NY Times Editorial: Let Students Discharge Private Loans in Bankruptcy

[Austrian Econ Disciple]

Not sure what the problem is here -- in every other case where you are unable to repay your debts you can declare bankruptcy. Why the void with this particular loan? I'm pretty glad we got rid of debtors prisons and indentured servitude. By not having bankruptcy you are basically taking all the risk away from the loaners, and is it then no wonder that there are nearly no loan standards in this particular market? Besides, it isn't like bankruptcy has no consequences.

 

[TCE]

So you opted for immediate gratification in lieu of personal responsibility. That's fine, but you did indeed have a choice. You chose not to wait for a better deal.

Most of your points are dead-on, but there is one thing you aren't considering: the new Student Loan law. Basically, all colleges now have extra administrative fees and the burden is on them to deal with loans. While this was hailed as a great step forward for student loans, it is a serious step back for everyone - except for governmental control over education. In 2009, I knew what tuition would be and knew I could afford it. However, that was before this law passed. Now tuition has jumped because my school is claiming all of these new regulations on them require a higher tuition. This is one example of how the government screws us.

As for your other points, for some, I think the victims are more so the kids and in others, I don't feel bad for the students at all. The moral hazard portion I was alluding to is the government offering 18-year olds loans at fixed interest rates that aren't set by the market and kids think they're great because the government, the savior of everything, is offering them. They are pushed by propaganda that these loans are actually good things and of course, with the government's seal of approval, they take them. As for the kids going to high-line schools and the expensive out of state schools for a premium, well, they deserve what they get by taking out tens of thousands in private loans.

 

[TCE]

Not sure what the problem is here -- in every other case where you are unable to repay your debts you can declare bankruptcy. Why the void with this particular loan? I'm pretty glad we got rid of debtors prisons and indentured servitude. By not having bankruptcy you are basically taking all the risk away from the loaners, and is it then no wonder that there are nearly no loan standards in this particular market? Besides, it isn't like bankruptcy has no consequences.

+Rep. If loans were able to be discharged in bankruptcy, banks would tighten their lending standards and the market would be better for it.

 

[ghengis86]

Not sure what the problem is here -- in every other case where you are unable to repay your debts you can declare bankruptcy. Why the void with this particular loan? I'm pretty glad we got rid of debtors prisons and indentured servitude. By not having bankruptcy you are basically taking all the risk away from the loaners, and is it then no wonder that there are nearly no loan standards in this particular market? Besides, it isn't like bankruptcy has no consequences.

Agreed.

More bankruptcy due to student loans where the student loans is discharged and after a few thousand similar judgements the private banks will be less eager to make student loans.

The only thing that screws the above scenario is government involvement in the student loan market. It really distorts the market signals, incentives, disincentives, etc.

 

[cindy25]

why stop with private loans; govt loans should be no different than private loans.

 

[jack555]

[FOOTNOTE][/FOOTNOTE]

So you opted for immediate gratification in lieu of personal responsibility. That's fine, but you did indeed have a choice. You chose not to wait for a better deal.

I don't know how old you are but try being in your late teens to early twenties and making much more then minimum wage, and that's with a college degree. I saw an opportunity to make 100,000 plus a year whereas my friends are unemployed or making less than 25,000 a year. I was accepted into a private school many people try and never get into any pharmacy school. Waiting 3 years to maybe get into a public school and go into 125000ish debt didn't seem like a good plan. If I had to do it all over again I'd try to find a degree like engineering where you don't need a doctorate and can still get a cheap degree. However a pharmacy degree should not cost 125000 to 200000. Yes I had a choice only time will tell if it's a good one. Again I don't think there should be federal loans and I'd definitely entertain the thought of outlawing private loans as being predatory. I am aware I chose to go into debt but if you want to be a pharmacist there really isn't much choice ( with a few exceptions for people who live in certain states).

 

[CaptainAmerica]

People who make poor decisions get bailed out.Pathetic.

 

[Anti Federalist]

There is going to have to be some sort of bailout or mass default on student loans at some point. College is an incredible bubble that has ripped off an entire generation.

Truth.

 

[LibForestPaul]

so dems are buying votes, thats cool...

but who is making money?

are colleges being targeted, and why? RP and his stance against Dept of Ed?

 

[LibForestPaul]

+Rep. If loans were able to be discharged in bankruptcy, banks would tighten their lending standards and the market would be better for it.

than what do all those liberal ed "doctors" do, who will they teach. we already have high unemployment and you want to make it go higher?

 

[TCE]

This feels like such a misdirected attack on people. Government creates loans and other incentives to artificially increase price of college---->Students go to college and enter into a system where the government has virtually guaranteed failure------>Government changes rules in the middle of the game and also makes sure loans cannot be discharged, condemning students who are victims of the system to a potential lifetime of debt slavery------>Moral assault is waged on students for being irresponsible. Something isn't right with the above.

Again, on a purely moral argument, some students are simply trying to get a degree as cheaply as possible and that's it. Others are taking out tens of thousands in private loans to go to fancy colleges with a ton of extra amenities and cry that they can't pay their student loans back. The former and latter cases are extremely different.

 

[angelatc]

[FOOTNOTE][/FOOTNOTE]

I don't know how old you are but try being in your late teens to early twenties and making much more then minimum wage, and that's with a college degree. I saw an opportunity to make 100,000 plus a year whereas my friends are unemployed or making less than 25,000 a year. I was accepted into a private school many people try and never get into any pharmacy school. Waiting 3 years to maybe get into a public school and go into 125000ish debt didn't seem like a good plan. If I had to do it all over again I'd try to find a degree like engineering where you don't need a doctorate and can still get a cheap degree. However a pharmacy degree should not cost 125000 to 200000. Yes I had a choice only time will tell if it's a good one. Again I don't think there should be federal loans and I'd definitely entertain the thought of outlawing private loans as being predatory. I am aware I chose to go into debt but if you want to be a pharmacist there really isn't much choice ( with a few exceptions for people who live in certain states).

Lord, won't you buy me a Mercedes Benz. Believe it or not, your is the first generation that feels entitled to earn more money than 75% of the workforce right out of college. The whole reason I don't go back for my Masters is because at my age, I'll likely never recover the investment. But heck, if it's not really my investment, why should I care?

 

[TCE]

than what do all those liberal ed "doctors" do, who will they teach. we already have high unemployment and you want to make it go higher?

With the current system, loans are artificially easy to get. If lending standards are raised, less people will be able to afford higher degrees. As a result, higher degrees won't be required for as many things. Since I am in the education field, I can tell you that this is what happened. Getting a doctorate became too easy to achieve. All one needed to do was take out a loan and take the required courses, and voila, a doctorate. This became a requirement and pretty soon, the education field was saturated. The "doctors" had to begin teaching at community colleges and pretty soon, anyone with a Masters degree is out of a job.

Is your argument that we need to keep lending standards artificially low to make sure unemployment stays low?

 

[TCE]

Lord, won't you buy me a Mercedes Benz. The whole reason I don't go back for my Masters is because at my age, I'll likely never recover the investment. But heck, if it's not really my investment, why should I care?

That is why I likely won't be getting my Masters even though I am over-qualified to get into a school. I'll never make the money back.

 

[angelatc]

As for your other points, for some, I think the victims are more so the kids ....,

Yep, that's what America has involved into. A nation of victims.

 

[angelatc]

That is why I likely won't be getting my Masters even though I am over-qualified to get into a school. I'll never make the money back.

One of the curses of getting a degree in a business class is actually understanding these things, right?

 

[TCE]

Yep, that's what America has involved into. A nation of victims.

In this case, yes. In today's times, try spending 12 years in a public school, hearing everyday how important it is to get a college degree and having your parents pushing you to get the degree. Society says only failures, rejects, and addicts don't get degrees and you say it costs too much so you're going to take the only job you can get, a minimum wage position in retail. Can't see many 18-year olds choosing that path.

 

[Anti Federalist]

http://www.ronpaulforums.com/showthread.php?305004-NYT-The-Master’s-as-the-New-Bachelor’s

 

[Gumba of Liberty]

Yep, that's what America has involved (I think you mean evolved) into. A nation of victims.

What was your tuition rate when you went to college? I would really like to know because from your posts and general attitude I do not think you understand how the college bubble formed. Hint hint, it was caused by the government and the banks, NOT by 18 year-old kids. By the way, allowing students to bankrupt their loans is not a bail out, it is the Constitutional method for the liquidation of debts. Are you in favor of bring back debtor prisons as the British had prior to the Revolution?

 

[Austrian Econ Disciple]

First time I've ever heard that bankruptcy is being bailed out. It's not my fault that decades of Government intervention into the educational field prior to my birth has increased tuition beyond levels where one could pay for them while going to college, and made accessibility so lax that it has become almost a requirement for many jobs. It's a system that is insidious. Ron Paul never personalizes and frankly I can't believe someone would attack people for making the best decision given their limited options. I have all the sympathy in the world for my generation being brutalized by such a destructive system. I am sure when you went to school you could afford to pay your tuition through work (and if not it wasn't that long ago you could), and a college degree actually meant something. It wasn't my generation that originated Government intervention into education.

For those astute enough not to want to go into debt to go to school, either you have to get a scholarship (which aren't exactly too commonplace), or join the military. It's a horrid system where the banks, MIC, and Government work to either make you a debt-slave, or a pawn in their global hegemonic system. If you notice it's my generation whom has the most support and admiration for Dr. Paul. Perhaps you shouldn't blame those trying to fix the situation.