Facts should matter, especially to newspaper editors.

On July 25, The Wall Street Journal based its lead editorial on a factually incorrect premise. I happened to notice the Journal’s error because I’m writing a book about the legal profession’s current crises, one of which is the explosion of law school debt. But the Journal‘s blunder raises an important question: How often does the truth lose out to editors’ ideological convictions?

The editorial in question, “You Don’t Owe That,” suggested that current bankruptcy law proposals to lessen the impact of burdensome student loans would “reverse a hard lesson learned during the 1970s.” Describing that supposed lesson, the editors claimed that the current provisions barring the discharge of educational loans in bankruptcy occurred “[a]fter a surge in former students declaring bankruptcy to avoid repaying their loans.” For that reason, the editorial continued, “Congress acted to protect lenders beginning in 1977.”

Not true. There was no such surge during the 1970s and there was no empirical record of abuse to support the legislative change that began a 30-year slide down a slippery slope, culminating in an even more unfortunate 2005 amendment to the bankruptcy laws.

Perpetuating Myths

Old misconceptions die hard. Prior to 1976, all educational debt was dischargeable. That year, Congress amended the Higher Education Act of 1965 to prohibit the discharge of federal educational loans until at least five years had passed from the start of the repayment period. Why?

More than 20 years ago, a thorough examination of what some critics at the time characterized as a “loophole” that “allegedly allowed graduating students to discharge their loan obligations through bankruptcy on the eve of lucrative careers” was “more myth and media hype than reality.” More recently, the Congressional Research Service noted that the 1997 Bankruptcy Commission found ”no evidence to support the assertion that when student loans were dischargeable the bankruptcy system was ‘systematically abused.’ ”

Fear and anecdotes—not facts or evidence—resulted in federal student loans joining the same bankruptcy category as child support, overdue taxes, and criminal fines. Except for rare exceptions based on undue hardship, a person pays those debts or dies, whichever came first.

Bipartisan Blame

The Bankruptcy Reform Act of 1978 continued the new five-year rule, even though separate statistical analyses from the General Accounting Office and a congressional committee confirmed that earlier claims of abuse were “virtually nonexistent.” In 1990 Congress and the first President Bush extended that period to seven years. In 1998, Congress and President Clinton decreed that debtors could never discharge their federal educational loans. In 2005, Congress and the second President Bush extended that protection to private lenders as well.

The recent Journal editorial concerns itself with those private lenders, whose congressional champion remains unknown because no one has been able to identify the author of the 2005 amendment giving financial institutions that huge break. In addition to that gift, the 2005 amendment gave the private lenders something else: a new incentive to lend money with less concern for how debtors would repay it.

Framing the Question

The position expressed in the Journal editorial seems somewhat paradoxical for the otherwise libertarian-leaning newspaper. On the one hand, personal responsibility is an easy argument to make when focusing on young people who incur debt: “They should be careful and make better choices.”

On the other hand, what entitles such students’ older, wiser, and more knowledgeable bankers to put the government’s heavy thumb (in the form of granting special creditor status to lenders) on the scale?  For some law school graduates, the result is enormous educational debt for degrees that won’t translate into the lucrative jobs required for repayment. Shouldn’t lenders also feel the consequences of their poor decisions? Might everyone be better off if lenders sat down with prelaw students and asked them what they planned to do with their J.D. degrees before approving loans for tuition?

Moreover, from the debtor’s perspective, the underlying issue involves the exercise of a constitutional right. Against the backdrop of eighteenth century debtors’ prisons, the founders empowered Congress to enact uniform national bankruptcy laws so that a debtor didn’t risk losing all assets in one state only to be thrown in jail for not paying debts in another. Forcing people to soldier on with massive, nondischargable educational debt seems out of step with the financial fresh start that bankruptcy is supposed to provide. It’s also troubling that this problem is now hitting the next generation especially hard.

Accountability

Perhaps questions of accountability and personal responsibility turn on the characterization of the issue—and who should be accountable to whom. The Wall Street Journal is accountable to more than 2 million daily readers. Those readers assume the honesty of editors who include purported facts in an op-ed piece on important policy questions. This time, readers got what an important newspaper’s editors would like the facts to be, instead of what they are. Even worse, most of them will never know it.

Steven J. Harper is an adjunct professor at Northwestern University and author. He recently retired as a partner at Kirkland & Ellis, after 30 years in private practice. His blog about the legal profession, The Belly of the Beast, can be found at http://thebellyofthebeast.wordpress.com/. A version of the column above was first published on The Belly of the Beast.