#55 - A Bankruptcy Expert Explains Why Millions Can Never Repay Their Student Loans with Robert Lawless

Robert Lawless is a Law Professor at the University of Illinois at Urbana-Champaign.Professor Lawless is one of the country’s leading experts on bankruptcy and consumer debt. In this conversation, he explains how the student loan crisis was created, why student loans are treated differently from almost every other type of debt, and how a series of legal and political decisions made them nearly impossible to discharge.Lawless walks through the history of bankruptcy law and shows how, over time, student loans moved from being treated like credit card debt to becoming a lifelong obligation. What began as a temporary restriction slowly hardened into a system where borrowers are expected to carry debt indefinitely, even when repayment is no longer realistic.He challenges the common belief that bankruptcy is a sign of economic collapse. During the pandemic, bankruptcy filings dropped sharply, not because people were better off, but because fear, uncertainty, and temporary relief masked deeper problems. Debt, he explains, works on a delay. The consequences often appear years later.Throughout the conversation, Lawless reframes bankruptcy as a tool meant to deal with failure in a functional way. Bankruptcy does not create money, jobs, or growth. It recognizes reality when there is not enough to go around. In that sense, it acts more like a hospital than a punishment.He also proposes a clear and practical solution to the student loan problem. Allow student loans to be discharged in bankruptcy after a five-year waiting period. Those who can pay would still pay. Those who cannot would have a path forward.This conversation is not about ideology or slogans. It is about how the system actually works, why it ended up this way, and what it would take to fix it.EPISODE LINKS:Robert Lawless's Website: https://rlawless.web.illinois.edu/Robert Lawless's UIUC Website: https://law.illinois.edu/faculty-research/faculty-profiles/robert-m-lawless/Debt's Grip by Robert Lawless et al: https://amzn.to/3LJAJef‘Too Little Too Late’: Bankruptcy Booms Among Older Americans: https://archive.is/jfpFSBlacks Face Bias in Bankruptcy, Study Suggests: https://archive.is/XAI8UCredit Slips Blog: https://creditslips.org/Matt Levine's Money Stuff: https://www.bloomberg.com/account/newsletters/money-stuffConsider Supporting UsIf you enjoy our talk show and videos, your support means the world to us! Your contributions help us keep the show running and focus on creating interesting conversations with interesting people. Every dollar goes towards our basic needs, allowing us to dedicate more time and energy to this project. Support us here: https://uiuctalkshow.substack.com/