The Truth About Student Loans

[JessMN]

[KeithDoxen]

LOL. Also note that the joke appears to be part of a presentation being made by a middle-aged male, obviously confused as to why all of the women his age, and of pretty much every age, would prefer to swoon over a kid young enough to be their child as opposed to forming a relationship with an accomplished, fully grown beta male. But who can truly understand such things?

[lindadale]

Its very true.Discharging student loans in a bankruptcy filing is next to impossible. To be able and include them when filing bankruptcy one has to show that they will never have the ability to repay them.

[despritfreya]

To be able and include them when filing bankruptcy one has to show that they will never have the ability to repay them.

That is so not true and if you were legitimate bk attnys who could actually help folks, you would know that. Ever hear of the “Brunner Test”? What about the “Johnson Test” or even the “totality of the circumstances test”? None of these tests require evidence that one will never be able to repay. What about the ability to obtain a "partial discharge"?

I really hate spam. Typically done by incompetent idiots.

Des.

[HHM]

Desp, although that is true...then perhaps the more apt language is "almost never"

If you actually calculate the number of student loan borrowers compared to the number of Hardship discharges, we are talking about fraction of a percent. But you are correct, never is too strong a word, but for 99.999% of student loan borrowers, they will not see a hardship discharge unless the law is changed.

[despritfreya]

If you actually calculate the number of student loan borrowers compared to the number of Hardship discharges, we are talking about fraction of a percent. But you are correct, never is too strong a word, but for 99.999% of student loan borrowers, they will not see a hardship discharge unless the law is changed.

Here is where we kind of disagree. Many, many 523(a)(8) claims never go to trial because they are settled and/or some government program meets the needs of all. A number do go to trial and in many instances hardship is found, either full or partial - so I disagree with the 99.999% you mention. You may not hear about them as they are not published decisions.

I would say that over the past 20 plus years I have handled about 10 of these type cases. While we are not talking about a lot of cases under my belt, I am pleased to say that none have gone to trial. If I recall correctly, all but two settled with full or partial discharges (payment terms on the partial) through stipulated judgments. One of the two actually was a full discharge by default and the other was an outright dismissal as, when the real facts came to light, there was no way we would "win".

The issue with student loans is making sure that the debtor has the facts to support the litigation. Single mom with 2 kids and no child support. Person with a disability that, while he/she can work, income will be limited and ability to hold down a job will be tough. In none of these cases do you have to show that a debtor can never repay and the ability to pay, while it is important, is not the only factor to consider. You have to pull at the right heartstrings. In one case where the client was deposed, the atty for the USDE nearly broke down in tears. The debtor held it together but the attny. . . well. Settlement offer was on my doorstep within a week. In actuality I thought the settlement was better than the partial discharge I think we would have gotten if we had gone to trial.

My problem with posters like the spammer or even someone like Orman is that their attitude is that one should not even try for the discharge. I have to wonder how many folks who could get a good settlement (better than the programs offered) simply do not ask because they keep hearing "no", "no", "no".

Des.

[MSbklawyer]

My problem with posters like the spammer or even someone like Orman is that their attitude is that one should not even try for the discharge. I have to wonder how many folks who could get a good settlement (better than the programs offered) simply do not ask because they keep hearing "no", "no", "no".

Des.

How do you get paid on the APs, Des? With depositions needing to be taken, economics experts needed to testify, court reporters, many many hours of attorney time, the cost can be beyond the reach of the debtor even if it were spread out over the life of the plan. The only ones I've successfully discharged have been where the debtor was absolutely permanently and totally disabled.

[despritfreya]

How do you get paid on the APs, Des?

I was just about to knock off for the evening when I saw this and just had to respond. My boss gets a small retainer and then hopes he will get paid down the road. Many time he does not and, unfortunately, cannot use the failure to get paid as brownie points with the State Bar for pro bono work. But, for him, helping the unfortunate debtor and not abandoning the client is the right thing to do. I give him a lot of credit for this.

Des.

[smartdivas]

really it's true many student loans for reading . bank and other financial company finance money student reading. to be able and include them when filling bankruptcy one has to show.

[keepsmiling]

A spammer by any other name would smell as....
this guy just can't take a hint

[GoingDown]

I would say the biggest hurdle is the Income Contingent Repayment Plan (ICR). Who cannot afford to pay zero dollars per month? And as your income rises above the poverty level for your state and your family size, they take 20% of your Adjusted Gross Income, and they get this info directly from the I.R.S.

The biggest problem seems to be for married borrowers, because they add both AGI's together to come up with their calculations for how much you have to pay each month. Married people without children are definitely at a disadvantage.

[bcohen]

I would say the biggest hurdle is the Income Contingent Repayment Plan (ICR). Who cannot afford to pay zero dollars per month? And as your income rises above the poverty level for your state and your family size, they take 20% of your Adjusted Gross Income, and they get this info directly from the I.R.S.

The biggest problem seems to be for married borrowers, because they add both AGI's together to come up with their calculations for how much you have to pay each month. Married people without children are definitely at a disadvantage.

The biggest problem is the fact that income-based repayment options are only available for federal student loans. People with private student loans do not have these options available, and lenders have no incentive to renegotiate the terms of the contract or settle for less than the balance owed, because they know that their debt is not dischargeable in bankruptcy, at least not without overcoming the very high legal hurdle of proving "undue hardship". If a person is unable to afford their private student loan payments, then the only options are deferrment or default, and once the deferrment is exhausted, then the borrower has no choice but to default and watch the balance balloon out of control.

[treehugger1]

Yep, the ICR is totally stupid. Perhaps one is better to just let the loan(s) default and budget a permanent 15% wage garnishment (yours truly.)

In terms of private lenders versus the government, I have already written several senators and representatives stating that I clearly oppose any legislation that allows a bankruptcy advantage for folks with private loans over those with government loans. The replies I have received suggest that politicos might also agree.

The bottom line is that there are many of us baby boomers who are going to retire collectively owing billions of dollars in guaranteed student loans. These will simply never be repaid.

I think people seem to think that the student loan issue is an issue associated with GEN X, Y and current students. This is not the entire truth. The unpaid educational debt of the baby boomers will soon rear its ugly head.

In the end we can all thank the "greatest generation" for providing so much opportunity for their children baby boomers to acquire immense educational debt. The voters in the 40's and 50's voted folks into office who set into motion the idea that "We want are children to have what we did not." This thought transcended party lines. Hence, the current social thought of recent generations.

[treehugger1]

Yep, the ICR is totally stupid. Perhaps one is better to just let the loan(s) default and budget a permanent 15% wage garnishment (yours truly.)

In terms of private lenders versus the government, I have already written several senators and representatives stating that I clearly oppose any legislation that allows a bankruptcy advantage for folks with private loans over those with government loans. The replies I have received suggest that politicos might also agree.

The bottom line is that there are many of us baby boomers who are going to retire collectively owing billions of dollars in guaranteed student loans. These will simply never be repaid.

I think people seem to think that the student loan issue is an issue associated with GEN X, Y and current students. This is not the entire truth. The unpaid educational debt of the baby boomers will soon rear its ugly head.

In the end we can all thank the "greatest generation" for providing so much opportunity to their children baby boomers of immense educational debt. The voters in the 40's and 50's and 60's voted folks into office who set into motion the idea that "We want are children to have what we did not." Hence, the current social thought of recent generations.

[bcohen]

In terms of private lenders versus the government, I have already written several senators and representatives stating that I clearly oppose any legislation that allows a bankruptcy advantage for folks with private loans over those with government loans. The replies I have received suggest that politicos might also agree.

Are you kidding? Private student loans DO NOT HAVE any of the borrower protections which federal student loans offer, such as income-based repayment options, ability to "rehabilitate" the loan out of default, ability to consolidate multiple student loans into one lower-interest consolidation loan, and so on. Federal student loans also DO NOT automatically default merely because the borrower or co-signer files for bankruptcy.

Private student loans are basically like personal loans which happen to have been disbursed through an educational institution, and are therefore given protected status in bankruptcy. Private student loans can charge very high interest, can demand very high payments which the borrower simply cannot live indoors and still pay, and can automatically default upon filing for bankruptcy. Also, once a private student loan has entered "default" status, the lender can continue to report is as a charge-off or default until every last penny has been repaid thereby torpedoing the borrower's chances of buying a house, buying a car at a decent APR, passing the bonding/security clearance requirements for certain jobs, and even renting an apartment in a city with a "tight" rental market.

So tell me again why you feel these loosely-regulated private student loan products should receive the same protection from bankruptcy discharge as federal student loans? Is it just "sour grapes" from a man who is himself burdened down with excessive debt that he'll never be able to repay?