Court Decision Erases a Huge Student Debt—Is that Good or Bad?

James G. Martin Center for Academic Renewal ^ | January 31, 2020 | George Leef

[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.

[buffyt]

My college roommate got the same $1K loan every year that I got. I also worked summers to supplement my funds. She spent all of her money during first semester. She was the party girl buying pizza for everyone. I stretched my $1K out the entire year. Things were cheaper then!

Also, at Okla St Univ they have been tearing down the old dorms and putting in APARTMENTS! The spoiled generation!!!

[buffyt]

I HOPE SO!

[buffyt]

Summer 1972... (I graduated in 1973) ... I went to class 8am till 4pm. I worked 4pm till midnight. I worked 10 hours on Saturdays, and 10 hours every other Sunday. My then fiance had hernia surgery in OKC so on my Sundays off I drove an hour to see him. I had a painting class and a Humanities class. Painting required 36 paintings that summer. Humanities required reading 5 books.

Summer 1969 I worked shiftwork, Liberty Glass, No AC. 110F inside the glass plant. Fans blowing hot air on us, free salt pills at fountain.

Summer 1970 I worked at Liberty Glass. They had a lot of temporary lay offs. While laid off I worked at JC Penneys in the next town. My sister’s baby sitter didn’t show up so instead of sleeping by day after working all night, I baby sat for nephew. Ended up in hospital, total exhaustion. Chronic Fatigue Syndrome followed for about ten years.

Summer 1971 I worked at Liberty Glass. They still had lay offs but I didn’t try to work 24 hours a day that summer.

Summer 1972 Glenn’s Snack bar 8 hours a day, 10 hours on Saturdays and alternate Sundays. Classes 8 hours a day.

We lived on fish sticks and hot dogs. Our friends got government commodities and they shared cheese, black beans, corn meal... with us.

But we had a GREAT TIME! Still married. First date January 29 1971 First child June 1981.

[Agamemnon]

The whole rotten system needs to be overhauled or rebuilt from the ground up on either the private lender model used by Hillsdale College ..."

When my son left the USMC he wanted to use his GI Bill to pay for college at Hillsdale. Hillsdale allowed employers to underwrite educations since they were private businesses. Hillsdale refused to accept my son's GI Bill for payment because they considered it a Government transfer payment rather than an employee benefit.

Suffice it to say that my son did not go to Hillsdale,

FReegards!

[Mr. Blond]

Put the burden on the colleges, they will start being more selective about admissions, and stop offering useless majors.

[Jumper]

Let those who sold worthless products forgive the debt.

[wildbill]

The 1976 Law was amended and the requirements on repayments and bankruptcy were changed several times after 1976.

The current law, the Bankrupcy Abuse and Consumer Protecation Act went into effect on Oct.17, 2005. Because of the lenient amendments and new laws that were passed between 1976, students were taking out loans with no intention of paying them back because they could declare bankruptcy.

This current law has operated since 2005 with the strictest provisions as interpreted in various federal bankruptcy courts’ cases to make it almost impossible to declare bankruptcy. Most attorneys won’t even take the case of a student without the client understanding it will be a waste of money. When a student wins occasionally against the attorneys for the lenders who are extremely experienced with this law, the lawsuit and verdict is not published to provide any clue to future students on how to beat the system.

Students have to review a video each semester about their loas as a contract which is inviolable. Most don’t pay attention or are convinced they can make a profitable career with a degree in romantic poetry of Elizabethan England. They are chumps who cant support themselves, much less pay off a huge outstanding student loan debt in their budget

[Vigilanteman]

Exactly why the educrats and their big government partners should be on the hook for at least a portion of it. Especially the educrats since "big government partners" always falls back on We, the beleaguered taxpayers.

And/or do it like the Bank of North Dakota does with their universities where the loan exposure is greatly limited and/or the student taking out the loan pays an origination fee or interest premium to cover the extra risk of a hard to market degree.

Ultimately, some write down or discharge is going to be necessary to make it politically saleable to get Fedzilla out of the student loan business. But it needs to be done.

Our side can't continue to spout platitudes (even if true) about how they took out the loans and should pay them when it just isn't going to happen with a useless degree and a job at Starbucks.

[Jim W N]

Congress write all kinds of unconstitutional laws.

The Constitution and ONLY those laws that are consistent with the Constitution are the Supreme Law of the Land (read U.S. Const., Art VI, Cl 2).

The Constitution tells the feds what they are allowed to do. The feds don’t tell the Constitution what they may do.

America was founded as a free nation under the Rule of law (the Constitution), not the Rule of man (whatever Congress comes up with next regardless of the Constitution).

[Desron13]

"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."

I understand your point but the state of higher education today has become corrupted to the point that even the hard sciences are not immune from the leftist dogma that actually cripples the minds of those attending. Here's a litmus test for you. If you spend four years in a place of "learning" and come out believing that there more than two genders; you know that you have been mentally screwed.