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Student loans and bankruptcy
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As college costs rise, students are finding they have no choice but to take out loans -- loans that are often shockingly high and which follow you to your grave. Ron Lieber wrote a story in the New York Times recently about the difficulties of discharging student debt.
"The reason why it's made so much tougher for students than it is for other people is that they know that theoretically, students can walk away from the debt and yet still keep the degrees that they borrowed to acquire," Lieber said.
In the 1970s, congressmen passed legislation to tighten standards for federal student loans, so the government and taxpayers are not taken advantage of. But they did add one loophole: If graduates can prove that paying back their student loans would cause "undue hardship" and that there is "a certainty of hopelessness" to their situation, they can get their loans dismissed. Unfortunately, the congressmen never defined what undue hardship meant.
A Princeton researcher Lieber spoke to pointed out that anyone who lives in a state with a lottery will fail to meet the "certainty of hopelessness" requirement, because theoretically, there is always hope that they can win the lottery and pay back their student loans.
However, Lieber said that more people should try to file for bankruptcy on their student loans. Through his reporting, he said he estimates only about 1,000 people attempt to get their loans dismissed -- and some do. He posits that if more people filed for bankruptcy on the student loans.
Learn more about student loans and bankruptcy in the interview above.
Price of college tuition is shockingly high today and it's true, lots of students just do not have another way execpt taking out a loan. But it's not just a loan... it's a financial commitment for long years and even if you will have no money at all and fill for bankrupcy, you will still have to pay off your debt. With today's wages it's difficult to save enough money to avoid the debt, it's almost the only option to get a higher degree. But I have heard that Obama made a new prograb that will be available from 2014 and it will make repaymnet of student loans easier.
http://paydaydesk.com/
Of cousre the attitude of many is like this: http://www.foxnews.com/us/2012/09/05/news-summary-pay-off-student-loans-...
A young man payed off $101,000 of student loan debt by scrimping and saving for seven months after getting his MBA. Note how Faux news calls him stupid for doing this because "you can earn a higher rate of return in the stock market".
It bewilders me why this subject ever comes up, and why anyone honestly believes borrowers deserve to discharge student loans. The only relevant fact is that these are loans that are not based on credit standards and therefore would never be made except for the federal guaranty of ultimate collection. Why should the govt, i.e. taxpapers, absorb a loss for doing something the private market won't do?The system is broken since there are too many loans that won't be repaid because the borrowers can't afford the payments. Would-be students should take responsibility for analyzing whether it is worth the gamble AND the govt should refuse loans when the cost/benefit analysis doesn't justify the loans. Further, the institutions who get the money (for students who otherwise would not attend) should be required to guaranty a significant portion as well. Our govts provides a free 13 yr education program, then substantially funds 2 yr community colleges plus provides significant support for public universities. That should be it. There is no money for lose-money loan programs.
