Governing Through Student Loan Debt

It's common knowledge that student loan debt is treated differently than other forms of debt. Unlike most forms of consumer debt, student loan debt isn't subject to normal bankruptcy proceedings, meaning that it's virtually impossible to get it discharged. Discharge is, still, a technical possibility, but one must demonstrate "undue hardship," an intentionally vague standard that leaves much open to interpretation. For the most part, the courts have sought to determine that standard according to the so-called Brunner test, which arose out of Brunner v. New York State Higher Education Services Corp. The Second Circuit adopted a three-part test to determine "undue hardship," requiring:

(1) that the debtor cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans;

(2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the loans; and

(3) that the debtor has made good faith efforts to repay the loans.

Much of the three-part test itself is open to interpretation, but whatever the case may be, it's an incredibly tall standard.

Notably, the test focuses not only on present circumstances, but projected future circumstances as well, above and beyond immediate context, along with a history of good intentions. Mere inability to repay, in other words, is not enough. One must show that one has attempted in "good faith" to repay but will never be able to.

There are, of course, reasons cited as to why student loans are subject to such stringent requirements. Student loans used to be more easily dischargeable in bankruptcy proceedings but, over time, Congress became leery about supposedly real and potential abuses of the bankruptcy process. After a series of legislative efforts to restrict the circumstances under which student loan debtors could seek discharges, in 1998 Congress eliminated the possibility entirely, except, of course, for reasons of "undue hardship." As a recent amicus brief on behalf of the United States to the First Circuit in Murphy v. U.S. Department of Education argues, the intent was "to withhold the discharge from undeserving debtors who were seeking quick and easy relief from student loan obligations."

The latter statement is telling, not just because it's not at all clear to what extent student loan debtors ever really gamed the bankruptcy process to their advantage. Like recent voter I.D. laws that appeal to fraud in order to tighten access to the polls, usually to the disadvantage of poor and minority voters, appeals to debtors seeking "quick and easy relief" may be more rooted in carefully-crafted hearsay than fact. The amicus brief mentioned above doesn't mention any tangible evidence in support of that view and, moreover, cites the House Judiciary Committee as finding "no evidence of a disproportionate increase in the number of student loan borrowers seeking discharge in bankruptcy."

It's telling, rather, for what it says about student debtors and their relationship to their creditor, the federal government. The immediate concern of the brief is the case of Robert Murphy. Murphy took out several Parent PLUS loans to help send his children to college. With accrued interest, his loan debt has now increased to just under $250,000. 65 years old and unable to find work for the past 13 years, Murphy is seeking to have his loans discharged through bankruptcy, though the argument presented on behalf of the federal government of course has a more general purview.

The lawyers, not surprisingly, cite financial reasons to make their case. "The fiscal integrity of the student loan program depends on ensuring that student loans are repaid where feasible," the brief states. But it's not at all clear that that is the main concern, at least if one digs underneath the surface.

For instance, instead of recommending discharge, the brief recommends that troubled debtors avail themselves of various repayment options, such as an income contingent-repayment plan. "Depending on the debtor's circumstance," the brief states, "an income contingent-repayment plan can reduce his repayment obligation in a given year to zero." Since the income-contingent repayment plan is, as stated, contingent on income, the hope is that the debtor's situation will improve in the future, enabling him or her to shore up obligations at a later date. That's not guaranteed, of course, and any outstanding debt can be cancelled after 25 years. That's not necessarily a recipe for "fiscal integrity," however, at least in the simplistic terms that the brief presents the latter.

That's because, I would suggest, the student loan system and its various repayment plans are really more about governing individuals than anything else, although so much isn't explicitly stated. The regulation of individuals through debt is, moreover, concealed in the language of generosity on the side of the federal government, and individual choice and responsibility on the side of the borrower. Student loans are, in other words, about creating what Maurizio Lazzarato refers to as "the indebted man."

Thus the brief portrays student loan debtors as largely "undeserving," subject to the beneficence of the federal government. Speaking of the "heightened standard" applied to student loans," the brief notes for instance that "it is consistent with the purpose of the federal student loan program and the bargain each borrower strikes with the federal government in gaining access to an invaluable educational benefit. Unlike most other loans, a borrower may obtain a student loan without security, cosigners, or demonstrated creditworthiness."

But that "bargain" comes at a price, namely the government's claim to future earnings and the debtor's obligation to repay. In reference to the general unavailability of discharge, the brief states that it "holds the borrower to his or her promise to use future earnings and resources obtained over the course of the entire loan term to meet the loan obligation." The obligation to repay, in other words, is a means to capture one's life.

One may, of course, eventually repay, but what matters is the obligation itself, since it's that obligation that shapes individuals as indebted. So long as that obligation is in place, the circumstances don't matter, and sacrifice may be required to make good on one's responsibility. For instance:

A parent borrower who takes out [PLUS loans] late in his or her work life does so with full knowledge that repayment may require that he remain employed at or past normal retirement age, that his income may top out or decrease at later stages of his or her career, and that further employment opportunities may be limited. This is part of the bargain that parents strike when they take out loans later in their work life.

That's why there can't really be any "fresh starts" when it comes to student loan debt. To discharge student loan debt would not merely disrupt the "fiscal integrity" of the student loan program. More seriously, it would potentially negate the claim that the federal government has on individuals in the form of debt, a claim that is maintained through repayment plans. Simply put, indebted individuals are easier to govern than those who aren't.