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White House Backs Bankruptcy Option for Some Student Debt
Wall Street Journal ^ | July 20, 2012 | By JOSH MITCHELL

Posted on 07/20/2012 4:01:31 PM PDT by Oldeconomybuyer

The Obama administration urged Congress to make it easier for people to discharge a portion of certain student debt by filing for bankruptcy protection.

The recommendation, in a report by the Education Department and the Consumer Financial Protection Bureau, wouldn't affect the vast majority of student debt, which is issued by the federal government. It would apply only to the roughly $150 billion, or 15% of total outstanding student debt, issued by private lenders such as SLM Corp.'s Sallie Mae and Wells Fargo & Co.

Consumer bureau chief Richard Cordray said Congress should consider modifying a 2005 law that, except in rare circumstances, prohibits discharging private student loans through bankruptcy.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Government; News/Current Events; Politics/Elections
KEYWORDS: doddfrank; obamanomics; studentloans
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Another bribe for votes.
1 posted on 07/20/2012 4:01:42 PM PDT by Oldeconomybuyer
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To: Oldeconomybuyer

Yes, and as 0bama goes around touting this as a good thing on the campaign trail, he’ll let the young adults believe it applies to ALL student loan debt, tell them it is just fair that they should not have to pay it, etc., etc., while we are letting rich people keep some of their money. And no one in the media will dispute it.


2 posted on 07/20/2012 4:06:20 PM PDT by NEMDF
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To: Oldeconomybuyer
Call it what you want, but when Congress decided to remove bankruptcy from those loans, the interests rates should have dropped to record lows.

They didn't.

So, why protect the lenders to any greater degree than other loans they make at the same rates.

3 posted on 07/20/2012 4:07:57 PM PDT by muawiyah
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To: Oldeconomybuyer

Student loan debt should not be treated any differently than any other debt in bankruptcy court.

No lender should have a “guarantee” that their loans will be repaid, else they begin to lend without concern for risk.

O M G! ! ! !

Did I just agree with something coming from the white house?


4 posted on 07/20/2012 4:08:13 PM PDT by Repeal The 17th (We have met the enemy and he is us.)
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To: Oldeconomybuyer

This guy has absolutely no shame.


5 posted on 07/20/2012 4:10:02 PM PDT by kempster
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To: Oldeconomybuyer
It would apply only to the roughly $150 billion, or 15% of total outstanding student debt, issued by private lenders such as SLM Corp.'s Sallie Mae and Wells Fargo & Co.

Mr. Messiah, you are going to have to do better than that to win reelection.

6 posted on 07/20/2012 4:10:22 PM PDT by EGPWS (Trust in God, question everyone else)
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To: Oldeconomybuyer

Yeah, maybe in certain extreme conditions, I can see some relief, but come on, I had to work my A$$ off to pay mine off, so everyone else should too.


7 posted on 07/20/2012 4:10:35 PM PDT by Nowhere Man (June 28th, 2012, the Day America Jumped The Shark.)
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To: Oldeconomybuyer
Sure!

You spent $120k for a degree in Art History, of course I should pay when you can't find a job worth your station in life.

Maybe, just maybe, parking cars IS your station in life.

To quote Rahm: quit whining!

Pay your own damn bills.

8 posted on 07/20/2012 4:12:08 PM PDT by Mikey_1962 (Obama: The Affirmative Action President.)
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To: Repeal The 17th

The government has taken over the student loan program so the taxpayers will be the ones who take the risk and lose whatever debt is excused. Thew government is now the main lender.


9 posted on 07/20/2012 4:14:16 PM PDT by kabar
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To: Repeal The 17th

The private lenders who made these loans knew they were not dischargable in bankruptcy. The Kenyan wants to retroactively change that law, which will make new private sector student loans impossible to get — making the GOVERNMENT the only source for these loans.

So banks will no longer be responsible for bad student loans, YOU ARE.


10 posted on 07/20/2012 4:17:19 PM PDT by Oldeconomybuyer (The problem with socialism is that you eventually run out of other people's money.)
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To: muawiyah
Private lenders warn that the suggested change could drive up interest rates, since the risk of losses would increase. They argue that bankruptcy provides too big a temptation for students to walk away from their debt obligations because, unlike homeowners, for example, many students lack major assets.

The net effect and probably the objective of this WH is to kill off the private lenders and let the federal government assume all of the lending responsibility, thereby increasing federal control over our lives even more.

11 posted on 07/20/2012 4:18:35 PM PDT by kabar
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To: Oldeconomybuyer

Slick way to redistribute by another name.


12 posted on 07/20/2012 4:18:52 PM PDT by ntnychik
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To: Repeal The 17th; Oldeconomybuyer

How many loans do you think banks would have given out to 17 and 18 year olds if they weren’t guaranteed ?


13 posted on 07/20/2012 4:19:07 PM PDT by PMAS
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To: Repeal The 17th

Did I just agree with something coming from the white house?


Fear not.. your safe. Zero only wants to allow them to file on non-public student loan debt.

IE Obama still gets his cut.

Here is the money quote

“. It would apply only to the roughly $150 billion, or 15% of total outstanding student debt, issued by private lenders such as SLM Corp.’s Sallie Mae and Wells Fargo & Co.”


14 posted on 07/20/2012 4:21:21 PM PDT by cableguymn (For the first time in my life. I fear my country's government.)
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To: Oldeconomybuyer

It has to be for all or none. the obama plan is to force out private business an make them thralls to the government loans.

It should be they are dischargable after 5 years and the university has to give the money back.


15 posted on 07/20/2012 4:22:00 PM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: Repeal The 17th

“Student loan debt should not be treated any differently than any other debt in bankruptcy court.”

If applied to existing debt, it would be a form of legal theft. If the new rules applies only to new debt, there will be no more private debt, and all student loans will be managed by the federal government (which is just what Obama wants).

The reason that student loan debt is not dischargeable in bankruptcy is that in a free market no private lender would offer student loans at a reasonable rate if the 22-year old graduates could borrow as much as they want and immediately file for bankruptcy afterwards.


16 posted on 07/20/2012 4:24:43 PM PDT by Stat-boy
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To: Stat-boy

Bingo. That was exactly what was happening before the law exempting student loans from bankruptcy .... and yes, you guessed it, LAWYERS were in the lead of previously bankrupting out of student loans. No one forces anyone to take these loans ... just a lot of lazy, I deserve it spoiled children.


17 posted on 07/20/2012 4:31:15 PM PDT by RetiredTexasVet (Skittle pooping unicorns are more common than progressives with honor & integrity.)
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To: PMAS
How many loans do you think banks would have given out to 17 and 18 year olds if they weren’t guaranteed?

Zero, zip, nada. I did paygo through college and my wife's parents signed for her nominal loans. Obama wants "free" government healthcare, condoms, and college.

18 posted on 07/20/2012 4:33:48 PM PDT by Oldeconomybuyer (The problem with socialism is that you eventually run out of other people's money.)
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To: Repeal The 17th

I somewhat agree with your “moral hazard” argument. Even federal taxes are dischargeable in bankruptcy, provided the debt is more than 3 years old, the returns were filed on time, the assessments were made timely, no offer in compromise was made, etc.

How about this idea: the Department of Education accepting offers in compromise regarding student debts, just as the IRS does with tax debts.


19 posted on 07/20/2012 4:42:26 PM PDT by Unknowing (Now is the time for all good men to come to the aid of their country.)
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To: muawiyah
Call it what you want, but when Congress decided to remove bankruptcy from those loans, the interests rates should have dropped to record lows. They didn't. So, why protect the lenders to any greater degree than other loans they make at the same rates.

Just because the loans can't be discharged in bankruptcy doesn't mean that borrowers actually make good on the loans. That's why interest rates haven't fallen much. However, the fact that these loans can't be discharged in bankruptcy is why student loan interest rates remain far below credit card rates despite the fact that these types of loans have one key feature in common - neither is backed by physical collateral that can be seized to cover the remaining loan balance.

20 posted on 07/20/2012 4:47:10 PM PDT by Zhang Fei (Let us pray that peace be now restored to the world and that God will preserve it always.)
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To: Repeal The 17th

I’d agree. A person (or couple) filing for bankruptcy is doing so for a reason. Having an inescapble student loan debt would: 1) Give preference over other unsecured debts which is unfair to those creditors, 2) Possible effect of treating other secured creditors as unsecured, and 3) Fail to help the distressed debtor acheive a fresh start and possibly continue to have financial difficulties.

I’m not looking for bankruptcy to be an entirely free ride, but bad things can (and do) happen to good people.


21 posted on 07/20/2012 4:48:15 PM PDT by Made In The USA (Can we cut the BS and just say it like it is?)
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To: Oldeconomybuyer
Another bribe for votes.

Paid for with other people's money. Notice that student loans to the Federal Government aren't covered, only loans to private lenders. So lenders who loaned money assuming that they could not be discharged by bankruptcy, now find themselves getting screwed like GM senior creditors.

GREAT.

22 posted on 07/20/2012 4:51:47 PM PDT by Lonesome in Massachussets (The Democratic Party strongly supports full civil rights for necro-Americans!)
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To: Oldeconomybuyer

Writing down debt, has an impact across the board.

You can’t do this sort of thing and not spread pressure elsewhere.

Here we go again, Obama flipping another domino with reckless disregard.

January, 2013 can’t come soon enough.


23 posted on 07/20/2012 4:51:59 PM PDT by DoughtyOne (Remove all Democrats from the Republican party, and we won't have much Left, just a lot of Right.)
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To: Zhang Fei

I do hope you don’t think current credit card rates are anything but usury.


24 posted on 07/20/2012 4:57:12 PM PDT by muawiyah
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To: Oldeconomybuyer

See the subtle difference ~ co-signing a note. BTW, the rates on those loans should have gone to historic lows, but they didn’t.


25 posted on 07/20/2012 5:00:58 PM PDT by muawiyah
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To: muawiyah

Student loans are mostly prohibitively expensive at market rate when bankruptcy is allowed.

Look how many students don’t pay up and are generally an expensive hassle to track down. Those rates on guaranteed loans are still way below what they’d be on such an open market.


26 posted on 07/20/2012 5:01:16 PM PDT by 9YearLurker
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To: Oldeconomybuyer

The incredably “not street samrt” republicans can’t seem to tell the American college student that all the reasons why loans for college are set up the way they are is because that is how Democratically controlled congress wrote the bills. The present loan “company” in NOW the US Government instead of private companies...thanks Nancy Pelosi and Harry Reid - but where are republicans on this message?


27 posted on 07/20/2012 5:02:43 PM PDT by q_an_a (the more laws the less justice)
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To: Oldeconomybuyer

Time for the year of jubilee where all debt is wiped clean.


28 posted on 07/20/2012 5:03:09 PM PDT by Dogbert41 ("...The people of Jerusalem are strong, because the Lord Almighty is their God" Zech. 12:5)
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To: kabar
The net effect and probably the objective of this WH is to kill off the private lenders and let the federal government assume all of the lending responsibility, thereby increasing federal control over our lives even more.

Precisely. And remember Zero's proposal that people who take jobs with the government should have their loans forgiven.

Like government having the power to decide whether a particular medical treatment is permitted to be paid under an insurance policy, Zero wants to move to a situation where government has the power to decide which students get loans and which students will later have their loans forgiven, as a way to exert political discipline and control over the population.

29 posted on 07/20/2012 5:03:19 PM PDT by Meet the New Boss
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To: Made In The USA
The Great Obama Recession happened to hundreds of millions of people ~ it's still going on. The job market continues to be tight for everyone but welders. Supposed to be a shortage.

Americans lost about 60% of the value of their accumulated wealth.

Existing debts were not reduced 60% of course, so there's less collateral to pledge.

Congress has let the credit crisis languish entirely too long.

A zillion other things.

Tell you what, Obama has got to go ~ sure wish the Republicans thought that way too.

30 posted on 07/20/2012 5:04:50 PM PDT by muawiyah
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To: kabar; Oldeconomybuyer; PMAS; cableguymn; Stat-boy; Unknowing; Made In The USA

I knew that I would a certain amount of grief for my post.

I have a son that did a stupid thing and will be paying for it all of his life.

A scam/sham school loaned him $90,000 for a 2 year associates degree in “Recording Arts” when he was 18 years old.

It just strikes me as odd that a person can do a stupid thing...
and borrow more money than they can afford to pay back for
houses,
cars,
boats,
businesses,
or just general unsecured credit card debt,
and they are allowed to file bankruptcy and be forgiven of those debts,
but if a person does a stupid thing...
and borrows more money than they can afford to pay back for a student loan, there is no relief available for them.

Geese and ganders should have the same sauce, that’s all I’m saying.

I see the whole blooming thing as a big scam run by a bunch of grifters.


31 posted on 07/20/2012 5:09:14 PM PDT by Repeal The 17th (We have met the enemy and he is us.)
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To: Oldeconomybuyer

Somebody from our side needs to come clean with the American people about “Big Education”:

Provide unlimited subsidized loans to students
Colleges raise tuition and fees to scoop up available funds
Colleges pay big bucks to admins and profs
Admins and profs donate to Democrats
and repeat


32 posted on 07/20/2012 5:09:48 PM PDT by nascarnation
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To: 9YearLurker
The open market is at about 4%. With government interference it's at 5%. Student loans are above that. Credit cards are above that.

This applies for people with or without collateral ~ which is making all the arguments related to collateral look specious in the extreme (as if they weren't already).

Tracking down debtors can be a problem in a country that doesn't even care to track down illegal alien serial killers ~ I can see where you're coming from on that ~ but eventually they trip up and the internet reveals their presence in some manner.

I think it's just a case of lenders not caring to pay the top dollar to the best track and trace folks. They imagine they can get by for cheap ~ maybe spin off that job to some call center in India or something (not to sound cynical, but isn't that what they do these days?)

33 posted on 07/20/2012 5:10:01 PM PDT by muawiyah
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To: Oldeconomybuyer
and America takes another one in the........

34 posted on 07/20/2012 5:15:43 PM PDT by Chode (American Hedonist - *DTOM* -ww- NO Pity for the LAZY)
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To: Nowhere Man

When were your loan debts made? Have you compared the costs of when you got your education to the costs now? I don’t care how many jobs a student must work to pay their college costs—there’s no way they can work/earn enough to pay for college any more.


35 posted on 07/20/2012 5:17:04 PM PDT by DallasDeb (usafa06mom)
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To: muawiyah
The open market is at about 4%. With government interference it's at 5%. Student loans are above that. Credit cards are above that. This applies for people with or without collateral ~ which is making all the arguments related to collateral look specious in the extreme (as if they weren't already).

Where can you borrow money at 4% without collateral? Or even 5%? I know of a few stock exchange listed companies that would like know your secret. In fact, it seems to me that you could make a bit of money by helping to connect lenders who are willing to make multi-decade loans at 4% and students who want loans at less than 6.8% (more or less the current private lender student loan rate).

36 posted on 07/20/2012 5:38:38 PM PDT by Zhang Fei (Let us pray that peace be now restored to the world and that God will preserve it always.)
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To: nascarnation

Exactly. The same pattern in so many areas.

One addendum:

Provide unlimited subsidized loans to students
Colleges raise tuition and fees to scoop up available funds
Colleges pay big bucks to admins and profs
Admins and profs donate to Democrats
Democrats win votes by promising to forgive loans (at a loss to taxpayers)
and repeat


37 posted on 07/20/2012 5:55:55 PM PDT by Stat-boy
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To: DallasDeb

“When were your loan debts made? Have you compared the costs of when you got your education to the costs now? I don’t care how many jobs a student must work to pay their college costs—there’s no way they can work/earn enough to pay for college any more.”

True. See post above about how government influence has distorted the market. Even public university tuition is outrageous, with the funds use to support liberal programs across the school.

However, there are several ways in which a student can pay for school, and here are ways of which I have first hand knowledge from very decent young adults currently doing this: 1. scholarships (of course); 2. start at a local community college for two years (living at home); 3. CLEP the first two years or more (living at home—this example is a young lady of 18 who expects to graduate at age 20, she already has over 60 hours); and 4. military service (can earn college credits while in the military, and there are federal $$ available for college, and in Texas, all public universities are tuition free, period, undergrad and grad schools, including business schools and law schools or whatever). I know two young men pursuing route 4.


38 posted on 07/20/2012 6:03:29 PM PDT by Stat-boy
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To: Repeal The 17th
but if a person does a stupid thing... and borrows more money than they can afford to pay back for a student loan, there is no relief available for them.

Actions have consequences. If you equate education loans to home or car loans, then exactly what collateral does the borrower provide? Homes, cars, businesses etc. can be repossessed.

Interest rates will soar on education loans if people can just walk away from them. And funding will become scarce because who is going to loan money under those circumstances. Maybe the parents can co-sign such loans and be responsibile for repayment.

Again, this move by Obama to allow student loans from private lenders to be subject to bankruptcy laws is just a poltical ploy gain votes and make the Federal government more powerful. And will this be done retroactively? Is that fair to change the conditions of a contract after the fact?

39 posted on 07/20/2012 6:05:15 PM PDT by kabar
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To: Oldeconomybuyer

And then they’ll bitch and moan where they issue fewer loans.


40 posted on 07/20/2012 6:08:27 PM PDT by dfwgator (FUJR (not you, Jim))
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To: Repeal The 17th

Wow. I am sorry to hear your son made those decisions. You may not like my reply, so feel free to tell me to take a walk. I have not been in your son’s situation, but I have made mistakes; and I (as all Christians), have been humbled and saved.

What he did is a textbook example of folly. He did it; no one else. The solution is for your son to go Dave Ramsey on his debt. It will be a difficult and miserable period. He is free to contact the holder of the debt and work out a settlement schedule, if possible. Maybe they will agree to a lower amount.

But if he does go Dave Ramsey, in full, I know he will (a) pay off the debt sooner than one thinks, (b) learn character and financial lessons that will benefit him for the rest of his life, (c) be able to teach others from his mistakes, and (d) know that for the rest of his life no one on the planet can take away his self worth and confidence, no matter what.

Or he can vote for Obama. His life, his choice.


41 posted on 07/20/2012 6:16:11 PM PDT by Stat-boy
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To: Oldeconomybuyer

A couple of things to keep in mind here:

1) Just about all other deadbeats get off without paying, so it does get difficult to understand why these losers shouldn’t get a free ride also.

2) Keep in mind that ANYTHING this clown proposes will add to the national debt, so if these loans are forgiven guess who has to pay them back (and no, not the taxpayers, but their kids and grand kids).


42 posted on 07/20/2012 6:16:41 PM PDT by BobL
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To: BobL

What if we really let the free market work? For example, a top student gets a loan for a mechanical engineering degree at a top school at low interest. A high school dropout, if they can get one at all, pays a lot for a loan to get an English degree, less for something practical and doable.

The loan underwriters would get to see your school records (acedemic and diciplinary), and any community or work records. Maybe young people would get the message that actions have consequences. Maybe it’s just too late.


43 posted on 07/20/2012 6:29:07 PM PDT by The Antiyuppie ("When small men cast long shadows, then it is very late in the day.")
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To: The Antiyuppie

“Maybe young people would get the message that actions have consequences. Maybe it’s just too late.”

Yea, you slipped up BIG TIME. There is no way that this government will do ANYTHING at all to cut down on the useless degrees. They will MAKE CERTAIN that people will continue to get paid to get useless degrees.


44 posted on 07/20/2012 6:41:16 PM PDT by BobL
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To: BobL

“Keep in mind that ANYTHING this clown proposes will add to the national debt.”

Worth repeating - but when is the last time you heard a Democrat politician publicize a proposal to SAVE money?*

* (unless it involved cutting the military).


45 posted on 07/20/2012 6:46:13 PM PDT by The Antiyuppie ("When small men cast long shadows, then it is very late in the day.")
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To: Zhang Fei
Should have made it clear ~ if you cannot discharge a debt through bankruptcy it should be marketable at much closer to the rate for a collateral lone than it currently is.

4% with collateral ~ actually you can get mortgages for less but given the amount of equity you need to have the actual rate (since you won't be earning interest on that equity) is nearer 4%.

46 posted on 07/20/2012 6:54:06 PM PDT by muawiyah
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To: Oldeconomybuyer

“The recommendation, in a report by the Education Department and the Consumer Financial Protection Bureau, wouldn’t affect the vast majority of student debt, which is issued by the federal government. It would apply only to the roughly $150 billion, or 15% of total outstanding student debt, issued by private lenders such as SLM Corp.’s Sallie Mae and Wells Fargo & Co. “

See above, where this is coming from. The Coffee Server Puppet not close to any brains making up these recommendations.

Inside bureaucratic-fascism, just like what’s coming with Extortion-Care.


47 posted on 07/20/2012 7:04:13 PM PDT by Varsity Flight (Extortion-Care is the Government Work-Camp: Arbeitsziehungslager)
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To: Stat-boy
Student loans used to be dischargeable. A debtor couldn't file on them until at least seven years and six months expired after the last student loan was made.

The rates charged to students were still very favorable.

48 posted on 07/20/2012 7:20:13 PM PDT by CharacterCounts (A vote for the lesser of two evils only insures the triumph of evil.)
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To: DallasDeb
When were your loan debts made? Have you compared the costs of when you got your education to the costs now? I don’t care how many jobs a student must work to pay their college costs—there’s no way they can work/earn enough to pay for college any more.

1985/89. Well, I guess you do have a point. I know one guy who is in debt, or will be, for $160,000 but until he finds his dream job, he works at an auto parts store. I do agree on that point where good jobs are not as easy or plentiful as they were 10 years ago or even 5. If he cannot find what he's looking for, he might as well roll over and say, "uncle."
49 posted on 07/20/2012 7:20:48 PM PDT by Nowhere Man (June 28th, 2012, the Day America Jumped The Shark.)
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To: CharacterCounts

“Student loans used to be dischargeable.” Yes, that was almost 40 years ago, and the laws have changed continuously since then.

Prior to 2005, student loans from gov or from a non-profit were not dischargeable. That’s where the lower rates came from [from Congress-a/k/a tax dollars]. Post 2005, loans from for profit entities (a/k/a banks) also were not dischargeable.

But back in the 70s, 80s, and 90s, student loans were dischargeable after a certain period of time (you mentioned 7 years) if they had been in payment during that time. I may have the details wrong, but this case was intended to capture a student who paid for a number of years and then had some unexpected hardship; it was designed to prevent a student from racking up big loans and declaring BK soon after graduation. Of course, remember that these loans were primarilly gov programs (or a non-profit) and that tuition was not outrageously high.

Public school tuition is way too high these days. I have a bunch of kids, and this is something I watch carefully. U. Texas is about 10K a year tuition for an in-state student! 25 years ago it was about 500 per year tuition. Heck, back then one did not need big loans to attend a public university—a part-time job during school and summer jobs could just about cover the entire thing.

In fact, I remember that it used to be rare for anyone to have large student loans, except for those who just graduated from medical school.


50 posted on 07/20/2012 8:13:55 PM PDT by Stat-boy
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