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Let Students Discharge College Debts In Bankruptcy? Yes, But...
Forbes ^ | July 24, 2014 | George Leef

Posted on 07/25/2014 5:42:54 AM PDT by reaganaut1

Ever since the obstreperous Occupy Wall Street protests of 2011, Americans have been getting an earful about the alleged crisis of student loan debt. Sensing a chance to appear both compassionate and pro-education, many lawmakers want to do something to ease the plight of indebted students.

Senator Elizabeth Warren, for example, is pushing her populist plan of allowing students to refinance their loans at absurdly low interest rates. President Obama recently expanded the touchy-feely repayment system so that students would never have to pay more than ten percent of their discretionary income for 20 years before the rest of the loan is forgiven.

And that is only ten years if the individual goes to work in a “public service” job. For more on Uncle Sam’s foolish generosity with our money, see this piece I wrote in May.

What about good old bankruptcy? Unlike other kinds of debts, the law does not permit students to wipe out their college debts by declaring bankruptcy. Should the law be changed?

(Excerpt) Read more at forbes.com ...


TOPICS: Business/Economy; Culture/Society; Editorial
KEYWORDS: bankruptcy; college; georgeleef; studentloans
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1 posted on 07/25/2014 5:42:54 AM PDT by reaganaut1
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To: reaganaut1

No! The student loans are now federal loans.


2 posted on 07/25/2014 5:48:49 AM PDT by DownInFlames
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To: reaganaut1

All these proposals have two things in common

1 - Keep the easy money flowing to students and colleges

2 - Let someone else pay off the moocher students debt

In Liberal-Land once you make it past the abortionist’s knife you are set for life as long as you vote the right way.


3 posted on 07/25/2014 5:50:33 AM PDT by Iron Munro (IRONY)
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To: reaganaut1
"Should the law be changed?"

Of course! Changed to require colleges to cosign student loans! If colleges were the ones on the hook if the student defaults, we wouldn't see nearly the number of defaults we see now. The main driver of the incredible college cost inflation over the past 35 years has been the easy availability of gov't money.


4 posted on 07/25/2014 5:50:45 AM PDT by Sooth2222 ("Suppose you were an idiot. And suppose you were a member of congress. But I repeat myself." M.Twain)
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To: reaganaut1

From the article:
“If individuals can escape from heavy credit card, medical bills,
and other debts through bankruptcy,
what should be different about student loans?”

“Unlike other kinds of debts, the law does not permit students
to wipe out their college debts by declaring bankruptcy.”

“Brannon has a good reply:
“If we are concerned that allowing students to escape debt via bankruptcy
might leave the government on the hook,
we could make the institutions of higher learning
assume their loan payments after a bankruptcy.”


5 posted on 07/25/2014 5:53:42 AM PDT by Repeal The 17th (We have met the enemy and he is us.)
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To: reaganaut1

I’m still trying to figure out how to short the student loan market...


6 posted on 07/25/2014 5:58:51 AM PDT by Wyatt's Torch
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To: Sooth2222
If student loans were discharged in bankruptcy, then loan issuers would necessarily be reluctant to loan to "affirmative action" students who would not financially benefit from college and/or flunk out before graduation.

If colleges were responsible for defaults, then colleges would also be reluctant to accept students who would not financially benefit from college, and would be less likely to offer worthless majors and courses.

This means that colleges and "civil rights" leaders would fight against this savagely.

7 posted on 07/25/2014 6:00:07 AM PDT by PapaBear3625 (You don't notice it's a police state until the police come for you.)
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To: reaganaut1

A student loan forgiveness scheme is going to win somebody an election. That is inevitable at this point IMO.


8 posted on 07/25/2014 6:05:42 AM PDT by Buckeye McFrog
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To: reaganaut1

The federal government needs to get out of the student loan business altogether.

Until that happy day arrives, going forward loans should only be made to students in majors that stand a decent chance of getting a job and being able to repay the loan.

No more money to grievance studies or transgendered Aleutian folk dancing.


9 posted on 07/25/2014 6:09:18 AM PDT by Arm_Bears (Rope. Tree. Politician. Some assembly required.)
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To: reaganaut1

I am so sick of this. If you are going to let students discharge this debt, then have the colleges make the loans. Let them suffer. They are to blame in large part for suckering kids into taking useless overpriced courses and then throwing them to the wolves in the market. Of course, kids who take these courses and don’t take their studies seriously are to blame too. The one party who is not to blame is the US taxpayer, who is getting screwed left and right already.


10 posted on 07/25/2014 6:14:43 AM PDT by Opinionated Blowhard ("When the people find they can vote themselves money, that will herald the end of the republic.")
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To: Wyatt's Torch
I’m still trying to figure out how to short the student loan market...

Buy the banks that hold the loans?

Or, are they too big to fail? Haven't we seen this act once before?

11 posted on 07/25/2014 6:17:35 AM PDT by Lou L (Health "insurance" is NOT the same as health "care")
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To: reaganaut1

http://www.thedenverchannel.com/financial-fitness/many-over-50-are-still-saddled-with-student-loans


12 posted on 07/25/2014 6:21:06 AM PDT by ReaganÜberAlles (Remember, you can't spell "progressive" without "SS".)
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To: reaganaut1

How about a program where a person can voluntarily join some type of a civilian or military “corp” for X number of years with each year paying off a portion of their student loans. Sort of an indentured servitude program.


13 posted on 07/25/2014 6:24:11 AM PDT by ReaganÜberAlles (Remember, you can't spell "progressive" without "SS".)
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To: reaganaut1

Student loans should be cut by 85%.

We’d all be much better off: taxpayers; the colleges, which would have to refocus on simply providing a good education within financial constraints; and students who could work their way through lower-cost schools, value their studies more, and graduate without debt.


14 posted on 07/25/2014 6:24:25 AM PDT by 9YearLurker
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To: Opinionated Blowhard

This whole mess began when we made someone other than the seller (college)libel for making a bad decision i.e. financing a worthless degree. I recall when I was in school, I was at my last semester cash short. My only asset was some stock I had acquired by working. I went to a bank and wanted to get a loan on the stock...the answer was no. Eventually I had to sell it and use the proceeds for my tuition. It really POed me but I learned a lesson which was don’t sign up for anything for which you cannot pay. This was before the student loan program of course.


15 posted on 07/25/2014 6:25:17 AM PDT by Mouton (The insurrection laws perpetuate what we have for a government now.)
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To: Opinionated Blowhard

Yep. And the colleges wouldn’t make the loans, because that would bankrupt them. Which gets us back to where things ought to be: lower cost, rarely financed, and requiring hard work and dedication from students.


16 posted on 07/25/2014 6:25:30 AM PDT by 9YearLurker
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To: PapaBear3625

The trouble is that most of the loan issuing is done by Uncle Sam, who would see making even more bad student loans as part of his larger current mission of redistribution and reparations.


17 posted on 07/25/2014 6:26:40 AM PDT by 9YearLurker
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To: reaganaut1

Not only no, but HELL NO!

The terms of these loans were no secret when the students signed up for them. The fact that they are not dischargeable in bankruptcy was abundantly clear. They should be held to the terms of the loan they signed.

Since these loans are written with no collateral other than the future earnings of the student, no bank in the world would write them unless it was clear that they were not dischargeable in bankruptcy. Otherwise, every single borrower would just declare bankruptcy the day after graduation. Their only assets at that point are their diploma, and their fond memories of five years of undergraduate education well partied. The lender can’t recover any money from those!

If you want to change the law, to make all new student loans dischargeable in bankruptcy, I’m all for that. But without any guarantee, no bank would write that loan for anything less than 20% interest. And even at that, they would probably lose money.

If the low interest loans are dischargeable, it is nothing more than a free education for every student willing to commit fraud. The few people who would repay the loan would be chumps. We should not have a policy that rewards fraud.


18 posted on 07/25/2014 6:26:50 AM PDT by Haiku Guy (Health Care Haiku: If You Have a Right / To the Labor I Provide / I Must Be Your Slave)
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To: ReaganÜberAlles

How about letting them just work for a time in the private sector instead?


19 posted on 07/25/2014 6:27:09 AM PDT by 9YearLurker
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To: reaganaut1

End ALL federal aid to education, including student loans.
Federal money flowing to colleges is what provides the breeding ground for Cloward-Piven types. Most college money is now spent on administrations that are more concerned with diversity than education. The result is the quality of a college education today is so poor that many grads are lucky to get a job at McDonald’s.
The only way to get rid of these leeches is to starve them out by cutting off their funds.


20 posted on 07/25/2014 6:27:29 AM PDT by wdk535
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