Dealing With Debt? Understanding your options is the first step. See how all your debt relief options compare — including ones most sites won’t tell you about. The Find Your Path quiz gives a recommendation based on your actual numbers, and the Scam-O-Meter checks any company’s complaint history before you sign. Federal Reserve research shows bankruptcy filers recover faster than those who don’t file.
Free Tool — Contract Decoder: Have a contract from a debt relief company? The free Contract Decoder analyzes it for red flags, hidden fees, and problematic terms — before you sign anything. Decode My Contract →
Key Takeaways
- DOE forgave $25 billion for 1M+ people no questions asked, but denied bankruptcy for a woman because she had a gym membership
- 4 million parents owe $104 billion in Parent PLUS loans—half to for-profit schools, with debt following them into retirement
- After 20 years of Parent PLUS payments, 38% of the original balance typically remains unpaid
- Gen Z auto loan delinquency at 2.21% (up from 1.75% pre-pandemic); Millennials at 2.14% (up from 1.66%)
- 30% of Americans making $250,000+ are living paycheck to paycheck—top 5% of earners
- Mobile home lot rents exploding from $350 to $1,000/month, displacing elderly and disabled owners
Full Transcript
Click to expand transcript
Steve Rhode: Hey, it’s Steve Rhode, your Get Out of Debt Guy for today, June 7th, 2022.
Student Loan Forgiveness Hypocrisy
Steve Rhode: Richard Fossey, a former law professor, shared a great post asking why the Department of Education is forgiving big blocks of student loan debt, yet chasing people who are trying to file bankruptcy.
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
In the latest issue (Sep 16): The truck was $28,999 online. At the desk it’s $31,400. As of yesterday, the FTC says the ad was the lie.
I write Your Money Actually most weekdays — actionable money information you will not find anywhere else, and the small decisions that compound. It is free, I sell nothing, and I take no money from any company I write about.
Fossey asks: Why does President Biden and congressional leaders advocate for massive student loan debt relief without examining each debtor’s circumstances? In addition, why does the U.S. Department of Education continue harassing distressed college borrowers in the bankruptcy courts? That’s an excellent question, and it just doesn’t make any sense.
The Everson Case
Steve Rhode: In Everson vs. the Department of Education, Kimberly Everson took out student loans to get an associate degree in medical assisting from Bryant Stratton College, a for-profit institution. By the time she appeared in bankruptcy court, her student debt had grown to $45,000, including accrued interest.
Judge Delano reviewed Ms. Everson’s financial status in precise detail and refused to discharge her debt. He pointed out that Ms. Everson went out to eat occasionally, had a gym membership, and sometimes made purchases at a liquor store.
The Department of Education has forgiven $25 billion in student loan debt owed by more than a million people without subjecting any of those debtors to the onerous Brunner test. How many millions have gym memberships? How many go out to eat occasionally?
Parent PLUS Loan Crisis
Steve Rhode: Almost four million parents owe more than $104 billion to help pay for undergraduate education. But about half of these loans go to help for-profit schools caught up in scams and schemes. With Parent PLUS loans, the parent gets all the debt and liability and none of the benefit of any education.
After 10 years of repayment, the median Parent PLUS debt has only been reduced by 55% of the starting balance. After 20 years of payments, 38% of the starting balance remains. Parent PLUS loans are generational debt and can easily follow a parent into retirement.
Gen Z and Millennial Car Loans
Steve Rhode: Gen Z and Millennials today have auto loan delinquency rates significantly higher than pre-pandemic levels. Gen Z has a past due rate of 2.21%, compared with 1.75% before the pandemic. Millennials have fallen behind on car payments at a rate of 2.14%, compared with 1.66% before the pandemic.
High Earners Living Paycheck to Paycheck
Steve Rhode: A recent survey found that three out of ten Americans making $250,000 a year are living paycheck to paycheck. That’s roughly the top 5% of earners in the country. More than half of top earners in the millennial generation report having little left at the end of the month.
Mobile Home Rent Crisis
Steve Rhode: For nearly 30 years, Virginia Rubio has lived in a trailer park in Forks, Washington, where monthly rent teeters around $350 but now it’s shooting up to $1,000. Rubio, a retired home care aide who lives on food stamps and $860 in Social Security each month, says there’s no way to make the math work.
About 20 million Americans live in a manufactured home. Nationally, the average sales price has risen nearly 50% during the pandemic from $83,000 to $123,000. I have no idea what will happen to the disabled, elderly or sick people booted from mobile homes, but I can guarantee it’s not going to be good.
Free Tool — Benefits & Free Money Finder: There may be government programs, creditor hardship options, or nonprofit grants available to you. The free Benefits Finder personalizes results by state and situation — SNAP, Medicaid, LIHEAP, and more. Find Your Benefits →
Frequently Asked Questions
Can you discharge student loans in bankruptcy?
Technically yes, but it's extremely difficult. You must pass the Brunner test proving undue hardship. Meanwhile, the DOE forgives billions without any such requirements.
What are Parent PLUS loans?
Federal loans parents take out for their children's undergraduate education. Parents get all the debt but none of the education benefit. After 20 years, 38% of the balance often remains.
Can high earners live paycheck to paycheck?
Yes. A survey found 30% of Americans making $250,000+ per year are living paycheck to paycheck, with over half of top-earning Millennials reporting little money left at month's end.
What is happening to mobile home lot rents?
Lot rents are exploding—in some cases nearly tripling from $350 to $1,000/month. About 20 million Americans live in manufactured homes, many on rented land.
Will bankruptcy ruin my credit forever?
No—credit scores typically start recovering within 1-2 years after bankruptcy. Many people see their scores improve significantly because the debt-to-income ratio improves immediately. The bankruptcy stays on your credit report for 7-10 years, but its impact diminishes over time.
