Thousands of graduate students out there face a troubling dilemma. With the job market in the crapper, newly licensed professionals are graduating from school and walking face first into a wall of unemployment, and as a result, these students are having a difficult, if not impossible, time repaying their debt. Just last week the real level of unemployment was revealed to be 15.8% rather than the 8.9% that is reported on the news. Turning specifically to JD’s, we all walked into law school knowing the costs. But most of us expected to be rewarded with high paying jobs (Remember those US News Rankings showing median incomes of $75,000 to $100,000 for schools at the lower end of tier 1 and tier 2 schools? I do.) that would help us pay down this absurd amount of debt in a manageable amount of time. With those jobs largely evaporated, law school graduates find themselves stuck in terms of what to do.

US News reports that “Student loan defaults are at their highest rate since 1998, and likely will go higher. And though federal student loans offer some payment modification options, private loans are far more onerous, because even filing for bankruptcy rarely wipes out the debt.” What many students might not know is that Congress last year reformed bankruptcy laws in a way that makes wiping out student loan debt extremely difficult. Many of you might have the same reaction that I did when I first learned that. I was extremely confused as to why bankruptcy allows people who have lived off of credit for years and overspent way beyond their earning capacity to have their debt wiped out, while my student loan debt wasn’t allowed to be eliminated through bankruptcy. In fact,” Bankruptcy law allows for discharges of credit card debt, car loans and even gambling debt, but not student loans.” The reasons given for not allowing student debt to be discharged in a bankruptcy proceeding are insufficient in my opinion. According to Scott Talbott, chief lobbyist for the Financial Services Roundtable, “If private student debt can be discharged in bankruptcy, that creates risk, and the result will increase the cost of tuition.”Seriously? The only good reason for not allowing discharge of debt is that it would create risk and result in increasing the cost of tuition? My tuition increased each year I was in law school for reasons completely unrelated to bankruptcy proceedings, so I don’t buy that argument. Also, what risk would be created? If we create a system that would only allow for a student to have his debt discharged for extremely rare circumstances (no family money, no liquid assets, has been unable to find employment that would allow for manageable debt repayment, etc), then risk would be a very minimal factor. I’m sure there are intelligent lawyers out there who can establish guidelines that would prevent the masses of unemployed law school graduates out there from successfully wiping out their student debt.

So the only conclusion that I can come to is that by enrolling in law school and finishing with my Juris Doctor degree, is that I have voluntarily enrolled in a slavery program.  As much as people like to say it, not all debt is slavery. Low debt can easily be repaid and cleared off the books. But $160,000? That is an amount of debt that will haunt you for decades of your life. Normally those decades would be spent toiling away (dare I say, slaving away) at a job that paid well enough to make a decent dent in your debt, but even then you would lose years of your life repaying your student loans. However, in today’s legal market where a licensed attorney can have a difficult time landing a job as a paralegal, highly skilled lawyers with massive debt will be forced to take low paying jobs just to survive, and won’t make enough income to even put a dent in their loan balances. Hmm. A never ending scenario where nothing changes, you work your ass off daily but never achieve any progress, only to have the fruits of your labor snatched away each month? That sounds like economic slavery to me. I have found that facing this reality sooner than later is mentally helpful.

These new bankruptcy regulations also raise one other issue that deserves mention. If a student truly wishes to have his or her debt wiped out, then they do have one means of accomplishing this. The student can actually sue the lender to try and have your debt eliminated. This process is rather difficult, and is basically a coin flip.

“A student loan debtor must try to claim an “undue hardship” to seek bankruptcy protection – a claim that is successful at best about 50% of the time. Unlike a traditional bankruptcy filing, a hardship filing requires debtors to file a lawsuit against creditors. That pits the student against corporate lawyers and defense teams, and often requires an expert witness, which can cost the graduate thousands of dollars to arrange.

“We’re talking about people who are in bankruptcy because they don’t have money,” says Rafael Pardo, associate professor of law at Seattle University and co-author of a recent research report about undue hardship litigation. “Yet we’re asking them, ‘If you want relief, you have to find a way to pay for a full-blown lawsuit.’ “

Renee Marie French wanted to file for an undue hardship claim in 2006 when she stopped working so she could care for her mother, who had cancer, in Albany, N.Y. As an unmarried parent of one child, French was unable to pay for a lawyer. But Thomas Califano, a bankruptcy attorney, agreed to provide pro bono service.

Even though French was able to go through the process, a judge ruled against her.

The whole process is unfair and extremely difficult, Califano says. Since then, French’s student loan has risen from $14,000 to $44,000 because of interest and penalties. And her life is more difficult. Her mother died, as has her stepfather. She works as a registered nurse and earns $20 an hour.” – US News

At $20 an hour, Ms. French doesn’t make a bad income. It is certainly much higher than minimum wage. But her case just illustrates the difficulties that a student can face when trying to eliminate debt. You can’t pay off your debt because you don’t make enough. But your only means of attacking your balance is to sue a giant corporation with deep pockets (pockets that you and millions of others just like you continue to line), which means spending money on the case itself. In the case of Ms. French, what is $44,000 to a billion dollar company? It’s the sound of pennies amongst hundred dollar bills. But honestly, what did you expect from lenders? Slaves have no rights in the first place.

 ”Y’all been eating long enough now stop bein’ greedy, just keep it real partner, give to the needy.” – DMX

RELATED ARTICLES:

Student Loan Bailout: The Choice of a New Generation [Above The Law]

College graduates struggle to repay student loans [USA Today]

Student Loans and Bankruptcy [SLBA]