Back in 1976, the reasoning was a car or house or other material possession beyond a certain exemption level could be repossessed to pay toward the debt, but knowledge could not.
In those years, most colleges actually taught useful marketable skills and tuitions were reasonable making loan repayments not so burdensome.
Both of my parents were on a university faculty at the time and made less than unionized high school faculty in the same town. The state university in question had very reasonable tuition and the state played a key role in student lending. They did such things as limiting loan amounts for fluff degrees and professional students. As a result, the default rate on their loans was near zero.
All of this changed when Fedzilla took over and started passing out easy money. Fluff degrees sprouted like mushrooms in a manure pile in spring as did skyrocketing tuitions and special professors (like Elizabeth Warren) who were paid mid six figure salaries for teaching one class.
The whole rotten system needs to be overhauled or rebuilt from the ground up on either the private lender model used by Hillsdale College or the state model which I just described used by the State of North Dakota. This was established back when it was one of the poorest states in the union.
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!
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