Durbin Urges Private Student Loans Be Discharged in Bankruptcy

[jk]

Students who take out loans from private lenders to finance their education should have the same right to discharge their debt in bankruptcy that other borrowers enjoy, Illinois Senator Dick Durbin said today.
“While the overall growth in student indebtedness is troubling, the most pressing concern is private student loans,” Durbin, the No. 2 Senate Democrat, said in prepared remarks at a Senate judiciary subcommittee hearing. “These private student loans are a far riskier way to pay for an education than federal loans.”
Outstanding student-loan debt reached anestimated $867 billion in the fourth quarter, and is greater than total U.S. credit-card debt. The student debt includes private loans, which don’t offer options as some government-backed loans when borrowers become financially distressed, including income-based repayment. Durbin introduced a bill in May to eliminate a 2005 provision that made privately issued student loans nondischargable in bankruptcy.

etc

http://www.bloomberg.com/news/2012-0...ankruptcy.html

[mmr]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

Which is all well and good, until lenders begin to price student loans as unsecured loans to unemployed individuals with generally limited to negative net worth (with rates that might approximate those for subprime credit card loans).

Unless the government steps in to expand student loan eligibility, 20% interest rates on student loans might help to clear up the education bubble fairly quickly.

[Raz]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

Which is all well and good, until lenders begin to price student loans as unsecured loans to unemployed individuals with generally limited to negative net worth (with rates that might approximate those for subprime credit card loans).

Unless the government steps in to expand student loan eligibility, 20% interest rates on student loans might help to clear up the education bubble fairly quickly.

Ah, yes - more unintended consequences of building the "Nanny State".

[dcarrigg]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

Which is all well and good, until lenders begin to price student loans as unsecured loans to unemployed individuals with generally limited to negative net worth (with rates that might approximate those for subprime credit card loans).

Unless the government steps in to expand student loan eligibility, 20% interest rates on student loans might help to clear up the education bubble fairly quickly.

Quite frankly, if you cannot finance your education through a combination of direct government loans and direct payments, you are probably getting robbed anyways.

The only segment of the education bubble I see this clearing up is in the private for-profit education market. It'll either cut into their margins by forcing them to control tuition costs, or make them become more predatory and actively seek to hit students with the 20% loans.

Either way, they already have the highest default rate. And the law as it stands caps wage garnishment at 15% of wages. Take that away, and it might make sense for banks to get out of the private student loan business all together were this change to occur. I'm not sure if that's a good or bad thing. I'd have to really spend some time looking at data.

[Raz]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

I never thought I'd live long enough to agree with Dick Durban on anything - but I do here.
Making Student Loan debt non-dischargable only helps create a new class of serfs.

But hey, who needs any real education? If they can't get financing for a degree in Bitterness Studies, they can join the Army!
How lucky we are to have an Empire!

[jk]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

I never thought I'd live long enough to agree with Dick Durban on anything - but I do here.

we have to watch for more phenomena like this, i.e. finding we agree with people we never thought we'd have common cause with. i just posted an article on "the new suburban poverty" that, among other things, calls into question some of the political alignments that grew out of classic post-wwii suburban america. maybe there's some king of political realignment possible. certainly, we now have 2 minority parties and no majority one.

[lektrode]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

Quite frankly, if you cannot finance your education through a combination of direct government loans and direct payments, you are probably getting robbed anyways.....
...

yeah, but SHHHHHHH!!!
wouldnt wanna start accusing the .edu-industrial complex of gougin the citizenry or sucking up too much of the federal deficit - that wouldnt be 'fair'

I'd have to really spend some time looking at data.

and we really like it/appreciate it when you do that and share it with us, dc (your skills/contributions in that area are very valuable in these discussions)

[lektrode]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

we have to watch for more phenomena like this, i.e. finding we agree with people we never thought we'd have common cause with. i just posted an article on "the new suburban poverty" that, among other things, calls into question some of the political alignments that grew out of classic post-wwii suburban america. maybe there's some king of political realignment possible. certainly, we now have 2 minority parties and no majority one.

+1
and worse than '2 minority parties' is the fact that the elections have devolved to the point where about 2% of the voters actually decide them; ie: the fence-sitters and swingvoters (that have no real opinion/conviction about anything - they just vote 'how they feel' that day after being splattered with 'drive-by shotgun blasts' of 30second soundbytes from the media assault weapon: tv news and rigged opinion polls

and we wont even get into the 'new advocacy' that we're getting from those halcyons of the info age:
twitter, the comedy channel, MTV etc = how the 'youth vote' stays "informed"

[lektrode]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

I never thought I'd live long enough to agree with Dick Durban on anything - but I do here.
Making Student Loan debt non-dischargable only helps create a new class of serfs.

But hey, who needs any real education? If they can't get financing for a degree in Bitterness Studies, they can join the Army!
How lucky we are to have an Empire!

+1 on that, but "we" dont have an empire, THEY (the political aristocracy that durban&co are the kings of) do

i also think that one of the bigger scams in modern American life is that "education for education's sake" has been sold to us just like derivitives and MBS/CDS have been sold to us

and that somehow forking out 10s to hundreds of thousands (of borrowed money in particular) for a degree will somehow guarantee 'the good life'

seems to me all its guaranteeing is enslavement...

[Ellen Z]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

+1
elections have devolved to the point where about 2% of the voters actually decide them; ie: the fence-sitters and swingvoters (that have no real opinion/conviction about anything - they just vote 'how they feel' that day after being splattered with 'drive-by shotgun blasts' of 30second soundbytes from the media assault weapon: tv news and rigged opinion polls

or by Hilary Clinton tearing up on the evening news

But, when was it different? Elections have been decided by the folks in the middle, based on scattered information and visual impressions, ever since TV was invented. Think of Nixon's five o'clock shadow in the Nixon-Kennedy debates.

[shiny!]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

Which is all well and good, until lenders begin to price student loans as unsecured loans to unemployed individuals with generally limited to negative net worth (with rates that might approximate those for subprime credit card loans).

Unless the government steps in to expand student loan eligibility, 20% interest rates on student loans might help to clear up the education bubble fairly quickly.

Agreed. Government steps in to guarantee health care via Medicare and Medicaid, and medical costs skyrocket. Government gets into the home mortgage business and sells the meme that everybody deserves to own a home, and we get a housing bubble. Government gets into the student loan business and sells the meme that every child should go to college, and college tuitions skyrocket.

Will we ever learn?

[c1ue]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

Time will tell if Durbin is serious or is just trying to garner more FIRE funding (E for education).

After all, Dodd-Frank - the anti-FIRE bill, has Barney Frank's name as a primary sponsor. The same Barney Frank who was chairman of the House Finance Committee, and who was in a relationship with (and got a job for by Frank's own admission) Herb Moses, the deputy director of product initiatives for Fannie Mae.

http://bostonherald.com/news/politic...643&position=1

[LazyBoy]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

+1
and worse than '2 minority parties' is the fact that the elections have devolved to the point where about 2% of the voters actually decide them; ie: the fence-sitters and swingvoters (that have no real opinion/conviction about anything - they just vote 'how they feel' that day after being splattered with 'drive-by shotgun blasts' of 30second soundbytes from the media assault weapon: tv news and rigged opinion polls

I hope you're not labeling all independents as having "no real opinion/conviction about anything". Frankly, it's no better to vote for someone just because some other group of people (a particular political party) has approved them.

I don't want anyone to be swayed by the last 30 second sound bite they hear either, but I'd prefer that people study the candidates and make a decision than vote party lines.

[Master Shake]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

I never thought I'd live long enough to agree with Dick Durban on anything - but I do here.
Making Student Loan debt non-dischargable only helps create a new class of serfs.

But hey, who needs any real education? If they can't get financing for a degree in Bitterness Studies, they can join the Army!
How lucky we are to have an Empire!

But why limit this to private student loan debt?

[shiny!]

Re: Durbin Urges Private Student Loans Be Discharged in Bankruptcy

But why limit this to private student loan debt?

Exactly!