This means that if you owe the government money for college and don't pay it back, filing bankruptcy isn't going to help you. You will still owe the government. All you can do is default on the loan or seek early forgiveness. And that's exactly what's happening. According to the Department of Education, the national default rate has increased every year for the last four years, and has nearly doubled since 2005. As the administration forgives more loans and defaults keep climbing, the cost to taxpayers keeps going up.
It's not crazy to talk about making student loans dischargeable again, or even capping the number of federally guaranteed loans so that private banks can compete for more borrowers. But the bigger challenge is reducing the cost of tuition in the first place. Tuitions are artificially high directly because of federal financial aid. "It's a vicious cycle," McCluskey recently explained in a speech. "Students tell the politicians, 'We don't want to pay this much for college,' and politicians respond by throwing more money at them, and colleges respond by increasing costs."
While critics charge that gradually cutting back on federal financial aid is "heartless," doing so would actually be one of the most compassionate things we can do in the long run for middle-class families. Going to college is a big part of the American Dream for many young people, but well-meaning "help" from the federal government is driving up costs, creating massive debt, and, in some cases, ruining lives.