Should the laws on Student Loans be changed to allow bankruptcy discharge?

[urian27]

Yes. And schools or private lenders (as the person who vouched for the viability of the loan) should have to pay a portion back to the government when it happens. In return, the government should also provide more support for schools to go toward scholarships. That way schools whose students pay off their debts get more money and schools whose students don't get less money. It gives the schools an incentive to charge what a degree at that school is worth and rather than gouge on education to pay for beautiful facilities, spend the money in places where it actually pays off, in the classroom.

I could see putting the bankruptcy on your record longer, because people coming out of college are usually young and more ready to absorb a bankruptcy on their credit, then wait until the record clears before rebuilding. It should be a difficult thing to do and worse than paying off the debts, but it should be possible.


What I would prefer, though, would be a totally different system. People should be required to serve the community, either through the military or through some other means, which could be working for a charity, it doesn't have to be government controlled. In return, the government should pay for your education through something like the GI bill. If you want to serve using your education, rather than manual labor (you could do pro bono legal work, for example), you could defer service, get your degree, and then serve afterward or, if you don't, pay a penalty that would be the equivalent of tuition.

That is a VERY incomplete plan. A lot would have to be flushed out to make it viable, but I would like to see something like that worked on to see if there is a feasible way to do it. They do similar things in Israel and other countries and it seems to work there.

EDIT: @tonalc2, I wouldn't be opposed to collecting on that asset in bankruptcy. Remove the degree title so that saying you have the degree is considered fraud (you would be considered the same as someone who didn't pay their last tuition check, took all the classes but never graduated). If you later pay off the debt, plus some sort of penalty, you can reclaim your degree. It should be a disadvantage to declare bankruptcy, but it shouldn't be impossible to start over at zero because you made a bad financial decision when you were 18 years old.


Think about this. Some kid, 17 years old, goes to an expensive school with an esoteric degree. The degree isn't worthless, but it isn't worth anywhere near what he paid. He doesn't do very well in school. He graduates, but with a low GPA and a useless degree and he can't get a decent job. He falls in debt because of he can't pay his loans, has credit problems, ends up in bankruptcy. After that, he can try to rebuild, but he still can't get rid of his student loans and with the bankruptcy on his credit, he can't make enough money to make ends meet. He qualifies for welfare, but the government garnishes those checks, which don't even cover the interest, so it does him no good and he can't get back on his feet. He can go on like this for decades. Eventually, as a final insult, the government will garnish his social security checks. All because when he was a child he decided to pursue a degree that was more expensive than it was worth and he didn't have the skills to rise beyond the debt that mistake created.

Shouldn't he have the chance, as an adult, to say hey, I made a mistake, I can't make use of this degree (that's not to say the degree isn't useful, but this person isn't capable of making use of it). I know I'll have to take some punishment for it, but I need to start over and undue the mistake I made when I was a kid. Does that sound so unreasonable?

[burdett]

Ask the Lord and Leader Barry Zerobama.

Student loans are considered health care under his wonderful plan.

[bernd]

No. Bailing out from Ones Commitments from Day 1 of our Adult Lives- does NOT set a wise Precedent for the rest of Our Financial Lives !! Loans "Made"- must be repaid... :o

[dacy17]

No. As a matter of fact I think the only kind of debt that should be discharged is medical. It's the only thing that can rack up that can be out of your sphere of control. And it should only be after every effort has been made to settle the debt.

I am not pro-big bank. But I don't think we should allow citizens to get a clean financial slate every 7 years for financing things out of their realm of income. And that includes college. I read an article the other day about some guy with a phd in history on food stamps and unemployment. The taxpayers cannot subsidize his poor education decisions. A better idea is an overhaul of the tuition system in this country. Not letting some people get their debts discharged while others have dutifully paid back their loans.