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By Diane Davis
July 5 — Democrats plan to protect the sovereignty of Puerto Rico and help it restructure its debt so it can stabilize its economy, according to a draft party platform released July 1.
The party also seeks to protect student loan borrowers and make it easier to discharge student loan debts in bankruptcy.
Puerto Rico should determine its own political status from “permanent options that do not conflict with the Constitution, laws, and policies of the United States,” the platform said. Presumably, that would mean statehood, but the platform doesn't elaborate on exactly what permanent options Puerto Rico might have and how they could be obtained.
The Democratic party respects Puerto Rico's self-government and autonomy and wants Congress and the Executive Branch to provide the “necessary tools and aid” to help Puerto Rico restructure its debt so it can stabilize its economy, the platform said.
Democrats helped to support the bipartisan legislation that President Barack Obama signed June 30 that will allow the island to escape from debts Wall Street once viewed as ironclad (28 BBLR 837, 7/7/16). Puerto Rico must still accept strict oversight by a control board that will have significant power over its day-to-day affairs.
The Democratic platform also takes a strong stance in favor of borrowers with student loan debt. The party favors allowing borrowers with student loan debt to be able to refinance those loans at the lowest rates possible. The party supports simplification and expanded access to the income-based repayment plan so that student loan borrowers won't have to pay more than they can afford, the platform said.
The platform also proposes cutting interest rates for future undergraduates to prevent the federal government from profiting from student loans.
The Democratic party platform seeks to restore the prior standard in bankruptcy law that “allowed borrowers with student loans to discharge their debts in bankruptcy as a measure of last resort.”
Under current law, Bankruptcy Code Section 523(a)(8) generally prohibits the discharge of any student loan debt unless it would impose an undue hardship on the debtor and the debtor's dependents.
“Congress has demonstrated a consistent desire to crack down on debtors seeking to discharge student loans, in order to protect the integrity of student loan programs,” according to Bloomberg Law: Bankruptcy Treatise, pt. II, ch. 63 (D. Michael Lynn et al. eds., 2016).
By using “undue hardship” as the statutory element that controls the outcome in most of the student loan cases, Congress has left it to the courts to determine its “contours,” according to Bloomberg Law: Bankruptcy Treatise. Generally, courts view Section 523(a)(8) as providing a “narrow exception” and a “heavy burden on debtors seeking discharge.”
“This heightened standard protects the integrity of the student loan program and saves it ‘from fiscal doom.' It also ensures public support for the program by preventing debtors from easily discharging their debts at the expense of the taxpayers who made possible their educations,” according to Bloomberg Law: Bankruptcy Treatise.
While the Democratic platform isn't clear as to specifically what changes will be recommended, perhaps it includes a softening of the “undue hardship” standard and making it easier for borrowers to discharge their student loan debts. How that new standard will be applied by the courts is unknown at the moment.
In conjunction with allowing borrowers to discharge their student loan debts, the Democratic party wants to make community college free, according to the platform. Perhaps Congress's perceived need to protect the integrity of the student loan program will be lessened as more students benefit from free education with less of a need for student loans.
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