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1.1 Introduction

As the cost of financing our nation’s higher education system falls increasingly on students and families, student loan debt is rising at alarming rates. As of the middle of 2017, more than 42 million borrowers were carrying over $1.3 trillion in federal student loan debt.1 Sixty-eight percent of students who graduated in 2015 from public and nonprofit colleges had student debt, averaging $30,100, which was 4% above the 2014 average of $28,950.2 From 2008 to 2012, average student loan debt, including both private and federal loans combined, increased an average of 6% each year.3 The majority of this debt is from federal student loans,4 but many private loan borrowers also experience significant problems, including delinquency and default.

It is not just the level of debt that causes problems, but the level of financial distress due to unmanageable student debt. In addition, in many cases student loan borrowers will have problems with other types of debt, particularly credit card debt.

Student loan debt is different from other types of debt on the one hand because individuals incur the debt to purchase education, a truly unique commodity. If all goes well, education leads to economic rewards. College graduates earn significantly more money than those without degrees and are more likely to be employed. There is also evidence of other benefits to a more educated population, such as less reliance on public assistance and better health.5 However, this is not always the result. A bachelor’s degree may be just the beginning of a student’s educational journey. In addition, some college graduates may find that their professions are not as lucrative as they hoped or may lose their jobs as the economy changes. Others will confront unexpected life traumas such as disability, divorce, or death of a family member. Still others will choose career paths—such as teaching and social work—wherein success is not measured in dollars but in satisfaction and promoting social good.

Other students, including many lower-income individuals, fall victim to the practices of unscrupulous proprietary schools (also known as for-profit schools). These practices are a tremendous source of frustration, financial loss, and loss of opportunity for consumers, particularly low-income consumers hoping to break out of poverty. Attracted by the financing provided by government student loan and grant programs, many proprietary school scams and ill-conceived schools have exploited federally funded student assistance programs.6

Education is particularly critical for people entering the job force for the first time. In addition, those re-entering the job force after layoffs or hoping to transition into other types of work because of unemployment or disability also often look to education to move ahead. Although student loan debt is a problem that crosses class lines, low-income students are much more likely to borrow and to borrow more.7

The student loan default crisis is discussed in detail in Chapter 6, infra. In general, the consequences of student loan defaults have grown enormously over time as the government’s collection powers have steadily increased. The government has collection powers far beyond those of most unsecured creditors. As discussed in detail in Chapter 9, infra, the government can garnish a borrower’s wages without a judgment, seize the borrower’s tax refund (even an earned income tax credit), seize portions of federal benefits such as Social Security, and deny the borrower eligibility for new education grants or loans. To compound the problem, collectors are allowed to charge fees that create ballooning balances.8 Even in bankruptcy, most student loans must be paid.9 Unlike any other type of debt, there is no statute of limitations.10 The government can pursue borrowers to the grave.

For borrowers in default, education, initially seen as a way out of poverty, instead often leads them into a cycle of endless debt. They find themselves in a trap. Student loan debt from the past keeps them from going back to school and moving into higher-paying jobs. On the other hand, most cannot afford to go back to school and get additional training without some type of financial assistance.

It is critical for advocates to understand how best to counsel and represent student loan borrowers. An important first step is to learn about local educational options, particularly low-cost community colleges and other affordable programs. Advocates should also familiarize themselves with the range of government and private scholarship and grant programs.

Unfortunately, most clients do not seek legal help until long after they take out loans and are having trouble with repayment. This treatise focuses on assisting these clients, reviewing in detail the primary cancellation, repayment, bankruptcy, and other options available to challenge government collection efforts and help borrowers get out of default. Options for private student loan debt are more limited, but there is some relief available for these borrowers as discussed in Chapter 12, infra.

The good news is that there is almost always something that borrowers can do to challenge federal student loan collection actions and either cancel a loan or set up an affordable monthly payment plan. Understanding borrower cancellation and repayment rights is the key to assisting clients with student loan problems. Resolving these problems is often a critical step in helping clients recover financially.


  • 1 {1} U.S. Dep’t of Educ., Federal Student Aid Portfolio Summary, available at

    For updated information on debt levels, see the websites for the Consumer Financial Protection Bureau and Department of Education. Other helpful resources include the College Board’s “Trends” reports and reports from the Institute for College Access and Success (TICAS).

  • 2 The Inst. for Coll. Access & Success, Student Debt and the Class of 2015, 11th Annual Report (Oct. 2016).

  • 3 {2} The Inst. for Coll. Access & Success, Average Student Debt Climbing: $29,400 for Class of 2012 (Dec. 4, 2013).

  • 4 Nineteen percent of the student debt owed by 2015 graduates was from non-federal loans. The Inst. for Coll. Access & Success, Student Debt and the Class of 2015, 11th Annual Report (Oct. 2016).

  • 5 {3} The College Board issues reports annually about levels of student loan debt as well as the benefits of higher education for individuals and society.

  • 6 {4} The scope of the problem and legal claims are discussed in Chapter 13, infra.

  • 7 {5} For a summary of borrowing rates, including disproportionate borrowing rates at for-profit schools, see Ben Miller, New Am., Policy Brief: The Student Debt Review (Feb. 2014).

  • 8 {6} See § 8.3, infra.

  • 9 {7} See Ch. 11, infra.

  • 10 {8} See § 8.5.3, infra.