Elizabeth Warren and Student Loans

Elizabeth Warren, the current chair of the Congressional Oversight Panel overseeing TARP, is widely viewed as the architect of the Financial Products Safety Commission, which was recently proposed in the Senate.  I had seen her name come up in various stories on student loans recently.  I thought that given her prominent role in the Administration, I would research some of her papers and writings on student loan issues to gain some insights on the issues that matter to her:  the non-dischargeability of student loans, concept of Financial Products Safety Commission and a national service program that provides student loan forgiveness in return for public service. 

• Credit Slips Blog (June 3, 2007):  "Student loan scandal fallout" post questions the appropriateness of the  non-dischargeability of student loans:

"Among the many wonders of the 2005 bankruptcy amendments is the provision that for-profit student loan agencies would get the same protection of non-dischargeability as government lenders.  No one seems to know where the amendment came from and no one seems to recall any evidence of abuse that would cause these for-profit lenders to get treatment usually reserved for domestic support recipients and the taxing authorities..."

"...Ultimately the non-dischargeability decisions boils down to two simple policy questions:  Why should students who are trying to finance an education be treated more harshly than someone who negligently ran over a child or someone who racked up tens of thousands of dollars gambling? And why should a for-profit lender should receive the kind of extraordinary protection that is usually reserved for domestic support recipients or the government?"

• "Making Credit Safer" is a research paper co-authored by Warren with Owen Bar-Gill, which serves as the foundation for the Financial Products Safety Commission.  Here is the abstract:

"Physical products, from toasters and lawnmowers to infant car seats and toys to meat and  drugs, are routinely inspected and regulated for safety. Credit products, like mortgage loans and credit cards, on the other hand, are left largely unregulated, even though they can also be unsafe. Because financial products are analyzed through a contract paradigm rather than a products paradigm, consumers have been left with unsafe credit products. These dangerous products can lead to financial distress, bankruptcy and foreclosure, and, as evidenced by the recent subprime crisis, they can have devastating effects on communities and on the economy. In this Article, we use the physical products analogy to build a case, supported by both theory and data, for comprehensive safety regulation of consumer credit. We then examine the current state of consumer credit regulation, explaining why the current regulatory regime has systematically failed to provide meaningful safety regulations. We propose a fundamental restructuring of this regime, urging the creation of a new federal regulator that will have both the authority and the incentives to police the safety of consumer credit products."

• Op-Ed piece in Boston Globe (June 5, 2008):  "Out of the hole of college debt"

Proposes a program called "Service Pays," a program that is as simple as it sounds: borrow money to go to college, work in public service a few years, and loans are forgiven."

• Wall Street Journal (January 6, 2005):  "U.S. gets tough with student loans"

"The aggressive approach has sparked an outcry from some borrowers, consumer-advocacy lawyers and even some bankruptcy-court judges. They complain that the department runs roughshod over some former students who've suffered reversals of fortune. "Student-loan debt collectors have power that would make a mobster envious," says Elizabeth Warren, a Harvard Law School professor and bankruptcy specialist."

• New York Times (January 11, 2006):  "Forgive us our student debts"

"When young people are training to be doctors or lawyers they should pay the freight because they can earn so much more," says Elizabeth Warren, a professor at Harvard Law School and a leading expert on personal bankruptcy. On the other hand, Warren is convinced that rising levels of undergraduate debt have diminished the potential — long taken for granted — of a four-year degree to deliver someone into the middle class. "We tend to talk about student loans in the abstract, 'Ten or twenty thousand dollars — it's not that much,"' she explains. "But I think it's really about what it means to be 28 and try to make loan payments and health insurance premiums and still put something aside for a down payment for a house. Think about how much extra room you have to have in your budget to cover those three things. Most can't do it." When Warren was at the University of Houston in 1970, she notes, her tuition was $52 a semester."