Student Loans to be bankruptable

[Drrrrrr. Celty]

http://www.examiner.com/article/student-loans-to-be-dischargeable-through-bankruptcy-meet-hr-532

Does this mean an end to banks giving anyone loans? Now they need risk assessments.

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[Erakis]

Not based on the chances that it will pass.

 

[SoulinNeed]

It won't pass. Hell, I doubt it'll even be brought up for a vote.

 

[LaughingMan]

Sigh.

Govt Govt Govt.

 

[Narmerguy]

I don't see this happening. I'm not completely sure it's even a good thing as it could make it extremely difficult to get private loans and would probably cause the rates to be crazy high.

 

[OCDOCDOCD]

Does this mean an end to banks giving anyone loans? Now they need risk assessments.

Please, when I applied for private student loans in my last semester of college I got rejected from almost every bank I applied for a loan at. They already don't give just anyone loans.

I don't see this happening. I'm not completely sure it's even a good thing as it could make it extremely difficult to get private loans and would probably cause the rates to be crazy high.

The one bank that approved my loan ended up pegging me with an interest rate of 11.725%. This was at a time when the fed's interest rate to banks was 0%. So already the interest is crazy high. Maybe not credit card high, but still pretty high.

Sure, if you have good credit you can get good student loan terms, but what college student has good credit (or rather any credit at all)? And sure, if you have a good cosigner you can get around the no-credit issue, but what do you do if you're like me and have parents with terrible credit?

The reality is that the whole reason the non-discharging student loan laws were passed in the first place is that the banks convinced everyone that if those laws were passed then access to loans would vastly increase while interest rates would vastly decrease. Neither of those things happened. As always, society got taken for a ride by banks.

 

[yehhhboiii]

Well who doesn't like free money? Bonuses don't pay themselves.

 

[Drrrrrr. Celty]

Please, when I applied for private student loans in my last semester of college I got rejected from almost every bank I applied for a loan at. They already don't give just anyone loans.


The one bank that approved my loan ended up pegging me with an interest rate of 11.725%. This was at a time when the fed's interest rate to banks was 0%. So already the interest is crazy high. Maybe not credit card high, but still pretty high.

Sure, if you have good credit you can get good student loan terms, but what college student has good credit (or rather any credit at all)? And sure, if you have a good cosigner you can get around the no-credit issue, but what do you do if you're like me and have parents with terrible credit?

The reality is that the whole reason the non-discharging student loan laws were passed in the first place is that the banks convinced everyone that if those laws were passed then access to loans would vastly increase while interest rates would vastly decrease. Neither of those things happened. As always, society got taken for a ride by banks.

12% on a loan. Jeez. That's completely crazy.

 

[Narmerguy]

Please, when I applied for private student loans in my last semester of college I got rejected from almost every bank I applied for a loan at. They already don't give just anyone loans.


The one bank that approved my loan ended up pegging me with an interest rate of 11.725%. This was at a time when the fed's interest rate to banks was 0%. So already the interest is crazy high. Maybe not credit card high, but still pretty high.

Sure, if you have good credit you can get good student loan terms, but what college student has good credit (or rather any credit at all)? And sure, if you have a good cosigner you can get around the no-credit issue, but what do you do if you're like me and have parents with terrible credit?

The reality is that the whole reason the non-discharging student loan laws were passed in the first place is that the banks convinced everyone that if those laws were passed then access to loans would vastly increase while interest rates would vastly decrease. Neither of those things happened. As always, society got taken for a ride by banks.

Yep I agree with what you're saying, but are you suggesting that it is somehow going to become easier for students to get loans, or that the rates will get better? As bad as it is now, I don't see this being a move that will improve the rates or access.

 

[OCDOCDOCD]

Yep I agree with what you're saying, but are you suggesting that it is somehow going to become easier for students to get loans, or that the rates will get better? As bad as it is now, I don't see this being a move that will improve the rates or access.

I'm not saying they'd get better if we allowed them to be bankruptable; that makes no sense. I'm saying that nothing will change because nothing changed to begin with.

The only downside to making them bankruptable is that maybe access to student loans goes down. However, I think that's outweighed by a couplebenefits:

- Loans now become dischargable. That means that we avoid the ever-growing crisis of millennial college grads never contributing anything to the economy due to being too crushed by debt to afford an apartment, car, furniture, etc.

- Decreased access to loans would mean that students would be forced to attend colleges that they can afford to pay out-of-pocket. That will pretty much reverse the exploding tuition costs around the country as schools realize they can't charge outrageous sums of tuition anymore. This by itself will go a very long way in fixing the student loan debt crisis.

Personally I think one of two things need to happen: Student loans need to become dischargable in bankruptcy again, or a law needs to be passed that caps the interest rate on student loans at a very low number (after all, there's zero risk for the banks involved right now so there's absolutely no reason to be charging even modest interest). I think we'll see some action eventually once the student loan bubble bursts. In all likelihood it's going to be the next event that throws the economy into recession again.

 

[sazerac]

Personally I think one of two things need to happen: Student loans need to become dischargable in bankruptcy again, or a law needs to be passed that caps the interest rate on student loans at a very low number (after all, there's zero risk for the banks involved right now so there's absolutely no reason to be charging even modest interest). I think we'll see some action eventually once the student loan bubble bursts. In all likelihood it's going to be the next event that throws the economy into recession again.

Or the predatory bank-based student loans should come with the same friendly repayment plans as federal loans, e.g. Income Based Repayment and Pay As Your Earn and dischargeable after 25 years of paying what is essentially a 10% income tax.

Banks might not be so willing to lend $200,000 for economically unviable undergraduate majors anymore, if they knew they would never be able to collect much from the debtor.