It is not a good time to be starting your career in America. The unemployment rate sits at 8.4 percent. For those lucky enough to have a job at all, almost half aren’t particularly happy with it: one survey found that approximately 46 percent of Americans consider themselves underemployed (defined as having part-time work but wanting to work full-time, or holding a job that doesn’t require or utilize your education, experience, or training). In the legal profession in particular, the recent spate of layoffs doesn’t seem likely to slow anytime soon, and we’ve all been increasingly well-informed about the difficulties inherent in paying down six figures of student loan debt on relatively unimpressive starting salaries.
Given the significant headwinds that young people face in entering the workforce, the big news from the Pew Research Center that 52 percent of 18- to 29-year-olds are now living with one or both parents might not be such big news after all. This is a new record: the previous recorded high was in 1940, toward the end of the Great Depression, when 48 percent of young adults lived with their parents (there is no data available for the worst years of the Great Depression, when higher proportions of young people certainly could have been moving back home).
There is nothing inherently wrong with moving back in with mom and dad. I’m sure some parents love having the company. But a trend this big isn’t just a mass pining for more family time. Young adults cannot afford a mortgage or rent payments without decent job prospects, not when many of them are already carrying around a mortgage-worth of student loan debt.
Which is why a recent ruling by the Tenth Circuit Court of Appeals might provide the slightest glimmer of hope for some educational borrowers. For decades, student loan debt of any kind has been thought to be sacrosanct in bankruptcy proceedings. Barring the undue hardship discharge — which I’ve heard described as having to prove not only that you can’t pay off your student loans now but that you have no chance of ever being able to — bankruptcy filers inevitably emerged from the bankruptcy process with their student loan debts just as enforceable as ever.
Now, some bankruptcy filers, in the Tenth Circuit at least, might not have to carry their student debts to the grave. A Colorado couple successfully argued that about $200,000 worth of their private student loan debt was discharged in their Chapter 13 bankruptcy proceeding, without having to demonstrate undue hardship.
While the Tenth Circuit’s opinion has precedential value (within the Tenth Circuit), this is an exceptionally narrow ruling. It only applies to private student loan lenders, so you’re out of luck if Uncle Sam holds your student loan debt, and it arguably only applies to some of the most exploitative forms of student loan lending, like loans that exceed the cost of attendance at a given educational institution. Still, this case demonstrates courts’ increasing reluctance to allow any and all student loan debt to survive bankruptcy filings.
Lawyers are very used to the concept of having to accomplish the right thing in a convoluted way. Students shouldn’t have to incur $200,000 in debt to go to school to try to get the good job that will allow them to move out of their parents’ basement, and then they shouldn’t have to go through bankruptcy to discharge the debt they never should have had to incur. Yet, I wouldn’t hold my breath on systemic change when we can’t even fix a slavery-era holdover that keeps the person who gets the most votes from winning the presidency. Until there’s real change for student borrowers, I guess a super-narrow court decision will have to suffice in the meantime.
Keep your head up if you’re one of the many young adults who has to shelter a bit longer with the folks. Maybe you can get a little satisfaction out of seeing a major federal court chip away at the unsatisfying system keeping you under your parents’ patronage. You just have to endure it until we get enough public support built up to (metaphorically) dynamite the whole damn system and build something better.
Jonathan Wolf is a litigation associate at a midsize, full-service Minnesota firm. He also teaches as an adjunct writing professor at Mitchell Hamline School of Law, has written for a wide variety of publications, and makes it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.