Is Student-Loan Forgiveness Obama's Next Crisis?

IBD Editorials ^ | October 26, 2011 | Editor

[PUGACHEV]

Here's a little Bankruptcy Code history for you. In 1978 when the Code replaced the Bankruptcy Act, student loans were dischargable in a Chapter 7 if the first payment was due more than three years prior to filing. Soon, that was increased to 5 years, and the same restrictions were placed on Chapter 13 debtors. Next, came an end run where the Health Education Assistance Act (HEAL) restricted the discharge of loans for a medical education in chapter 7s and 13s unless the repayment was unconscionable. In 1998 the Code was amended to discharge Student loans only if the debtor could show an undue hardship. By that time most courts had adopted the "Brunner Test", a very high standard for “undue hardship”, which included “a substantial certainty of the future likelihood of the inability to repay the loan”. In other words, the borrower could be living below the poverty level, or have a disabling disease, but unless they could show that the condition would persist for the rest of their working life, the repayment of the loan was not an “undue hardship”. In 2005 the same non-dischargability standards were extended to commercial, non-government guaranteed student loans in both chapters 7 and 13.

[Mike Darancette]

From what I understand it is only for loans originating after 2008 and not in default. Little help here.

[Mike Darancette]

Is there any type of loan agreement (contract) signed for these loans? If so, I can see this affecting future loans, but how can a change in policy negate a legal contract?

I think it begins with new loans made this year. They will allow loans back to 2008 to be rolled into the new loan.

I caught a creditor who paid his student loan off with an American Express Card then went BK 6 months later.

[April Lexington]

I think it begins with new loans made this year.

Who would be stupid enough to make a student loan after this goes into effect? Only Ben Bernanke as he tries to sop up crapola student loan backed bonds in a buyer less market...

[Graewoulf]

Thanks for the clarification.

I am led to believe, from the data available to me, that the US taxpayer is ultimately responsible for the debt of the Student Loans, and /or the “forgiven” portion of these loans.

Am I correct, whole or in part, in my above understanding?

My second question is: Is the current 951 BILLION dollar Student Loan Debt included in the Total National Debt of the US Federal Government?

[Mike Darancette]

I caught a creditor who paid his student loan off with an American Express Card then went BK 6 months later.

I meant debtor.

[maine-iac7]

he’s trying to buy back those college voters that are no longer enamored -

[RipSawyer]

“He’s counting on these kids not having a brain yet.”
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Yes and as a little looking around will reveal, with the kind of “education” they are likely to get for their student loan money they probably won’t have a brain when they are forty either!

[RipSawyer]

I knew that wasn’t a serious protest sign at first glance because I couldn’t find any misspelled words!

[SteveAustin]

Regardless of whether the program has some limits, it still really sucks.

I hadn’t heard about this until I was talking with a couple guys about it yesterday who were really very upset. This issue hits home because you’ve got millions of Americans who worked hard to put themselves through college and if they used student loans, paid them back on schedule.

Now you have some OWS protesters show up and Obama starts playing Hugo Chavez and puts in rules forgiving much of the debt.

The whole thing is just a horrible mess. The more the word gets out on this “program” the better for our side.

[cookcounty]

“It doesn’t cost the taxpayers anything.”

This man is a math-moron......or something far far worse,....

I hate conspiracy theories and am the first one to beat down all the idiocies that people come up with. But this man, ....I’m almost there. How else do you explain this crap?

[MrB]

When “stupid” fails to explain someone’s actions,
“evil” is what is left.

“When you eliminate all other possibilities, what remains, no matter how improbable, is the answer.”