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(37,305 posts)
Thu Apr 26, 2012, 08:58 PM Apr 2012

Student Loan Debt Slaves In Perpetuity - A True Story Of "Bankruptcy Hell"

But under a 2005 law passed by Congress to protect lenders, private student loans fall under the same nearly-impossible-to-clear category as child support payments and criminal fines.

Generally, it's these private loans that bring borrowers to the door of bankruptcy lawyers like Barrett. Private student loans often lack the protections of federal ones, and have rates that typically start higher and can shoot up. A recent survey of bankruptcy attorneys found 81 percent reporting more clients with student debt in recent years, and roughly half reporting a significant increase.

Private lenders haven't always enjoyed a spot at the front of the line of bankruptcy creditors.
Until 1976, all education loans were dischargeable in bankruptcy. That year Congress began requiring borrowers to wait at least five years before they could discharge federal student loans. Since 1998, borrowers have been unable ever to discharge federal student loans, and in 2005 the then-Republican-controlled Congress made private loans almost impossible to discharge. Essentially, borrowers must prove they can't repay and will never be able to, but the standard is vague. And litigating in bankruptcy court may be impossible financially for someone in those circumstances.

Finally, if the spigot of private loans cut off, it might temper college cost increases. Colleges would find it harder to get away with charging more than what students can borrow from the government.


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(51,666 posts)
1. Student debtors need to finagle their way into credit cards with high limits
Thu Apr 26, 2012, 10:00 PM
Apr 2012


Secured >>>>> unsecured (and bankruptable). Otherwise they will die with debt they have carried all their adult lives.

I'm not saying they should go into these loans with the idea of defaulting on the debt, but it's time to learn how to play the game and beat the banksters at it.


(7,800 posts)
4. Student loans are unsecured (unless taken to judgment). And refinanced student loans
Fri Apr 27, 2012, 09:15 AM
Apr 2012

are still nondischargeable (absent nearly non-existent extraordinary circumstances).



(37,305 posts)
6. The suggestion is to pay off the student loan with credit cards which are dischargable.
Fri Apr 27, 2012, 10:19 AM
Apr 2012

Interesting idea.



(51,666 posts)
8. I'm not talking a refi. I am talking paying them off with funds from a credit card
Fri Apr 27, 2012, 11:13 AM
Apr 2012

or line of credit not linked in any way to the student loan.



(5,957 posts)
9. How big of a credit line do you think a person in that position would get?
Fri Apr 27, 2012, 11:25 AM
Apr 2012

I think it would be a drop in the bucket.


(13,330 posts)
2. I was just having this conversation about Debt Forgiveness
Thu Apr 26, 2012, 10:00 PM
Apr 2012

...it's such a scam, Student Loan debt is the worst...and you can't shake it. I even called the DOE Years ago when i finally got FREE from my abusive marriage, and told them the ONLY reason I'd gone into default was basically being held prisoner in my own house, not to mention NO access to finances...There were NO ways to get back to deferment, no options - no bills protecting victims of extenuating circumstances - other than to cough up ALL the Interest from those lost years, and only THEN would they even negotiate...

needless to say I have been in default for 8 years now - I can;t even afford to pay my rent without assistance...so ya, student loan is last on MY list...fuckers.

What's worse, is that the ORIGINAL loan amt was 12K, and I took them during my early college years as a single mom, and was told more than once by the College..."don't worry, by the time you get your degree, the payments will be just a fraction of your income." Ya, this was also during the Clinton Admin, when the economy was booming and everyone thought it was always going to be so grand...

I dunno, I have a hard time hearing from people that it's MY debt and i should have to pay it back...well i actually used that loan to BUY an EDUCATION and that was supposed to help me get a better JOB too...
It's hard to explain and discuss this with those who have the hard line of - "If you don't like it, you shouldn't have signed... Because the loan officers at school are there to SELL you, and when you are in your early 20's and someone is offering you a big check, and you THINK you are going to graduate and have a REAL job...well, that Loan isn't such a burden. Add some years of hardship, maybe a decade total... and that "offer" looks very different. How many kids know what the terms even mean? And why aren't there more opportunities for negotiating the payments or getting out of default?
I swear, if I could actually send them $25 a month or so to show them good faith, I WOULD - but they either want the full payment each month of $360 or more...or a bulk payment of the interest. When the Loan Holders begin holding such a hard line, and defaults, etc. go UP...maybe that means they are being a bit unreasonable? Probably no better than the banks and foreclosures...



(37,305 posts)
3. The thing is all these loans have made it more expensive because the colleges know people can pay.
Fri Apr 27, 2012, 09:06 AM
Apr 2012

And the banks and government will give you loans because they have you for life.

I wonder how many kids know there is no way to get out of this debt? Would they have hesitated if they did?


naaman fletcher

(7,362 posts)
5. yup, think about it this way:
Fri Apr 27, 2012, 09:24 AM
Apr 2012

Let's say you run a burger joint. Different people come in and ask you how much for a burger. Some will pay 4 bucks for a burger. Others would pay 8. You would love to be able to charge 4 to the people who can only pay 4, and 8 to the people who will pay 8. Of course, you don't know which is which, so you charge everybody the same price for a burger.

Now, let's say you have a different product. People come to you and ask you how much it will cost. You respond with someone outrageously high price that almost nobody can actually pay. Guy says "no really, you know I can't afford that, how much will it cost"?

You say "give me yours and your parents tax returns, and then I will tell you".

So, you calculate how much he can afford to pay, and that's what you charge him.

Meanwhile you lobby the federal government to make it easier and easier to give the guy loans, so that you can charge even more.

What's great is when this is all said and done you say "Gee, aren't I so nice for not charging you the super high price and instead providing you with aid and helping to secure loans"?

Of course costs go up every year.


(9,213 posts)
7. I just don't see a way for congress to give reprieve here because there is no way to reimburse
Fri Apr 27, 2012, 10:46 AM
Apr 2012

those who actually DID pay their loans back, even at great expense and sacrifice. That's why they can't just wipe the slate clean them.


(1,185 posts)
12. NDEA Student Loans in the 70s
Fri Apr 27, 2012, 01:28 PM
Apr 2012

were loaned at 3%, payments deferred until one was employed, and if employed in a "low income" qualifying district, the loan was paid down. It took me 5 years teaching in a low-income district to have the debt paid down/forgiven. I don't even remember how much it was, but back then, college was not nearly so expensive and a teaching salary was meager.

I don't think it was a retail lender, but actually the federal government. Times change.

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