As senator, Biden facilitated the lending industry’s campaign to eviscerate consumer debt protections.
Joe Biden is trying to appeal to younger voters as he is expected to launch his bid for the presidency. However, for years, Biden made it his mission to block student debt forgiveness, leaving many young people facing a lifetime of debt.
Biden’s potential candidacy comes at a time when the U. S. debt crisis is reaching unprecedented levels across all consumer sectors.
Student debt broke $1.5 trillion in the first quarter of 2018 according to the Federal Reserve, outstripping auto loan ($1.1 trillion) and credit card debt ($977 billion) significantly, with 1.1 million people owing over $100,000 for their educational expenses. Twenty percent of student borrowers default on their loan payments.
Similarly, almost one in five Americans’ credit reports feature delinquent medical debt. Bankruptcy from growing insurance and prescription costs is also affecting Americans at a precipitous rate. Studies vary widely, but generally between 26 to even 62 percent of bankruptcies cited medical debt as a contributing or even primary factor. A harrowing figure from the October 2018 American Journal of Medicine showed that 42 percent of new cancer patients exhaust their life savings within two years of treatment, with an average loss of $92,098.
Perhaps tellingly, the highest median projected loss in home equity from bankruptcy was in the state of Delaware, with a projected loss of $125,745 according to 2015 data from the American Economic Association. Delaware’s own senator and former vice president of the United States, Joe Biden, is at the center of the decades-long campaign by lenders to eviscerate consumer debt protections, so it seems fitting that his home state would rank at the bottom of the nation in raw numbers.
During the 1970s, isolated anecdotes began appearing in the media about students graduating college and then immediately declaring bankruptcy to avoid their debt obligations. Although a 1977 Government Accountability Office study showed that less than 1 percent of educational loans were being erased through bankruptcy, a bill was proposed in 1978 to block students from seeking bankruptcy protections for a set time period after graduation, a landmark change to the 80-year-old bankruptcy laws then on the books.
Biden was chosen as one of three Democratic representatives on a committee tasked with writing the bill. Although the National Consumer Law Center advised the committee against an “unwise and unjust” crackdown on students, the committee imposed a five-year exemption on government-sponsored loans from bankruptcy protections. This small hole was chipped away at over years, as bankruptcy exemptions were extended to government loans for vocational schools in addition to higher education in 1984, again with Biden spearheading the effort among the Democratic constituency. Even the unrelated 1990 Crime Control Act included language that further extended the bankruptcy exemptions’ waiting periods.
In 1997, the National Bankruptcy and Review Commission, formed under the direction of President Clinton, advised that student loans be made dischargeable again like any other private, consumer debt. Once again, however, Biden favored the industry professionals’ view and limited bankruptcy protection to those who could prove their failure to pay sprang from “undue hardship.” Common wisdom among law experts is that undue hardship can only be proved if the debtor’s economic prospects are impossible to improve, colloquially known by the grim “certainty of hopelessness.”
Biden pushed legislation in 2001 that would have stripped bankruptcy protections not just from government-backed or nonprofit loans, but also from loans from private industry. This bill was eventually defeated, but a changing Congress allowed the bill to be revived and passed by George W. Bush in April 2005. A Delaware lending firm known as MBNA had recently become the top financial contributor to President Bush over his career.
Progressive firebrand and presidential candidate Elizabeth Warren has a long history of fighting against these erosions in bankruptcy protection laws, and she has repeatedly called out Biden specifically.
