Today

So here we are.  Not much has changed in the eleven years since all standard consumer protections were stripped from student loans.  For specifics on that, visit my website: http://www.keepjessicaafloat.com and click on About Student Loans.  I am encouraged that many good people are trying to change the laws, which are terrible.  A woman who used to work for Sallie Mae, (one of the largest collectors of student loans) is now regularly giving money to Student Loan Justice.  Check out Student Loan Justice on Facebook, they are working hard to try to change things.  It is striking that a former Sallie Mae employee recognizes that the laws are so bad, that she is giving money to try to change them.

Recently when I told a conservative that the student loan people go after the incomes of spouses of people who have student loans, he was surprised.  I met a young woman whose student loan payment was doubled after she got married!  On the application form for a payment plan, there are blanks to fill in all your spouse’s information, including their gross income.  You are also expected to send in your most recent tax return. It doesn’t matter that you likely didn’t even know your future spouse when the loans were taken out.  It is taken for granted that their income will go toward paying them.  I believe this is a factor in why so many young people are raising families without getting married.  I read recently that people are borrowing less money for college. This could be related to the many student loan horror stories out there.  Unfortunately, it also likely means that many prospective college students are being priced out of the market.  College costs need to be lowered, and standard consumer protections, including bankruptcy, need to be restored to student loans.  And this needs to be retroactive, for the millions already caught in the trap.

Bankruptcy and Student Loans

This article by the founder of Student Loan Justice is excellent and shows just how bad the system, and situation have become.

http://www.latimes.com/opinion/op-ed/la-oe-0310-collinge-student-debt-bankruptcy-20160310-story.html

A right to debt relief from crushing student loans

Something unusual happened in late February. Commentators on the right and left, liberal Thom Hartmann and conservative Ike Brannon, published essays on the same day, Feb. 22, saying the same thing: Americans should have the right to discharge their student debt in bankruptcy proceedings, just like all other loans. Perhaps this historic convergence means we’re finally ready for change.

Our bankruptcy system goes back to the 18th century. When the founders — many of whom suffered at the hands of British creditors — wrote the Constitution, they specified that Congress had the authority to create a uniform, federal bankruptcy system, listing that power ahead of the power to declare war, to raise an army and navy, and to coin currency.

It wasn’t until nearly 200 years later that Congress targeted student debtors, making bankruptcy uniquely unavailable to them. The rationale was that students were fleeing, en masse, to bankruptcy court promptly upon graduation. But we now know that less than 1% of student loans were being discharged in bankruptcy court at that time.

Absent bankruptcy protection, the student loan industry functions without checks and balances. Lenders have no reason to seriously evaluate a prospective borrower’s ability to repay a loan, because they can make more money on defaults than on loans that remain in good stead. If a debtor lacks the funds to pay interest, lenders have collection powers that would “make a mobster envious” — in Sen. Elizabeth Warren’s words. They can extract huge sums from clients, often many multiples of what was originally borrowed.