They Said It Couldn’t Be Done: Student Loan Debt Freedom

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It has taken a lifetime – or two – or several million – to witness the recent realization that the government in Newfoundland-Labrador has had in understanding the draconian nature of lending huge sums of money to poor people  to get a post-secondary education that’s necessary for finding a job – and doing something about it.

As reported by CBC news on August 3rd 2015, provincial student loans have now been replaced with non-repayable grants.

I’ve often wondered why the major political parties, federal and provincial, have methodically steered away from the issue of student loans for decades. The principle of lending money to people who can’t afford something has long been known. How could it be construed to be helping the poor by lending them not just payday loan amounts but gargantuan life-defining amounts that would effectively keep millions of individuals and families poor after graduation?

The second principle of contemporary jurisprudence, the fresh start principle for honest but otherwise overburdened individuals or families, was violated by the federal government by way of a housekeeping amendment to the Bankruptcy and Insolvency Act in 1997-98 that prohibited student loan debts from being discharged from a bankruptcy for 10 years (now 7 years).

No debate or public attention followed this stripping of student loan debtor’s legal rights. It just seemed that our society had evolved to such a myopic state that debtors have been considered bad, especially defaulting debtors. Who cares about debtors? Debt is a negative and perhaps even worse, too boring a topic for politicians and the media.

This all happened at a time when the total consumer debt outstanding (excluding mortgages) in Canada was almost $200 billion up from $20 billion in 1975 and destined to reach $535 billion in 2015. In other words, we had already become a nation of debtors but nobody wanted to talk about it – or scrutinize it.

The student loan division of government used parliament to collect its debts – to improve its position as a creditor over all other unsecured creditors in a bankruptcy. At the same time all mercy for student loan debtors was eliminate. It didn’t matter what caused the insolvency or how compelling the cry for compassion was – a voice so often heard in Canada for human rights and freedoms. It all fell on deaf ears.

Bankruptcy legislation was first drafted to bring impossible debt problems to a conclusion and let honest debtors have a second chance while punishing dishonest ones.

The government of Canada and the provinces inadvertently punished poor people for attending a very expensive university or college if the student loan debtors couldn’t find a job or suffered the same kinds of problems that happen to all other consumer debtors like health problems or marital breakdown. Student loan debtors were isolated and disenfranchised.

The effect of this disregard for student loan debtors spilled over to the wider society where it has been an easy sell to the public that the government shouldn’t lose any money because of all the help they are giving to poor people by lending them impossible sums of money.

Today’s announcement by the Newfoundland-Labrador government to abolish student loans demonstrates great compassion and leadership that should be followed by the other provinces and the federal government.

I remember vividly over the last 2 decades how many times experts from all walks of life have consistently argued that, what the government in Newfoundland-Labrador has just done – couldn’t be done.

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