Posted on 01/31/2020 5:48:59 AM PST by karpov
For years, a contentious and sometimes emotionally heated debate has raged over the issue of letting people discharge their student loan debts in bankruptcy. A recent decision opens the door for individuals with high levels of student debt to have their burdens discharged in bankruptcy.
Should we cheer?
Until 1976, the bankruptcy law made no distinction between student loan debt and other kinds. In that year, however, Congress amended the law so as to mostly exclude student loan debts from bankruptcy, even though the level of college debt was vastly lower than it is today. On average, college cost only around $2,300 per year back then, but Congress saw fit to eliminate the temptation for graduates to file for bankruptcy to wipe out even the low amounts of debt that students were accumulating.
Congress did not make it impossible to discharge college loan debt in bankruptcy, but put impediments in the way. Student loan debts could only be considered for bankruptcy discharge only if the debtor filed an “adversary proceeding” in court to demonstrate that repaying the debt imposed “undue hardship.”
The law deterred many from seeking to escape their student debts, but some still tried. One was Marie Brunner, who sought relief from her college debts in 1987. Just 10 months after her loan payments began, she filed for bankruptcy. A sympathetic bankruptcy judge in New York granted her wish to be free of the payments, but the federal district court reversed that ruling and, when Brunner appealed to the Second Circuit, it upheld the district court’s reversal of the initial ruling in her favor.
(Excerpt) Read more at jamesgmartin.center ...
That would fall under the heading of cruel & unusual punishment. You would take away someone’s livelihood. That is the whole reason we have bankruptcy. How does someone have a fresh start when they can no longer work in their field. In fact in bankruptcy people are allowed to keep the things they need for work, a house, a car. The degree would fall under that umbrella.
Bankruptcy law serves three basic purposes: (1) to solve a collective action problem among creditors in dealing with an insolvent debtor, (2) to provide a “fresh start” to individual debtors overburdened by debt, and (3) to save and preserve the going-concern value of firms in financial distress by reorganizing.
In Chapter 13 bankruptcy, you can keep all of your property. But that doesn’t mean that you won’t have to pay for some of it. You’re allowed to protect, or “exempt,” a certain amount of equity in the property you’ll need to maintain a home and job. If you want to keep nonexempt property, such as a boat, baseball card collection, or another luxury item, you’ll have to pay for it through your Chapter 13 plan.
Here's a clue Sherlock, Stop sending your young folks to these monstrous indoctrination rip off centers that were formally institutes of higher learning. There's a new thing in town. It's called the World Wide Web and it contains just about anything you need to know. At least for now. The Democrats are working diligently to change that of course.
If he borrowed $116,000, never paid any principle, after 15 or so years, he’s at $218,000. That’s just north of a 4% interest rate. If he made any payments at all, the rate goes up.
The Fed invents money from thin air. Why aren’t we offering student loans at the prime lending rate? Essentially, you can borrow it from the magic pile of free money, but you will pay it back with a token interest rate.
That’s certainly better than Warren’s plan to just wipe away the debt of the people who didn’t save for College or in fact pay for any of it as they went.
I worked A LOT in college. Yes, it was much cheaper in the late 80s but back then I didn’t qualify for student loans because my dad just barely made too much money. Of course, he couldn’t pay for it either because he was in debt to his eyeballs, so either I worked or I didn’t go.
*I meant federal funds rate, not prime rate*
Government involvement was the problem.
It enabled colleges to offer programs that did not deliver marketable skills, to staff innumerable counselors, diversity coaches etc just raising tuition without any repercussions. Then the music stopped and student debt became a crushing burden.
The Government involvement made it easy for students to get loans that any reputable lender would not have allowed. The interest rates went up as well because there was no competition. The schools had no sense of fiscal responsibility & no pushback from the naive students.
Student lending should be shifted back to the private sector. Tuition will come down when there is no longer “free” money on tap. We might even prune all those worthless departments amid wailing & gnashing of teeth.
Just as making patients aware of costs is most effective if they are paying the bill (hopefully out of a medical savings account) making students & parents aware of costs so they can shop for value would do a lot of good.
Lastly the Federal Government bears the blame for this mess. They had no business becoming the sole source of student loans and their involvement distorted the marketplace and cause this debt bubble.
It’s a shame the people will have to pay the cost of straightening out the mess. That’s why voting is so important and the siren call of the Left is so insidious. The piper doesn’t get paid until long after you follow his song. The socialist idea of everyone goes to college for free is a further distortion waiting to destroy a generation & America’s economic system.
I agree that if the problem is addressed the right way using an innovative practical approach there can be creative solutions to deflate the bubble of present debt while making the future debt more manageable. Work study programs encourage students to understand the meaning of working to pay back debt and become more aware of costs while decreasing the burden of their later years and expansion of those programs could be an avenue.
Please tell me what college today costs $1300/ year. Oklahoma St. currently costs $12,500 per year and $9,340 for room and board. https://go.okstate.edu/scholarships-financial-aid/cost-of-attendance/undergraduate-cost/in-state-cost/index.html
Not a lot of jobs for students pay $21,840 per year.
How exactly would one go about repossessing a college education?
That should be $12,700 per year tuition.
Hard to become a doctor or engineer by just reading the internet. Most employers want credentials, and they’re not going to spend time and money trying to figure out what you learned on your own.
The only effective way to “cure” the always-rising costs of education and massive student loan debt (most of which can’t be repaid, anyway) is to once more allow the debt to be discharged in a Chapter 7 bankruptcy. If dischargeable, lenders will be very careful to whom they lend if they are tempted to make unwise loans. Think about the ramifications all down the line.
When I graduated in 2002 I was the only member of my class of 38 Civil Engineering students that had a job and no student loans. The other 37 didn’t have jobs but really enjoyed living the college life with their student loans.
Not only did I not have any loans, I was married, I had a mortgage payment, 2 car payments, utilities, insurance, and child support. Knowing that I would be graduating that June , my now ex-wife, decided to quit her job in April! That was the worst squeeze of my life at the time, but I knew that my salary would double as I had already secured gainful employment upon graduation.
Good. The US Constitution and the Bible allow for bankruptcies to prevent monopolistic practices as we have seen in college education.
Ditto all of that for both my wife and myself. Scholarships, student (and summer) jobs, and loans got us both PhD’s in Chemistry.
If student debt is discharged through bankruptcy, then the person should lose all credits earned, any certificates and diplomas. If they don’t pay for it, they don’t get it. If they hold a title or position dependent on the academic credits, they must surrender that title or position.
I paid off MY student loan in FULL out of my OWN pocket. These snowflakes can, by God, pay back the money WE gave them. It is called a loan! It is not a “right” or “entitlement.”
The answer to this actually is quite simple. These are “student” loans. They can only apply to one who is a student. They do not apply to anyone who is no longer a student. Once you graduate and get out of college, you are no longer a student and so you no longer have to pay it.
As long as the rich universities and colleges take the hit. They’re the ones charging exorbitant fees and taking legacy bribes.
That sounds very stressful.
Only the last 2 months, other that it wasn’t so bad, but then I’m fortunate that I don’t have that stress gene, so most everything just slides off.
Excellent suggestions!
We paid my loans back. We paid for our kids’ college. Daughter graduated from U.T. I don’t remember how much it cost us but they say it is now $60K a year. Our youngest son grad from Concordia Irvine Ca. It was $75K a year. How did we do it? We didn’t buy a new car for ourselves from 1995-2011. Right there you save a lot of money. There were times when I had to put tuition on credit card and pay it out all semester. We didn’t take expensive vacations. I never got into designer clothes, purses, shoes. We still have our old furniture. etc etc etc
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