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Thursday, July 17. 2014
A Conservative case: The case for allowing these debts to be erased via bankruptcy.
Makes some sense, as long as that doesn't get dumped on the taxpayer. Of course, having a bankruptcy on your credit report will not do much for your future prospects.
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Every other kind of debt can be erased via bankruptcy, and so should student loan debt.
The case for erasing student load debt is reinforced by predatory colleges and universities (the vast majority nonprofit) who lure students into debt by enrolling them in worthless degree programs. Instead of punishing the duped students with life-long penury, punish the schools severely.
At one time (after the Biden sponsored Bankruptcy reform) the progs were all for relief thru bankruptcy. Now, I notice they just screech about loan relief.
BTW, who would be hurt worse by discharging the debt? The schools or the varied financial types? Remember the school has already been paid.
Well perhaps the financial types should take a closer look at what/who they're lending to. Low market value courses of study like most junk liberal arts should either carry a higher interest rate and/or less funds generally avaiable to lend to that course of study. That would certainly impact the amount of resources that colleges direct to those areas.
I graduated from a private art school with over 30k in debt, a Bachelor of Fine Arts degree and no job.
Yeah, the first few years were tough, especially since I got married that summer to a woman with a BA in History.
But we had "work ethic" and I (unlike most of my classmates) understood computers.
But now we want people to avoid the consequences of their actions.
Can I get the 30k I paid back returned to me?
Let them discharge the debt, but they have to surrender the credential. They can keep the education they gained, such that it is. Those with debt and no graduation will the be the same as those who did graduate but don't want to pay.
"Lending a student $60,000 to attend a private school he may have little chance of graduating from is not terribly different than the mortgage lenders who gave imprudent loans to people buying homes they could not really afford."
And did nobody notice what happened when all those home owners declared bankruptcy?
why would anybody make a loan to a kid with no assets who can simply walk away from the loan through bankruptcy once they graduate? if they are allowed to walk away that will be the end of student loans - as usual, the knuckleheads will ruin it for the rest.
Don't change the contracts already signed. If new student loans can be discharged by bankruptcy then lwet those contracts reflect that and let the lending institutions take the necessary steps to secure their loans. But to retroactively make the prior contracts eligible for bankruptcy would be unfair.
I would like to see a simple change in the bankruptcy law. The person declaring bankruptcy actually has to go bankrupt and their assets given over to the creditors. Nothing protected. Current law allows the bankrupt person to exempt substantial assets from the process.
Keep in mind, the student loan practice came into being back when we as a society wanted more college graduates and most degrees were viewed as valuable. Today - according to labor and industries - roughly 40% of jobs require a degree and 60% of the workforce has one - which means there's 20% (minimum) that are doing jobs for which their degree serves no purpose aside from possibly hosting self-esteem. I think there are a lot of jobs that exist for no reason other than people have degrees - they're not actually productive.
We have a glut of degrees, we need more trades not more degrees - So, making the loan process onerous would be beneficial in reducing student debt - fewer loans. It might eliminate some competition between schools, resulting in possibly higher quality universities, and fewer useless teachers (does anyone really need a class in blogging?)
Once you reduce the number of pointless loans, then you can look at removing the bankruptcy exemption.
I feel bad for the kids - having been told since birth that a college degree was the ONLY way to be successful - and it didn't matter what the degree was. They've been lied to since birth - and now they're reaping the consequences. If you put the burden on the schools, starting in kindergarten and proceeding though college, of paying off the loan - maybe. They're certainly the ones that pushed this the point it's at.
Blame the education/political/financial institution industrial complex. Education became big business and was sold way beyond its value. Time for a huge retrenchment in this industry.
Allowing former students to bankrupt their loans is a tertiary consideration when the issue is the massive national student debt. As it stands, most of that will never be repaid in any case. If it could be paid back the issue would be academic because it would be getting paid back. One way or another, the money would be getting collected. But it isn't and it won't.
Just as millions of mortgaged homes have been abandoned, so to have those student loans. Nobody is chasing them down to collect and any credit damage is a done deal for most. The credit damage is also moot because without the money to pay creditors, they won't be getting any more loans anyway. This issue is not about paying anything back or bankruptcy protection or contract details or credit ratings.
It's almost about what happens when the government gives out free money in the form of guaranteed student loans. The schools and banks get rich, the student gets to party for a few years and then have a little something to complain about if he has wages to garnish later and the tax payer gets soaked. Eventually. But the taxpayers instituted this system. They voted for it, they like it. So, what's really the problem?
If there is a problem, and if anyone wanted to fix it, the focus of the discussion should begin at the beginning. And in the beginning, the people voted themselves lots of free goodies. Ooops, except those free goodies came with consequences. Serfdom.
Get rid of PLUS loans, and that will solve many, many problems. Parents should NOT be co-signing for big educational loans for their children. What kid wants their mother or father notified for the next 25 years that they are behind on a student loan payment? What parent wants to take on the responsibility of being liable for child's debt well into that child's middle age years? It is ridiculous.
Student loans through the government should ONLY be given to students and involve NO co-signing.
My kid will be going to college soon and I have been playing around with a lot of online cost calculators from various colleges. Every single one of them will pretend as if you are getting 'aid' when much of it is listed under a PLUS student loan. It is ridiculous! That is NOT 'aid' when the parent is still considered responsible for the debt.
PLUS loans need to go away. Then, the schools will only be able to offer the maximum student loan amount (which I think is around $6500 or maybe $5500 per year). That is a more reasonable amount of debt, college costs will come down when they realize they can't get more $$ from the federal loan programs, and we will all be a lot happier.