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Wednesday, May 13, 2009

Law - "Student Loan Bailout: The Choice of a New Generation"

The ILB has had a number of entries about student loans, including the impact of the 2005 bankruptcy law amendments, which eliminated the possibility of relief in bankruptcy for student loans in nearly all cases. See this June 10, 2007 entry, which quotes Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers: “When a student signs the paper for these loans, they are basically signing an indenture,” Mr. Nassirian said. “We’re indebting these kids for life."

This entry from July 30, 2007 contains quotes including "Many a student comes out of college only to discover that his loan has become a noose around his neck" and this one, quoting Joe Nocera of the NYT, writing about Sallie Mae:

“Sallie revolutionized the industry,” says Representative Miller, and he doesn’t mean that as a compliment. It imposed fees and penalties that added costs when students were already having trouble repaying loans — while increasing Sallie’s profits. It bought its own collection agency. It lobbied to make it nearly impossible for borrowers to escape their student debt. (It was aided along the way by occasional reports of the wealthy reneging on their student debt, thus saddling the taxpayer with the bill.) * * *

But in our obsession with the market, we had forgotten that this stock’s performance resulted in no small part from Sallie Mae — like many of its competitors — making money on the backs of struggling college graduates. It was a little like the credit card business: the “best” customers aren’t the ones who pay off their monthly charges on time; they’re the ones who can’t. For the student loan industry, the best customers are the students who take on more debt than they can handle to get through school. What’s been lost is the idea that student loans are a service with benefits that transcend the financial.

Today Elie Mystal writes in a long entry in Above the Law:
A couple of months ago, it occurred to me that if the government didn't start tackling the student loan issue, people would simply stop paying off their loans. According to USAToday, that is precisely what is starting to happen.

Just to be clear, if you are a financial idiot and you rack up thousands of dollars in credit card debt on flat screens and rims, you can get that wiped out in bankruptcy. But if you take out loans to pay for your education, and you can't get a job because the economy has stopped, the debt will follow you to the grave.

More horror stories that the baby boomers don't want us to talk about ....

The ATL post quotes from this USA Today story by Christine Dugas. Read them together.

Posted by Marcia Oddi on May 13, 2009 12:31 PM
Posted to General Law Related