Student loan debt is the largest type of consumer debt outstanding in America, except for mortgages, with over 1.2 trillion dollars outstanding. That’s about $10,000 for each household in America. More than 40 million borrowers owe student loans. In a relatively recent development, for-profit companies have ramped up their operations. These institutions typically get more than half of their income from student loans and have been criticized for spending more on marketing than instruction. The largest for-profit company, Corinthian Colleges, had been under investigation for falsifying placement rates, deceptive and predatory recruiting. It signed a consent decree with the federal government and closed or sold off its 100 campuses under the Everest, Heald, and Wyotech names last year.

Federal student loans have a provision for student loan cancellation if the school closes either while the student is enrolled or within four months. Students have to make application for debt forgiveness, which has been difficult and complicated. The federal government announced a few weeks ago that it would appoint a special master and streamline the forgiveness process to accommodate the tens of thousand of affected students.

Congress made student loans largely immune from Bankruptcy as part of the 2005 law change, so we note that help for students is an important first step towards rationalizing the student loan mess. This affects everybody, not only students, since new graduates burdened with student loan debts will be less likely to buy cars, houses, or retirement investments and thereby depress the prices of these assets. Forward-thinking organizations, like realtors’ groups, have already sounded the alarm about the shortage of younger buyers due to student loan debt.