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Wed Jan 4, 2012, 10:46 PM

Should Student Loans be Dischargeable in Bankruptcy ?


One of the most cited grievances to come out of Occupy Wall Street is the crushing burden of student loans. I have had a couple of guest posts on the topic including one from Tim Smith who blogs on the Echo Boom. Here, now, is a piece by Alan Collings, who has been devoting himself to the issue.
...
Some perspective is needed here. If there is an infectious disease outbreak, the CDC is pretty snappy about warning the public. Similarly for the USGS and earthquakes, NOAA and tsunamis, etc. Should we not expect the same type of response from the Education Department in the face of exponentially increasing student loan debt and astonishingly high default rates? When we were looking at a Trillion dollars in national student loan indebtedness, and the default rate was north of 1 in 4, why wasn’t the Department of Education sounding the alarm? These questions have yet to be posed to those in charge at the Department, but need to be. By Congress. Department staff who should have warned congress and the public but didn’t should be held accountable. This isn’t a question of good government. Rather it would seem that is a question about minimally adequate government.

So the question now is how to “fix what is broken”, to borrow a phrase from President Obama, Secretary Geithner, and others following the most recent State of the Union Address. Gainful employment rules, dickering around with the Pell Grant, and similar activities do nothing here. Neither do the various repayment programs that are being marketed by the higher ed crowd as viable substitutes for the consumer protections that were stripped from the system. Some policy “thought leaders”, in fact, are pointing to these untested, unproven programs as a basis for dramatically increasing the federal loan limits! This is not the direction we want to go. We cannot afford it, and to claim otherwise is hugely irresponsible.

Don’t be distracted by the sophisticated, confusing rhetoric being forced into this debate by those who would maintain the status quo no matter what the cost, or those who would end public support for higher education altogether. Neither extreme has the interests of the citizens at heart. Remember only that reall, this is not a difficult problem. Congress created it by removing fundamental, free-market consumer protections from student loans. Congress can and must fix it by essentially undoing what they did. Quite simply, it begins by returning, at a minimum, the bankruptcy protections that were removed without rational basis (when bankruptcy was the same for student loans as all other loans, far less than 1% of federal loans were discharged this way). With this fundamental, free market mechanism returned, the Department of Education will have a vested interest in compelling the schools to provide a high quality product at a low cost, and at reasonable debt levels.
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read article->
http://www.forbes.com/sites/peterjreilly/2011/12/29/should-student-loans-be-dischargeable-in-bankruptcy/

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Reply Should Student Loans be Dischargeable in Bankruptcy ? (Original post)
limpyhobbler Jan 2012 OP
lonestarnot Jan 2012 #1
hobbit709 Jan 2012 #2
Yupster Jan 2012 #3
limpyhobbler Jan 2012 #9
pnwmom Jan 2012 #25
MrNJ Jan 2012 #36
1monster Jan 2012 #41
Tuesday Afternoon Jan 2012 #4
RainDog Jan 2012 #5
Yupster Jan 2012 #6
jberryhill Jan 2012 #11
ArcticFox Jan 2012 #17
treestar Jan 2012 #49
unionworks Jan 2012 #7
WingDinger Jan 2012 #8
saras Jan 2012 #10
limpyhobbler Jan 2012 #13
MrNJ Jan 2012 #35
limpyhobbler Jan 2012 #40
gtar100 Jan 2012 #43
Cerridwen Jan 2012 #12
Yupster Jan 2012 #15
limpyhobbler Jan 2012 #16
handmade34 Jan 2012 #53
limpyhobbler Jan 2012 #57
handmade34 Jan 2012 #58
spooky3 Jan 2012 #14
kestrel91316 Jan 2012 #18
dkf Jan 2012 #19
limpyhobbler Jan 2012 #20
dkf Jan 2012 #21
limpyhobbler Jan 2012 #22
dkf Jan 2012 #23
limpyhobbler Jan 2012 #30
pnwmom Jan 2012 #27
dkf Jan 2012 #52
pnwmom Jan 2012 #55
pnwmom Jan 2012 #26
JDPriestly Jan 2012 #31
JDPriestly Jan 2012 #24
exboyfil Jan 2012 #28
limpyhobbler Jan 2012 #29
xocet Jan 2012 #33
EdinGA Jan 2012 #32
limpyhobbler Jan 2012 #46
sense Jan 2012 #34
limpyhobbler Jan 2012 #38
sense Jan 2012 #47
limpyhobbler Jan 2012 #50
sense Jan 2012 #51
limpyhobbler Jan 2012 #56
sense Jan 2012 #59
SemperEadem Jan 2012 #37
HisTomness Jan 2012 #45
SemperEadem Jan 2012 #60
handmade34 Jan 2012 #54
SemperEadem Jan 2012 #61
DirkGently Jan 2012 #39
Catherina Jan 2012 #42
sense Jan 2012 #48
gtar100 Jan 2012 #44
bemildred Jan 2012 #62

Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 10:48 PM

1. Absofuckinglutely!

 

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Response to lonestarnot (Reply #1)

Wed Jan 4, 2012, 10:50 PM

2. +1000

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 10:51 PM

3. Wouldn't every kid

automatically declare bankrupcy at graduation since they typically wouldn't have a whole lot of assets that could be taken from them?

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Response to Yupster (Reply #3)

Wed Jan 4, 2012, 10:58 PM

9. maybe have a waiting period of a few years?

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Response to Yupster (Reply #3)

Thu Jan 5, 2012, 05:00 AM

25. No. Most graduates won't want to have bankruptcy on their record for the next seven years.

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Response to Yupster (Reply #3)

Thu Jan 5, 2012, 05:55 PM

36. that's exactly the reason that they mentioned in my Secured Transactions class.

Besides, if everybody declared BK to discharge student loans, there wouldn't be any stigma to it.

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Response to Yupster (Reply #3)

Thu Jan 5, 2012, 08:10 PM

41. No. The interest rate on a National Direct Student Loan (meaning it did NOT go through private banks

with extremely high usury rates) was 3% when I was a student. Students with education loans in the past ten to twenty years were paying so much in interest that they will be paying triple to ten times as much as they borrowed when they finally pay of their loans.

Many student's loans are so onerous, that they are larger than many people's morgages.

And that is ridiculous.

If a person has reached the point that they need to file for bankruptcy to survive, then the student loans need to be on the table too.

There could be some arrangement whereby the the amount due could be cut drastically, and/or no interest would be charged on the balance with payments low enough that the person owing the debt can make the payments without overshadowing the rest of their lives, that's good. An arrangement could be made for the people owing the debts could do some public service that would lower the amount due.

Education should not cost that it is inaccessible or places the student under onerous debt. I personally think that all students, no matter what their financial situation, should pay for their education through public service. People getting filthy rich from education is just plain wrong.

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 10:51 PM

4. hell to the yeah

fucking hell yes.

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 10:51 PM

5. it's ridiculous

that students w/o the family financial help to attend college anyway are then treated worse than the criminals on Wall Street who created the worst job market since the great depression

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 10:55 PM

6. Why can't we make college cheaper?

It's gone up way faster than inflation for 30 years.

My local college has administrators on top of administrators who used to do something 20 years ago, but now they teach one class and no one knows what else they do for their $ 80,000 income plus big benefits. The best anyone can say is they will retire soon.

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Response to Yupster (Reply #6)

Wed Jan 4, 2012, 11:02 PM

11. "no one knows what else they do"

 


Has anyone checked the locker room showers?

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Response to Yupster (Reply #6)

Wed Jan 4, 2012, 11:29 PM

17. It would be cheaper without the huge loans

There is a bubble in education costs every bit as real as the recent real estate bubble, brought on in both cases by easy access to exorbitant loans.

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Response to Yupster (Reply #6)

Thu Jan 5, 2012, 10:00 PM

49. Agree. And there are a lot of people willing to teach

There's no good reason for college expenses to go up so much.

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 10:55 PM

7. Hell Yes

 

Went to tech school at age 35 in the 90's. The job field for my training collapsed in 2001. They are still confiscating my income tax returns, one of thefew tools left for my survival. Enough is enough.

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 10:55 PM

8. Should personal debts be discharged, or not.

 

Bankruptcy reform was done just in time for destitution. OF MANY.

As for student loans, they are sharks. And I cannot disagree with libertarians, who say costs will rise equal to the kick Uncle Sam gives. Students are a major profit center for banksters.

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 11:00 PM

10. Loans are loans. Is there a compelling reason they should be excluded?

 

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Response to saras (Reply #10)

Wed Jan 4, 2012, 11:03 PM

13. no. student loan companies gave money to congress to get the exemption. that's the reason.

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Response to saras (Reply #10)

Thu Jan 5, 2012, 05:54 PM

35. compelling or not

When you buy something on credit, that something can be repossessed if you default.

Education is yours to keep. It cannot be taken from you and resold.

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Response to MrNJ (Reply #35)

Thu Jan 5, 2012, 08:02 PM

40. Other things that can't be repossessed.

Take a trip to Las Vegas, spend Thousands in a casino, that can't be repossessed.

Run up thousands of dollars of debt at $walmart on clothes and supplies for your home. Can't be repossessed.

Eat dinner at TGI Friday's every night for a year. $14/meal x 365 meals = $5110.

But all of these debts are eligible for bankruptcy protection.

Why should student loans be exempt from bankruptcy protection ?

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Response to limpyhobbler (Reply #40)

Thu Jan 5, 2012, 08:20 PM

43. Oh stop bringing facts to the argument. The guy wants to punish these lazy youngsters

and you bring to light all those other things that can be discharged in a bankruptcy. How could he possibly hold on to his contempt for all these thoughtless, careless young people who should have know what they were getting into when they signed on the dotted line. Now he'll have to argue against bankruptcy completely and throw compassion and understanding out the window entirely just to be consistent. Ba-humbug to you!









(just to be clear)

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 11:03 PM

12. Yes! Followed by our national education system...

K-infinity should be 'nationalized'/socialized/whatever you want to call it.

It's insane that we are charged high dollar to learn.

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Response to Cerridwen (Reply #12)

Wed Jan 4, 2012, 11:11 PM

15. Why do people pay the high prices?

Around here you can go to perfectly good state colleges for $ 8,000 - $ 10,000 a year or you can go to colleges for $ 50,000 a year.

Seems simple to me, but people pay the 50k.

I don't get it.

My job needs a college degree but no one cares which college. They want to see the licenses and certifications that the job requires.

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Response to Yupster (Reply #15)

Wed Jan 4, 2012, 11:25 PM

16. it cost's that much sometimes

you said it: $10,000 x 4 years = $40000.
That's a heck of a lot of a loan to start someone off with. Especially if they don't end up making the type of money they expected.

If somebody blows $40,000 in 4 years on hookers, booze, cocaine, gambling, stock market investments, a fancy car, fancy clothes, eating in restaurants....they can declare bankruptcy.

But someone makes an honest effort to improve their life, do what they think they need to do to be middle class and/or get a degree they want or whatever. And it just doesn't pan out. That person gets saddled sometimes with a lifetime of debt that they can never pay off, and never get out off. And it keeps 'em from doing other things like getting a car, a mortgage, getting married, having kids.
sometimes.

Sometimes people make financial errors and they get bankruptcy. Why single this one kind of loan out and treat it more harshly. There is no evidence that it was ever being abused.

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Response to limpyhobbler (Reply #16)

Thu Jan 5, 2012, 10:45 PM

53. there was abuse in the 70's

"...Basically, in the 1970s student loan bankruptcy gained magnetism. Students used to go for student loan bankruptcy filing just after they finished their highly expensive education. They wanted to get rid of any student loans on their name before entering practical life. Nowadays it does not work any more because the conditions were changed in 1998 for the whole process..."

"...Back in the 1970s, many students, having secured employment after graduation, found loopholes in the U.S. Bankruptcy laws that allowed them to declare for bankruptcy and have their student loans discharged. Congress made changes in bankruptcy law for student loans in the late 1990s in order to stop people from taking advantage of this flaw in the bankruptcy code. What the changes did, however, was to make discharging student loans almost impossible, creating difficult situations for people already saddled with other debts..."


I am no fan of the current laws and we desperately need changes but there is some background for the earliest changes in the bankruptcy/student loan laws

The Obama Administration has allowed for more humane payment plans but there are still many lives that are forever changed, often ruined, because of student loans

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Response to handmade34 (Reply #53)

Thu Jan 5, 2012, 11:14 PM

57. what abuse?


"...Basically, in the 1970s student loan bankruptcy gained magnetism. Students used to go for student loan bankruptcy filing just after they finished their highly expensive education. They wanted to get rid of any student loans on their name before entering practical life. Nowadays it does not work any more because the conditions were changed in 1998 for the whole process..."

"...Back in the 1970s, many students, having secured employment after graduation, found loopholes in the U.S. Bankruptcy laws that allowed them to declare for bankruptcy and have their student loans discharged. Congress made changes in bankruptcy law for student loans in the late 1990s in order to stop people from taking advantage of this flaw in the bankruptcy code. What the changes did, however, was to make discharging student loans almost impossible, creating difficult situations for people already saddled with other debts..."


I would like to see some evidence, such as statistics on this subject. Do you know where I can find some evidence or statistics to suggest there was some bankruptcy abuse or that people "found loopholes."

Did you get that from www.defeatbankruptcy.org ?

I think that site is questionable.
I saw the same quotes on that site and it looks like they just made it up out of thin air.
They don't provide any source or evidence for what they are saying.

Thanks.

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Response to limpyhobbler (Reply #57)

Thu Jan 5, 2012, 11:27 PM

58. basis for calls to include student loans

"...Legislative History of Student Loans in Bankruptcy. Prior to 1976, educational debt was dischargeable in bankruptcy.14 In 1970, Congress established the Commission on the Bankruptcy Laws of the United States (Commission) to analyze the bankruptcysystemandtomakerecommendationsforreform.15 In1973,theCommission issued its report and recommended prohibiting student loan discharge of governmental loans until five years had passed after the beginning of the repayment period, except in cases in which it would cause undue hardship16 for the debtors or their dependents.17 In 1976, Congress adopted these recommendations when it amended the Higher Education Act of 1965 by adding Section 439A, which included an amendment to the bankruptcy laws with governmental student loans being nondischargeable.18..."

http://www.policyarchive.org/handle/10207/bitstreams/19283.pdf

"...Rationales for Making Student Loans Nondischargeable. The reason most often cited for making student loans nondischargeable is to prevent fraud. The legislative history of the 1978 Bankruptcy Reform Act contains warnings that making student loans dischargeable would be “almost specifically designed to encourage fraud.”32 There was the fear that students would discharge their debt and then be able to spend their earnings on other items instead of paying off what they owed.33
Another argument is that student loans are different from other loans, and as such, should be treated differently.34 Under this view, a college degree is an asset which should bar debtors from discharging loans that were used to procure it.35 Also under this view, student loan recipients are generally younger and will have more working years to repay their debts.36..."

I don't believe there were substantial abuses of the bankruptcy laws but just enough and enough fear on the parts of lending institutions and Congress...

The problem we have in not the bankruptcy laws per se but the entire corrupt and unreasonable way we educate and then pay for that education (as a society)...

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 11:09 PM

14. Part of the problem is the for-profit schools that exploit people to get the loan money

The Congress investigated this in the past few years and found that the default rate is much higher for students attending (and not graduating, in many cases) from these schools. If these loans are forgiven, the primary beneficiary is these schools. I would like to see more tightening up of the standards, then more flexibility on forgiveness.

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Response to limpyhobbler (Original post)

Wed Jan 4, 2012, 11:36 PM

18. YES. I can't believe we are even having this conversation.

 

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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 12:27 AM

19. Would you loan your savings to a college student knowing they can declare bankruptcy the day after

 

Graduation?

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Response to dkf (Reply #19)

Thu Jan 5, 2012, 12:49 AM

20. So have a 5 year waiting period after graduation.

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Response to limpyhobbler (Reply #20)

Thu Jan 5, 2012, 01:26 AM

21. So you get 5 years of payments.

 

I bet 5 years out of college it would still make sense to declare bankruptcy.

It's like walking away from an underwater house except you don't lose your house.

I don't think this will encourage anyone to make student loans.

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Response to dkf (Reply #21)

Thu Jan 5, 2012, 01:34 AM

22. Nobody needs to be encouraged to make student loans. The Dept. of Education makes them directly now.

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Response to limpyhobbler (Reply #22)

Thu Jan 5, 2012, 01:38 AM

23. Well as a taxpayer this isn't a good bet either.

 

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Response to dkf (Reply #23)

Thu Jan 5, 2012, 09:58 AM

30. going to college was a bad bet for many.

It was a bad investment. Took a loan to invest in education. Every indication was that it would be a good investment. By spending the time and money to get the degree, people thought they were just working hard and playing by the rules. Now the economy sucks. McJobs everywhere. Many would happily return their college degree if they could get the money back. Why single out this one type of debt for harsher treatment?

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Response to dkf (Reply #21)

Thu Jan 5, 2012, 05:02 AM

27. If that's the case, why aren't they all defaulting on their credit cards?

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Response to pnwmom (Reply #27)

Thu Jan 5, 2012, 10:41 PM

52. How do you know they aren't?

 

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Response to dkf (Reply #52)

Thu Jan 5, 2012, 11:06 PM

55. I'm sure the Rethug media would be happy to trumpet that story. n/t

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Response to dkf (Reply #19)

Thu Jan 5, 2012, 05:01 AM

26. Depends on the student. But declaring bankruptcy has repercussions for at least 7 years

that most students would want to avoid, if possible.

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Response to dkf (Reply #19)

Thu Jan 5, 2012, 11:06 AM

31. Same of any loan.

From the student's point of view, a student loan should be looked at as an investment.

It really is no different from an investment in any other business. The student's business is to do well in school, finish a useful degree as soon as possible and then work hard to pay back the loan.

I'm not sure that student loans should be as easy to get as they are now, but if a student qualifies to get a loan after being vetted in the way a small business would be, then I think that student loans that cover tuition and books should be treated like business loans and not like personal loans.

Loans above the cost of tuition and books should probably not necessarily be dischargeable. Those loans are more like credit card loans.

The US needs well qualified workers, scientists, teachers, etc. We need them more than we need a lot of the businesses, say the restaurants and liquor stores, the smoke shops and race tracks.

I believe that as a national policy we should subsidize university and college education far more than we do. Also, we should encourage students who have not performed exceptionally well in high school to live at home and attend a local junior or city do their first couple of years. Students who do that generally do not have to borrow so much money. And while living the extra couple of years at home, they become much more mature, do better in school and are more responsible when they graduate.

That is what I observed with my children. One of them lived at home during most of college. The other one did not. But they both went to school close to home. Home was an anchor for them and it worked out well. Of course, other factors may have played roles.

But I do think that a student loan should be as dischargeable in bankruptcy as any other business investment loan.

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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 02:07 AM

24. Yes.

And they will be when the risk of getting a higher education becomes so great that potential students refuse to take it, refuse to go to college.

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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 05:23 AM

28. Many people being in college is a lifestyle choice

Even with the current laws they continue to wrack up debt for additional education without any thought as to how they will pay it back. It may seem strict but the loan forgiveness measures are getting us pretty close to a huge bubble down the road in which loan dollars will become scarce because of the level of defaults or use of payments based on income and not the actual amount loaned.

Lets start with loaning only to schools and majors who have a good track record of paybacks. Also we could make an assessment about the background of the individual receiving the money - if they have a spotty High School record, then maybe they should not get a loan unless they are in a major with a good payback record. Test for additional loans by looking at the GPA and completion of major.

Perhaps more merit money should be made available instead of loans? Instead of a strictly Pell grant for everyone who qualifies, how about a sliding scale based on merit as well so more middle class individuals can access Pell grants. Right now the EFC is completely insane for a parent's ability to help with college.

Public universities could also do more to lower costs for students. The first would be to mandate the use of open source textbooks unless compelling reasons are shown for using a proprietary (expensive) textbook. Really should Calculus, Chemistry, and Physics textbooks cost $250/each? Another would be to make more lower cost options available for students to live on campus. I really have a tough time believing a $10/meal meal plan is necessary. The meal plan edifice is built entirely on the presumption of providing a certain number of meals and pricing to force on campus students to take the full plan.

What really amazes me is the cluelessness of the educational structure starting with the High School counselors and teachers. I am trying to work towards having my daughter finish her Freshman year of engineering at home while still in High School. Such a move will save up to $20K (credits much cheaper, some are paid for by the school through PSEO, and she does not have to live outside the home with an expensive meal plan). They seem to think it is outrageous that we would even attempt such an approach. It seems that should be my daughter's decision. There are only 20 scholarships/year where she is going that have more value than $20K. Her likelihood of getting such a scholarship is pretty low based on previous history.

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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 09:42 AM

29. unpayable student loans should be treated as what they are, a failed investment, watch this video

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Response to limpyhobbler (Reply #29)

Thu Jan 5, 2012, 04:30 PM

33. FYI: Education should be fully funded by the government. It is an investment in society's future.

That video is a rehashing of the simplistic idea that any circumstance can be overcome by positive thinking alone.
Suze Orman comes across in this video as the Benny Hinn of the financial world. Orman's twist to the religious idea of having faith is that one must address one's problems by "standing in one's truth."

(time index 5:32)
Orman: "When you have more energy, you attract things to you. Cause everybody wants to be around a powerful, energetic person. Who knows? You may be making $20,000 a year today, but when you learn to stand in your truth, when you learn to change your ways a little, you might be making $40,000, $60,000, $80,000 one year. Anything is possible if you dare to dream, if you dare to be the man that were born to be, if you dare to look in the mirror and just for once like what you see looking back. So, I want you to stand straight right now. In fact, I want you to come down here for a second. (applause) ... (inaudible) ... Stand with me. Look at this face. Look at this man. Look at this incredible human being. ..."




(smacking Larry with the microphone) Orman: "Hallelujah! In the name of my audience, my show and my financial gospel, you are healed!!!" (audience sings Hymn 43, fade to black)






If the USA can afford to bailout the banks, there is no reason that the USA should not provide education to its citizens as an investment in its own future.




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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 04:09 PM

32. I'd like to see a resolution go just a bit further!

In Georgia we have the HOPE scholarship which pays the tuition of deserving students attending state universities. It's not perfect, but it sure helps a lot. The schools still ding us with useless fees and forcing students to buy the most recent edition textbooks, which is bogus, but still a substantial savings overall. The rest of the states could use this as a start, but the real answer is to guarantee a free college education just as we do K-12 as long as the student achieves well and masters the curricula.

I think the gov't should also provide access to post secondary degrees in return for newly minted doctors and other recently graduated professionals to work in areas of exceptional need, such as inner cities or poverty ridden rural areas in return for the high training costs associated. There are already some programs of this sort, but they need to be expanded and more fully funded.

I believe a return to a more progressive tax structure could make all this eminently feasible, along with building less war machines and restricting breathtaking Pentagon budgets, just for starters.

Do you agree?

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Response to EdinGA (Reply #32)

Thu Jan 5, 2012, 09:08 PM

46. yep

sounds rightto me. Education should cost less, we should expand service programs to help with repayment.

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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 05:21 PM

34. No

I worked in student loan repayment and collection. The vast majority of students could have repaid their loans, it simply wasn't a priority for them. I worked with NDS loans which were extremely low interest and the funding for future students was dependent on the repayment of prior students. I wish I could tell you otherwise, but it was just a stunning revelation to me to receive information from them on their budgets and their supposed plan for non-repayment. Lots of excess debt and responsibilities taken out after getting their education (enormous houses, horses, boats, RV's, retail debt, memberships in this and that), with no thought given to how they'll pay for the debt they accrued first. Then, they'd admit that they didn't intend to repay the student loans in a timely manner because the low interest and extremely low late charges didn't make it a wise financial decision. No empathy at all for the current students they were harming with their selfishness.

I do realize that times have changed and our current system sucks. Tuition is too high, grant access and financial aid are too little to help most, but bankruptcy isn't the answer. Changing the political system in this country is. Get the money and sociopaths out of politics.

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Response to sense (Reply #34)

Thu Jan 5, 2012, 07:35 PM

38. "enormous houses, horses, boats, RV's, retail debt, memberships in this and that"


The vast majority of students could have repaid their loans, it simply wasn't a priority for them. I worked with NDS loans which were extremely low interest and the funding for future students was dependent on the repayment of prior students. I wish I could tell you otherwise, but it was just a stunning revelation to me to receive information from them on their budgets and their supposed plan for non-repayment. Lots of excess debt and responsibilities taken out after getting their education (enormous houses, horses, boats, RV's, retail debt, memberships in this and that),


1)
I cannot believe that the vast majority of student debtors have horses, boats, rv's, and memberships in this and that. I think your perception may have been biased. As a loan debt collector you might have selectively perceived the worst things.

2)
Why paint with such a large brush stroke?
Why not consider individual circumstances?
For every student debtor with 'boats and horses', there is probably at least one that lives in poverty conditions and used money on 'medical bills and diapers'.

3)
If irresponsibility and bad financial decisions are the standard for denying bankruptcy, why is it that someone can charge up $30,000 in Caribbean vacations and trips to Europe, and then declare bankruptcy, or any other kind of consumer debt, and then still qualify for bankruptcy? You could take a month trip to Amsterdam and run up $20000 credit cards on drugs and prostitutes, the most irresponsible thing imaginable. You would still be eligible for bankruptcy on those expenses.
Why is student loan debt the only kind of debt singled out for harsher treatment?
Are you opposed to all bankruptcy?



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Response to limpyhobbler (Reply #38)

Thu Jan 5, 2012, 09:47 PM

47. Not painting with a broad brush

You're trying to discredit what I said by making assumptions.

Most could have repaid. Single statement. All people were given enormous leniency (which I didn't say, but should have.) Many, many people were given endless deferments, and decades to pay some very small loans. Some people had more than one bankruptcy on their record, and simply thought it was a way of life..... and just kept insisting that we couldn't collect.

I gave an example of the financial information I received. I didn't say everyone had all of those assets, but it was stunning to have people admit that asset acquiring came long before any thought of repayment. They were surprised to be expected to re-pay and thought our insistence upon it would somehow expire if they simply ignored their obligation. Many, many thought there was an "expiration date" on their debt!

I'm not opposed to all bankruptcy. I'm opposed to people taking advantage of enormous opportunities they were given and denying it to others. One person actually told me that the less educated people, the less competition for jobs, so giving back the money amounted to stupidity on his part and he wasn't stupid.

Every single person is an individual. Most people who got the loans simply paid them. My job was to deal with those who didn't and it was a really depressing job...... and an ugly lesson.

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Response to sense (Reply #47)

Thu Jan 5, 2012, 10:23 PM

50. Isn't denying bankruptcy to all based on irresponsibility of some is painting with a broad brush?

You are pointing out examples of irresponsible and selfish behavior by some people, and then using that as a reason to exempt all student loan debt from bankruptcy protection.

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Response to limpyhobbler (Reply #50)

Thu Jan 5, 2012, 10:30 PM

51. And how would you propose to figure out,

realistically, who to let off the hook? People hide their assets all the time. People lie and don't give it another thought. I do believe the bankruptcy laws are broken. You said it yourself, all sorts of people use the current law to live the high life and not pay for it. No reason to add more loopholes to not paying back debt. I am for less loopholes, not more.

Education should be free, as should healthcare. They are not. Work to fix that, not to allow more unscrupulous people to prosper.

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Response to sense (Reply #51)

Thu Jan 5, 2012, 11:07 PM

56. that's what bankruptcy courts are for

And how would you propose to figure out, realistically, who to let off the hook?

That's what bankruptcy courts are for. The debtor goes with a lawyer and presents their case before a judge, and another lawyer argues against the debtor for the creditors. The judge decides based on the law and his/her own judgement.

No reason to add more loopholes to not paying back debt. I am for less loopholes, not more.

What we have is now is a huge loophole for the benefit of the banking industry who made excessive student loans and the student loan servicing industry. I would just delete that loophole so student loan is treated like any other investment debt or consumer debt.

Education should be free, as should healthcare. They are not. Work to fix that, not to allow more unscrupulous people to prosper.
Just because someone got into financial trouble with debt and seeks bankruptcy protection does not necessarily make them 'unscrupulous'.

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Response to limpyhobbler (Reply #56)

Fri Jan 6, 2012, 12:43 AM

59. Pay the debts you accrue before accruing more.

Simple. Your arguments reveal your agenda. Pay your loans. If the courts worked, the unscrupulous wouldn't get away with all they do. If you can afford a good attorney, you can do whatever you want.... Not fair.

Take out a student loan, pay it off. Can't repossess an education. You thought it was worth it at the time.... most profit from their education.



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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 07:29 PM

37. I had to pay mine off, so...

no, it shouldn't. If I can do it, so can others.

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Response to SemperEadem (Reply #37)

Thu Jan 5, 2012, 08:41 PM

45. That's the most selfish, myopic thing I've read all day. /nt

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Response to HisTomness (Reply #45)

Wed Jan 11, 2012, 07:45 AM

60. well then get over it

and take your pearls with you.

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Response to SemperEadem (Reply #37)

Thu Jan 5, 2012, 10:52 PM

54. Oh....

we are such a diverse group... want to rethink that comment?

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Response to handmade34 (Reply #54)

Wed Jan 11, 2012, 07:45 AM

61. no, I don't

nor do I need to.

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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 07:49 PM

39. We need to do something to stem the crushing debt, especially from questionable schools.

The idea was to keep doctors, lawyers, et al., from getting out of school with their valuable degrees, then turning around and declaring bankruptcy before they've earned anything to wipe it all out. And yes, they absolutely would.

But school costs are out of control, and so are fees at some of these questionable for-profit institutions cropping up.

There have always exceptions to the non-dischargeability of student loans. Recently they were tightened up. They ought to be re-loosened, then loosened some more.

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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 08:14 PM

42. Yes But

I think student loans should be dischargeable under bankruptcy, under restricted but generous conditions, especially for first time students who can't find jobs that earn enough to pay back the loan (see Dirk's post 39 for an example).

But I think the real problem is why isn't education free in this country?

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Response to Catherina (Reply #42)

Thu Jan 5, 2012, 09:51 PM

48. That is the real problem

Education should be free. Until it is.... loans must be repaid.

Critical thinking should be taught in school, but that's an even bigger problem.......

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Response to limpyhobbler (Original post)

Thu Jan 5, 2012, 08:31 PM

44. Yes, absolutely yes!

What incentive is there for the schools or the lenders to keep costs affordable when they have little or no risk themselves? They don't even have to be concerned about the bigger picture of employment for graduates if they know they can forever follow them and go as far as garnish wages just to pay interest and late fees that often end up greater than the principle.

I bet many of these lenders also call themselves capitalists and are mighty proud of it. Even hating on government. Funny how they have positioned their advantage through the strong arm of the government by manipulating the rules in their favor.

Imagine how much better alumni assistance would be if they actually had to worry about students being unable to repay their loans. But they don't have to worry and currently post-graduate employment assistance is dismal at most colleges I've heard about.

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Response to limpyhobbler (Original post)

Wed Jan 11, 2012, 10:57 AM

62. Higher education should be free to all who are willing. nt

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