| Student loans are nearly impossible to discharge in a | | | | institutions package up the private student loan debt |
| Bankruptcy. The legal standard for discharge is | | | | and sell them as investments. It may very well be |
| "undue hardship" but the legal code doesn't define | | | | the next bubble waiting to pop. This will be particularly |
| what undue hardship actually is. So the judges in each | | | | true if the economic recovery is slow, so that there |
| district rule on it. They look at the "totality of the | | | | simply aren't sufficient wages and or jobs to allow |
| circumstances", which is legal jargon for considering | | | | for repayment of these debts. It is not a stretch to |
| many factors in someone's situation, assigning | | | | think that the private student lending industry is a |
| different weights to those factors and deciding which | | | | major factor in contributing to the unprecedented |
| way the justice scale tips. Typically, it means the | | | | rise in the cost of tuition. What the real estate |
| debtor must have a disability and is unlikely to ever | | | | lending did for the real estate market could very well |
| generate sufficient income to repay. If the debtor | | | | be what the private student loan lending is doing to |
| had a disability when they borrowed the money for | | | | the education market, contributing greatly to the |
| school, the disability typically needs to have | | | | 10-20% rise in tuition year after year. |
| worsened considerably. Bottom line, it's difficult and | | | | There are arguments that if you change the |
| the results aren't standard, meaning they're | | | | bankruptcy law to more easily for student loan |
| inconsistent. | | | | discharge, people will take advantage by borrowing |
| My own student loan debt is absolutely crushing. I'm | | | | and declaring bankruptcy shortly post graduation. |
| back in school part time taking LLM courses now, | | | | That can be addressed by creating a time limit, for |
| just so I don't have to pay what I already owe | | | | example requiring that the student loans be at least |
| because I can't afford to pay and I am trying to | | | | over 5 or 7 years old. The lenders could also require |
| avoid a default until hopefully my situation improves. | | | | co-signing to protect their investment better. This |
| The last bill introduced into legislature proposing | | | | could also mean that the potential student and the |
| dischargeability of student loan debt failed. Way back | | | | co-signer (usually a parent) would consider more |
| in the days, student loans were dischargeable. As | | | | deeply the implications of the debt. |
| recent as September 2009, legislators were taking | | | | Another argument is that if you make the loans |
| testimony in considering whether a change allowing | | | | dischargeable, it will dry up funding for new students. |
| dischargeability of at least the private student loans. | | | | Probably that is correct. However, perhaps this needs |
| Private student loans are not the same as the | | | | to happen. The lenders in being more stringent about |
| taxpayer guaranteed federal loans. But even this | | | | to whom and how much is lend, would probably |
| proposal has considerable opposition and doesn't | | | | decrease the amount of money available to students. |
| seem to be a priority at this time. Perhaps many | | | | Yes, certain populations would be hurt more than |
| victims will need to fall before attention and | | | | others, basically lower income bracket students. But, |
| awareness is raised as to the immense suffering | | | | consider the effect of borrowing too much on these |
| these easy get loans are causing to a growing | | | | same people now. A generation of paupers is rising |
| number of people. | | | | as a result. Arguably, it's a drag on the economy as |
| There are some organizations working toward | | | | well since these debtors have little to no disposable |
| changing the law and they make compelling | | | | income to make purchases that create other jobs |
| arguments. One argument is that the lenders | | | | and ultimately benefit us all. If the funding dried about |
| recklessly loan out the money to anyone with a | | | | there is also another possibility. Empty seats in |
| social security card. The default rates on student | | | | classrooms, could force the education institutions to |
| loans are only tracked for up to a year post | | | | do something that could benefit us all, drop the |
| graduation. This is ridiculous, since deferment, | | | | tuition rates, making it more affordable to attend. |
| forbearance, and use of credit and help from family | | | | Supply and demand theory could drive this change. |
| can usually help people get past that first year. What | | | | The immense student loan debts are causing |
| would be more telling would be an exam of default | | | | tremendous suffering to ambitious hard working |
| rates 4-5 years post graduation. | | | | diligent people who borrowed thinking they were |
| An opinion shared by many is that what had been | | | | making a smart choice and a chance to improve their |
| going on in the real estate lending industry for the | | | | lives. Unbeknown to them, most of them seemed |
| better part of past ten years, has and continues to | | | | doomed to a lifetime of financial suffering. |
| be going on in the student loan industry. Financial | | | | |