why student loan debts should be discharged for bankruptcy

why student loan debts should be discharged for bankruptcy

In the United States, a large number of populations represent unpaid student loan debts. The government loses a lot of money from outstanding student’s loans. Many people are held back from progressing economically due to the student’s loan debts.  Making the student’s loan debt bankruptcy is an appealing move. It would mean that students do not have to worry about paying back when they leave college. This would give them a chance to progress constructively without fear of being held back. It would also give them a fresh start. This would also ensure the wealth disparity among the black and white folks is bridged. However, some argue that making student loan bankruptcy is a dangerous move. It would encourage unlimited borrowing, which shall raise tuition fees. More so, they hold that such a move could encourage borrowing without the intention of paying back. This would make the government lose a lot of revenue. Nevertheless, I believe an amicable solution could be reached to harmonize discharging student loan debts into bankruptcy. This paper analyzes why student loan debts should be discharged for bankruptcy while exploring bias within the assertion.

Denying student loan debtors the benefits of bankruptcy is unfair. According to the supreme court of the United States, in the year 1915, the benefits of bankruptcy allow debtors to have a fresh start. Famous individuals in the United States, like Henry Ford and Donald Trump, have been beneficiaries of bankruptcy for a fresh start. During college days, many students often find it amusing to misuse student loans. However, this teaches them an essential lesson in life on how to use your money appropriately. I believe denying students’ loan debtors a benefit of bankruptcy is unfair and unworthy. Most students leave college with nothing other than the knowledge they learned. Most of them take a lot of time before finding well-paying and permanent jobs. Although people argue that discharging loans would make students find a reason to take up loans with no intention of paying them back, the government and the institutions could help divert this reasoning.  I believe student loans should be used as a government incentive to increase more student enrollment. Also, I think the government, in conjunction with respective institutions, could come up with policies that encourage savings amongst students so that they do not misuse their student loans on unworthy spending.  Therefore, I believe failure to offer student loan debtors a benefit of bankruptcy is utterly unfair and should be considered as hurting to the student leaving school for searching for jobs.

According to a study by the institute of assets and social policies at Brandeis University, black students graduate with more debts as compared to white students. (Shapiro, Meschede, & Osoro,  2013). The disparity grows with time. This shows the existing wealthy gap between the social classes, which ultimately leads to social differentiation. Discrimination has been cited as becoming a considerable disadvantage for the black debtors as compared to white classmates. If the student loan debts were reduced or curtailed, the wealth gap between the two social classes could be minimized. However, the United States government loses a lot of billions in student debts. This is because only one out of six students get to pay the student loans. Therefore, many would argue that reducing student loans into bankruptcy would mean the state loses more money. However, I believe there are other means the government could raise more revenue as compared to student loan repayment. For instance, if the government works so hard to reduce the wealth gap between social groupings, more revenue could be raised from the activities individuals among these social classes indulge in. I believe that making it easier to discharge student loans into bankruptcy is a perfect way of empowering young graduates into making more money, thereby raising revenue for the federal government.

Financial burdens hold people back from making constructive progress in their lives. According to results from a study, 35% of United States citizens assert that they were not in a position to start small businesses or acquire daily necessities due to their student loans. (Yannelis, 2016).  Student loan debtors are not only fresh graduates; rather, there are several people out there who graduated long ago but have not been in the apposition to move on with their lives. The student’s loans have held them back. However, some argue that eliminating student loan debts would lead to unlimited borrowing. This would ultimately lead to higher tuitions. It would act as a subsidy for not only students but also schools. However, I do believe that the federal government could set limits on tuition. It could be a crime charging higher than the set limit by the government. Therefore, a student’s loan debts should be considered for elimination.

A common tendency people tend to get involved in is leaning on a specific direction, either in favor of or against a particular subject. While making my assertions about the student loan debts, I felt compelled to lean towards favoring the topic. The self-serving bias could be as a result of several reasons. However, the most common reason is that I was once a student, and I still identify with the struggling students. Moreover, I felt confident that discharging student loans into bankruptcy would help the student gain a fresh start. Someone would argue that this is being overconfident on an abstract idea. Overconfidence and self-serving nature could be termed as selection and response bias. These were the two significant biases that I encountered in my assertion of the topic.

Studies have indicated that individuals may get influenced by making a decision based on their identities. The identification of people could be in several forms, including based on race and skin color. Racial identity compels an individual to act or decide in favor or lean towards people of their race. Being an African American former student, my assertions were influenced by how the blacks were treated, especially in borrowing loans. The black students were overly disadvantaged when it comes to borrowing student loans. This phenomenon led to wealth disparity and the creation of social classes among the black and the white. My enculturation based on group/race identification largely may have influenced my bias in asserting the topic.

Students loan are an essential tool of learning for the students. However, discharging debts into bankruptcy could have severe adverse effects as compared to the advantages. For instance, one can say doing so would encourage unlimited borrowing with no intention of paying back. Such would undermine the government since it will be spending so much on the student’s loan year they are not recovering it in the long run. Such would make services by the government unavailable or of low quality since it is losing millions of money ion unpaid student loans. However, still, I hold that student loan debts should be discharged as a bankruptcy.

Overly, I believe that student loan debts need to be discharged as a bankruptcy. Despite many arguing that such a move may be disadvantageous, I believe it is the right thing to do. Especially considering how the student’s loans hold many people from progressing in life. Many are not able to start a small business or even acquire daily necessities. Doing away with the student’s loan debtors would mean these people have been granted a fresh start in life. They would make it meaningful, considering famous people in the United States are beneficiaries of bankruptcy. Therefore, I believe earnestly that making a student’s loan debtor’s bankruptcy would serve to protect the interest of students.

Reference

Shapiro, T., Meschede, T., & Osoro, S. (2013). The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide. Institute on Assets and Social Policy, Brandeis University; Waltham, MA, USA: 2013. Research and Policy Brief.

Should Student Loan Debt Be Easier to Discharge in Bankruptcy? – Top 3 Pros & Cons – ProCon.org. (2018). Retrieved 10 February 2020, from https://www.procon.org/headline.php?headlineID=005378

Yannelis, C. (2016). Strategic default on student loans. Working paper.