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Student Debt Lawsuits Are a Lucrative Business

nytimes.com

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Re: Student Debt Lawsuits Are a Lucrative Business

#21

Post by harryh »

maxerickson wrote: post #10
distances wrote: post #7

Earlier quoted context omitted.

Or alternatively, you could make sure there's an affordable public option for university level education for qualifying students, to avoid the need for a loan in the first place. It was feasible before, and I'm sure there isn't any non-political reason why it'd be impossible now.

The percentage of the population that enrolls in college has increased dramatically, so a given level of individual support has become more expensive in total. (I don't mean the above to really try to address whether it is feasible, just to point out that the situation has changed)

In addition to this very good point, Baumol's cost disease makes education ever more expensive as long as it is a labor intensive practice.

Re: Student Debt Lawsuits Are a Lucrative Business

#22

Post by turc1656 »

ChrisBland wrote: post #5
arcanus wrote: post #3

It is remarkable that you cannot declare bankruptcy from student debt. We have essentially decoupled the price of college from the expected return.

If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have no income and no assets). You'd be 29 by the time the bankruptcy fell off your credit report, meaning credit might be tight in those years to buy a car or house, but you'd be debt free - something many people in their 20s and 30s would gladly do if they were gi…

"If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job"

Yeah, but that's exactly why no one would ever lend that amount in the first place. That, I believe, was the OP's point. College should not cost what it does. And part of that reason is federal guarantees upon the debt. So colleges can raise the price and since the debt is guaranteed creditors are happy to lend. Essentially, there is no check and balance on the price of education that exists for pretty much everything else that might be financed (i.e. a car).

"IMO the only way to solve it is to put the school on the hook for part of the $$ if the default rate exceeds X%."

Totally disagree. That seems to violate every notion of contract law that exists. The colleges are not taking part in the loan process. They are not agreeing to take any monetary risk on the individual. They are simply offering a service at a (bloated) price. The debtor agrees to take on debt to pay for the service and the creditor agrees to take the risk. The college should not be brought into that totally separate contractual agreement. That's like holding an employer responsible for debts that an employee defaults upon because the employer had cutbacks and laid off the employee.

Re: Student Debt Lawsuits Are a Lucrative Business

#23

Post by AdamJacobMuller »

ChrisBland wrote: post #5
arcanus wrote: post #3

It is remarkable that you cannot declare bankruptcy from student debt. We have essentially decoupled the price of college from the expected return.

If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have no income and no assets). You'd be 29 by the time the bankruptcy fell off your credit report, meaning credit might be tight in those years to buy a car or house, but you'd be debt free - something many people in their 20s and 30s would gladly do if they were gi…

> put the school on the hook

While I agree with that (a lot), you can repossess a degree. The school can choose to disavow knowledge of a student. Employer tries to verify your degree, nope, don't know you. You cannot repossess an education, but you can repossess a degree. How important that is, I'm not sure. Your other solution (clawing back money from the schools for useless/overpriced degrees) is far more elegant IMO.

Re: Student Debt Lawsuits Are a Lucrative Business

#24

Post by avs733 »

ChrisBland wrote: post #5
arcanus wrote: post #3

It is remarkable that you cannot declare bankruptcy from student debt. We have essentially decoupled the price of college from the expected return.

If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have no income and no assets). You'd be 29 by the time the bankruptcy fell off your credit report, meaning credit might be tight in those years to buy a car or house, but you'd be debt free - something many people in their 20s and 30s would gladly do if they were gi…

>At the end of the day, maybe giving an 18 year old 120k to study underwater basket weaving for 4 years is not the best investment of money?

This seems to be some undying myth that is really effective because it allows individuals to gloss over personal value judgements about individual's educational choices under the guise of economics. It massively oversummarizes college education AND market economics. It is a bad idiom used to undermine any area of thought (e.g., when I heard it applied to mechanical engineering "because mechE's don't code") that it requires more than two neurons to see the value to society from.

The role of education is to provide value to society, not simply provide labor to company's who create one form of value (i.e., capital).

Re: Student Debt Lawsuits Are a Lucrative Business

#26

Post by kharms »

rayiner wrote: post #15
arcanus wrote: post #3

It is remarkable that you cannot declare bankruptcy from student debt. We have essentially decoupled the price of college from the expected return.

It's hardly remarkable. Student loans are originated without regard to credit risk, at the same interest rate for all borrowers. Moreover, pretty much every student is eligible to declare bankruptcy soon (and often, long) after they graduate. Requiring loans to be freely originated on one hand, and permitting people to discharge them in bankruptcy on the other, would be completely unworkable. As to why we require loa…

>Student loans are originated without regard to credit risk, at the same interest rate for all borrowers.

That's not entirely true.

For undergraduate students, no more than $57,500 can be loaned from the government at a fixed 4.45% APR. This is what you're talking about.

If you need more than $57k (which you would even at most state schools) you need to get a private loan. Private loans have variable APR based on your and your cosigners credit history. Sallie Mae offers loans with an APR between 5.74 and 11.85.

Re: Student Debt Lawsuits Are a Lucrative Business

#27

Post by briandear »

maxerickson wrote: post #10
distances wrote: post #7

Earlier quoted context omitted.

Or alternatively, you could make sure there's an affordable public option for university level education for qualifying students, to avoid the need for a loan in the first place. It was feasible before, and I'm sure there isn't any non-political reason why it'd be impossible now.

The percentage of the population that enrolls in college has increased dramatically, so a given level of individual support has become more expensive in total. (I don't mean the above to really try to address whether it is feasible, just to point out that the situation has changed)

However, university cost inflation is even greater than health care costs. One of the only logical reasons is that as more “free” or “cheap” government money enters the system, the more inflation. Ready availability of student loans has made universities much more insulated from market pressures than “normal” industries.

If you were to eliminate student loans, costs would drop like a rock. You wouldn’t have universities hiring endless Vice Provosts of Some Bullshit Initiative or spending 10s of millions building “Student Life Centers” or luxury-level athletic facilities for sports that aren’t revenue self-sustaining. Universities are like the military — they pay the privates (adjunct professors) almost nothing while spending huge money on things like the Crusader Artilley System (insert random boondoggle university initiative here.)

Considering university tuition at a private university for a single student per year is literally more expensive than the salary of a single low level professor, it’s clear universities are running quite a racket. And we haven’t even touched on the insanity that is textbook pricing.

Re: Student Debt Lawsuits Are a Lucrative Business

#28

Post by amorphid »

arcanus wrote: post #3

It is remarkable that you cannot declare bankruptcy from student debt. We have essentially decoupled the price of college from the expected return.

As someone who exited a chapter 7 bankruptcy (all dischargeable debts wiped out) in 2010 with $140K USD in student loans, I can say with certainty that student loan debt sucks.

Re: Student Debt Lawsuits Are a Lucrative Business

#29

Post by amorphid »

ChrisBland wrote: post #5
arcanus wrote: post #3

It is remarkable that you cannot declare bankruptcy from student debt. We have essentially decoupled the price of college from the expected return.

If we didn't prevent it, then you'd be stupid to not go to college take out $120k in loans and then declare bankruptcy at 22 prior to taking a job (you'd have no income and no assets). You'd be 29 by the time the bankruptcy fell off your credit report, meaning credit might be tight in those years to buy a car or house, but you'd be debt free - something many people in their 20s and 30s would gladly do if they were gi…

> You'd be 29 by the time the bankruptcy fell off your credit report

7 years for chapter 13, 10 years for chapter 7

Re: Student Debt Lawsuits Are a Lucrative Business

#30

Post by Sir_Cmpwn »

>In Miami, a law firm working for Transworld brought a lawsuit last year against Antonio Fuentes, seeking payment on a $13,356 student loan. With interest and fees, Mr. Fuentes now owed $25,322.31, according to the complaint.

>“Many judges take the attitude: ‘I paid my student loans. You ought to pay yours. Don’t give me this nonsense about technicalities.’”

That judges are even allowed to do this is awful. Why should this person have to go through the arduous and expensive appeals process just to get justice administered correctly?

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