddled with $167,000 in student loan debt, apparently to study at Washburn University, where he did not obtain a degree.
He now owes far more than he actually borrowed. Love took out $29,000 in federal loans and $68,000 in private loans–totally just $97,000. The balance of his debt–about $70,000–is mostly accumulated interest.
Indubitably, Betsy DeVos’s Department of Education will oppose a student-loan discharge for Mr. Love. DOE will probably argue that Mr. Love has not done enough to maximize his income–no matter what he has done to improve his financial circumstances.
If Mr. Love eats a hamburger at McDonald’s twice a month, DOE will say he hasn’t been frugal. And no matter what the court records reveal, DOE will almost certainly argue that Mr. Love has not handled his student loans in good faith.
But that will be government bullshit, already packaged in DOE lawyers’ canned legal briefs.
I’ll bet you dollars to donuts that DOE will tell the bankruptcy judge that Mr. Love should sign up for a 25-year repayment plan. But, as he pointed out in his complaint, he will be 72 years old before he finishes a 25-year plan. And since the payments won’t cover accruing interest, he will owe more than he owes right now when the plan terminates in 2045. And whatever amount is forgiven will be taxable to him as earned income.
That’s nuts. Why does DOE continue, year after year, to oppose bankruptcy relief for student-loan debtors who are clearly at the end of their rope?
One reason. DOE forces desperate debtors into long-term repayment plans so it can pretend that mountains of student debt are loans in good standing. But that is not true. Billions of dollars in outstanding student loans are not collectible.
If Education Secretary Betsy Devos believes DOE’s opposition to student-loan bankruptcy helps maintain the solvency of the federal student loan program, she is the emperor who wears no clothes. That stance defies the naked truth, which is this: Forty-five million Americans have outstanding student loans, and at least half of it will never be paid back.
Love v. U.S. Department of Education, Case No. 13-41680 (Bankr. D. Kan. Jan. 28, 2020) (complaint).