Finally an article that tells the truth about student loans.
http://www.latimes.com/opinion/op-ed/la-oe-0310-collinge-student-debt-bankruptcy-20160310-story.html
by Alan Collinge
Something unusual happened in late February. Commentators on the right and left, liberal Thom Hartmann and conservative Ike Brannon, published essays on the same day, Feb. 22, saying the same thing: Americans should have the right to discharge their student debt in bankruptcy proceedings, just like all other loans. Perhaps this historic convergence means we're finally ready for change.
Our bankruptcy system goes back to the 18th century. When the founders — many of whom suffered at the hands of British creditors — wrote the Constitution, they specified that Congress had the authority to create a uniform, federal bankruptcy system, listing that power ahead of the power to declare war, to raise an army and navy, and to coin currency.
Who gets into college?
It wasn't until nearly 200 years later that Congress targeted student debtors, making bankruptcy uniquely unavailable to them. The rationale was that students were fleeing, en masse, to bankruptcy court promptly upon graduation. But we now know that less than 1% of student loans were being discharged in bankruptcy court at that time.
Absent bankruptcy protection, the student loan industry functions without checks and balances. Lenders have no reason to seriously evaluate a prospective borrower's ability to repay a loan, because they can make more money on defaults than on loans that remain in good stead. If a debtor lacks the funds to pay interest, lenders have collection powers that would “make a mobster envious” — in Sen. Elizabeth Warren's words. They can extract huge sums from clients, often many multiples of what was originally borrowed.
Borrowers who default on student loans are relegated to a lifetime of socioeconomic insecurity. In addition to sustaining damage to their credit scores, they can be fired from public employment, their wages garnished without a court order. They can lose their professional licenses and even their driver's licenses.
Those who manage to pay their way out of default through a hugely expensive loan “rehabilitation” process wind up in default again more than 60% of the time. Ultimately, borrowers in default can look forward to giving up a portion of their Social Security or...
http://www.latimes.com/opinion/op-ed/la-oe-0310-collinge-student-debt-bankruptcy-20160310-story.html
by Alan Collinge
Something unusual happened in late February. Commentators on the right and left, liberal Thom Hartmann and conservative Ike Brannon, published essays on the same day, Feb. 22, saying the same thing: Americans should have the right to discharge their student debt in bankruptcy proceedings, just like all other loans. Perhaps this historic convergence means we're finally ready for change.
Our bankruptcy system goes back to the 18th century. When the founders — many of whom suffered at the hands of British creditors — wrote the Constitution, they specified that Congress had the authority to create a uniform, federal bankruptcy system, listing that power ahead of the power to declare war, to raise an army and navy, and to coin currency.
Who gets into college?
It wasn't until nearly 200 years later that Congress targeted student debtors, making bankruptcy uniquely unavailable to them. The rationale was that students were fleeing, en masse, to bankruptcy court promptly upon graduation. But we now know that less than 1% of student loans were being discharged in bankruptcy court at that time.
Absent bankruptcy protection, the student loan industry functions without checks and balances. Lenders have no reason to seriously evaluate a prospective borrower's ability to repay a loan, because they can make more money on defaults than on loans that remain in good stead. If a debtor lacks the funds to pay interest, lenders have collection powers that would “make a mobster envious” — in Sen. Elizabeth Warren's words. They can extract huge sums from clients, often many multiples of what was originally borrowed.
Borrowers who default on student loans are relegated to a lifetime of socioeconomic insecurity. In addition to sustaining damage to their credit scores, they can be fired from public employment, their wages garnished without a court order. They can lose their professional licenses and even their driver's licenses.
Those who manage to pay their way out of default through a hugely expensive loan “rehabilitation” process wind up in default again more than 60% of the time. Ultimately, borrowers in default can look forward to giving up a portion of their Social Security or...
