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Saturday, September 29. 2012

Bankruptcy and student loans

A history of bankruptcy puts a nice ding on a person's credit rating and future employability. Even so, sometimes it's the only way to get a second chance in life if one has been highly irresponsibe and, hopefully, learned from it. Zero Hedge had this last Spring: Student Loan Debt Slaves In Perpetuity - A True Story Of "Bankruptcy Hell".


Naturally, cancelling out loans via bankruptcy will make lenders more cautious about lending to any student. But who is the biggest lender? Us, the government. Who is the biggest beneficiary? College administrations. Do you hear gripes about college administrator salaries? Nope, but college presidents make about the same as greedy CEOs.


It's all crazy.

Posted by The News Junkie in Hot News & Misc. Short Subjects, Our Essays at 14:03 | Comments (5) | Trackbacks (0)

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Just like other things you buy on time then can't pay for, the students should have to forfeit the credential if they discharge a student loan in bankruptcy. They can keep the knowledge, what little they acquired, even the networking contacts, but they can no longer trade on the credential as it would be suspended. No record on file to confirm other than attendance at the school. The record of graduation would be concealed. Any use of the actual diploma as proof would reinstate the debt.

I'm not sure I see why this isn't the standard now, if higher ed is all about education and not credentials? The student gets out from under the loan, they have their education and there is a cost to having the debt removed.
#1 JKB on 2012-09-29 15:43 (Reply)
I have no problem with JKB's plan, but I would augment it with recourse to the schools.

If a student from School A declares bankruptcy, School A either coughs up the dough or replaces the bad loan with a good loan.

In the 90's I made a decent living doing recourse lending programs. That living dried up as the lending standards got stupid easy and trying to sell recourse became impossible.
#2 Mike (Link) on 2012-09-29 17:40 (Reply)
Since 2005, student loans cannot be discharged through bankrupcy. Of course, Uncle Sugar just might be willing to write it off, if you do some service in say, Americorps, or some such. Expect this shortly before the election, or in a second term.
#3 bikermailman on 2012-09-29 18:45 (Reply)
Student loans CAN be discharged in bankruptcy, but only on a substantial showing of hardship and lack of any reasonable lifetime prospects for paying them back.

All debt that's unreasonably large in proportion to one's prospects for future income makes people debt slaves. That's why it's a terrible idea to borrow irresponsibly.
#3.1 Texan99 (Link) on 2012-09-29 19:58 (Reply)
Are you guys telling me my Masters in Feminist Basketweaving and Mantras is NO GOOD? Fie, I say FIE on thee for being such downers!
#4 Sam L. on 2012-09-30 10:22 (Reply)

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