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Judge rules that student loan debt is dischargeable in bankruptcy

480 points by jrs235 7y ago

olliej 7y ago
One would hope this will result in universities having to drop there absurdly high fees. The ability to pay absurd fees is dependent on the loan providers providing huge amounts of debt - but they only do it because they know that that debt can never be escaped. If it becomes established that student debt is dischargeable, then they availability of credit will be reduced. Ideally that would put downwards pressure on university fees. That said this absurd “pay by semester” model taken by US universities - which further inflates fees, while limiting the ability to work at the same time forces students into debt, so maybe universities will start recognizing that that isn’t tenable in the long term.
- Google234 7y ago
  Maybe universities in the US will finally get rid of the huge number of administrators and non-academic staff that they have bloated themselves with. Maybe they could also start providing fewer unnecessary services to students for free. Dorm rooms where much less opulent if you go back 30 years or more.
  - olliej 7y ago
    Agree about the excessive admin, but don’t get the dorms comment - they’re not significantly fancier (outside the ivy leagues that all have a tonne of money, and for which most students have rich families). Also: 30 years ago the public universities also had substantially more government funding. By drastically cutting the tax rates for the wealthy (and in CA prop13 essentially was a variant of that), state and federal governments were “forced” to cut education funding, thus putting more pressure on universities to increase fees. Honestly I’d be all for a platform to return taxes to the levels that the boomer generation got to benefit from.
    - zaroth 7y ago
      Educational funding has not been cut in the slightest. It’s grown rapidly for decades, even in terms of “constant” (inflation adjusted) dollars — from ~$3,000 per pupil in the 60s to about $14,000 per pupil today for primary and secondary education. [1] Research “cost disease”. [1] - https://nces.ed.gov/programs/digest/d17/tables/dt17_236.55.asp https://nces.ed.gov/programs/digest/d17/tables/dt17_236.55.a...
      - olliej 7y ago
        The per student cost has many contributory factors, the most obvious are: * historically underfunded education for minority groups, disguising the reason for reduced cost * In CA at least use to underfund many schools, until the state Supreme Court ruled that all children were entitled to equal education resources - literally same $ amount per student, which again significantly increased the average cost per student, so the story is more “rural and poor communities subsidized education of other areas” * cost of living increasing at above inflation rates - teachers need to be paid enough to cover the cost of living, so if your funding increases at a rate lower than cost of living your actual funding has decreased. That said the relevant measure is tertiary education - that’s the part of education we’re talking about, and that’s the part that is bound by legally mandated free access.
        zaroth 7y ago
        $14,000 per pupil means we are paying for a class of 20 students, on average nationwide, $280,000 for a K-12 education per school year. That’s an insane amount of money to teach a small group of kids the things which the average K-12th grader are actually being taught. The problem is definitely not that the cost of living for the average teacher for that class of 20 average students is anywhere near even $60k. Or that the depreciation on the capex for the portion of the facilities used by those 20 kids and 1 teacher is anywhere near $20k. The problem is the other $200k is being burned in an administrative and political dumpster fire.
        olliej 7y ago
- ethbro 7y ago
  This is absolutely right. The entire current system is rigged to increase leverage on students' futures to provide more profit (or "non"-profit) for educational institutions, while providing the least possible transparency that this is being done to benefit institutions. Simplifying and making the transfer of wealth more transparent are required first steps. Only after that's done should subsidies be evaluated to promote desired outcomes. The entire "wholesale paying off all student debt" plan is a terrible giveaway to entities that have contributed very little to the process.
irjustin 7y ago
It is interesting that bankruptcy does not discharge the debt as in normal cases. Apparently home mortgage is difficult as well[0]. The reasoning is if it is hard to get rid of the debt, then it keeps investment money flowing in because the loans are 'secured'. Clearly the whole system is inflated and needs to find a new 'norm' on the student side. Loans for school are too easy, so schools charge more, faculty charge more, etc etc. Vicious loop. [0] https://www.forbes.com/sites/stephendash/2015/10/25/why-student-loans-are-so-difficult-to-discharge-in-bankruptcy/#4a08468f7202 https://www.forbes.com/sites/stephendash/2015/10/25/why-stud...
- syshum 7y ago
  Mortgages are not hard to discharge if the person wants to, however they are secured debt so if you discharge the debt you have to give up the asset. It should not be possible to discharge the debt AND keep the asset, that is recipe of disaster
  - freeone3000 7y ago
    So if you go bankrupt with student loans, the government repossesses your degree?
    - deleted 7y ago
      [deleted]
    - syshum 7y ago
      The government should not be in the loan business in the first place. Further a degree is not a hard asset thus can not be "repossessed" a degree is simply proof of knowledge (or rather that is what a degree should be, modern degree's that is not so clear) thus it would be and is today treated as unsecured debt for the purposes of bankruptcy
    - teamspirit 7y ago
      What then is the value of: Education: University of Higher Eductaion, M.S. Computer Science, (repossessed) on a resume? I ask only half jokingly.
anoxor 7y ago
It reads like the guy had the ability to pay off the debt, but left a job he didn't like. I feel like he made a mistake going into a field he didn't like or just started at a bad company and could have used those skilled he borrowed to get to pay it off and made a decision not to. The student loan situation isn't great, but this doesn't seem better. If this becomes common, so will having to secure loans against likely the assets of your family, which a lot of people don't have that as an option. The current situation of 70k a year college is predatory, but a student accepting that cost should be smart enough to know what that means.
- RandomInteger4 7y ago
  That would be a good thing, not a bad thing. It would force colleges to conform to the rules of capitalism, making the market for education sane again. Student loans should not be handed out as easily as they currently are.
  - mschuster91 7y ago
    The problem is that, trades aside, higher education is a must for earning money that one can actually live on. The US needs public funding for universities. It's not impossible - Germany's universities are all free of charge, most even for foreigners.
    - toasterlovin 7y ago
      Attending a state university as a resident is actually well within reach for almost everyone. And people who can’t afford it usually qualify for financial aid and grants. The problem is that too many people overspend on higher education. And most people are only able to do this with access to humungous student loans.
    - linuxftw 7y ago
      Right, the problem is higher education is required. Reform secondary education so higher education is not required, and only fund public institutions that give people additional skills to help 'live on.' As long as public money is subsidizing 4 years of 'drama camp' or whatever it those kids do, we should be investing in people that want to do actual work for a living.
syshum 7y ago
One of the biggest problems I have with the "student loan" problem is there was/is no accountablity for how the money was actually spent. More than a few people have taken out student loans, then used that money not for tuition or even books, but for anything from housing to vacations to car payments, to paying of higher interest credit card debt Privately Held Student loan debt should ABSOLUTELY be discharged under bankruptcy. However I refuse to agree that tax payers should be on the hook for it.
- gravypod 7y ago
  Are housing and transportation not valid applications of a student loan? I am currently close to graduating from college. During my last 3 years I haven't had a stable enough family life to consider living with my parents. I'm very fortunate in that I've spent a large amount of time, throughout my childhood, developing a skill set that is highly valued and I also had the energy required to work full time as a SWE while doing my degree. Had any of those cases not been true I'd have to either give up on getting a degree and live with the sunk costs or I would have had to take out larger loans to cover housing. It feels like if I was someone with a chronic medical condition that made it impossible for me to work 75hr to 90hr I would have effectively been barred from getting a degree.
  - syshum 7y ago
    >>Are housing and transportation not valid applications of a student loan? IMO, no >> I would have effectively been barred from getting a degree. One thing we need to get away from as a society is this belief that everyone should get and/or is entitled to a degree. I am very much in Mike Rowe's camp on this issue, the idea that the default position is every child should spent until the age of 24 in schooling costing in general about $500,000 to "educate" a single child is a complete waste of resources. We need to refocus the work force and have more opportunities for people that do not have a degree. The vast majority of jobs in society should not (and do not in reality) need a degree. Sure Doctors, Engineers, etc may still need that level, but one should not need a 100K+ Computer Science degree to write LOB apps in python, or to be a mid level manager in some office.
- 7y ago
Traster 7y ago
The weird legal protections for student loans seems bizarre to me. The effect of making these loans exempt from bankruptcy just inflates their value which puts colleges into a position where they can inflate their fees - safe in the knowledge that banks will lend practically anything and students have very little choice. But I'm still left wondering- what is the reason that bankruptcy exists at all, and if there is a good reason, why does that reason not extend to student loans?
- toasterlovin 7y ago
  The argument for bankruptcy protection for student loans is that, at the end of college, students are in a uniquely advantageous position to file for bankruptcy. They don’t have any assets, they don’t have any significant income earning history, etc. I think the original intent was to incentivize more lending, and thus more access to higher education, by giving lenders more protection. It was a mistake, IMO.
  - whyenot 7y ago
    It seems like having a bankruptcy on your credit report for the next seven years would be disincentive enough, especially now when everyone from the phone company, to your landlord, to your employer may look at your report.
    - ouid 7y ago
      why would any of those people care if you have declared bankruptcy? It's much worse for your credit to have a bunch of debt that has higher priority than what a creditor might extend to you. If I'm selling you a cell phone on a payment plan, I would much rather it be the case that you don't have 100k of student loans to pay for first.
      - heavyset_go 7y ago
        > why would any of those people care if you have declared bankruptcy? Landlords aren't in the business of providing housing for free, and seek restitution for damages and unpaid rent through the courts. A low credit score or bankruptcy shows that a potential tenant could incur significant damages and unpaid rent, and leave the landlord high-and-dry when the bill comes due. In today's owner's market, there are plenty of other potential tenants without a poor credit history or bankruptcies.
burfog 7y ago
This ruling can't stand. It would crush the economy. You can't just wipe out $1.5 trillion in debt without consequence. That is about 7% of our GDP, or 1/3 of our federal budget. Drastic and desperate measures would be required to stabilize the economy. We would need to get about $10,000 in tax from every family for the bailout and probably to avoid hyperinflation. As of now, the economic devastation is limited only by the slowness of our soon-to-be-clogged bankruptcy courts and by the feeling some people have that bankruptcy is immoral.
- chrisseaton 7y ago
  > only by the slowness of our soon-to-be-clogged bankruptcy courts and by the feeling some people have that bankruptcy is immoral Doesn't bankruptcy also have long-lasting effects on your credit and other factors? I'm often asked in applications for all sorts of things if I've ever been bankrupt. I'm not sure what they do if you answer yes but I bet it's not great.
  - david927 7y ago
    My understanding is that it lowers your credit score for a few years. Not ideal but not formidable either.
- david927 7y ago
  >This ruling can't stand. It would crush the economy. Law doesn't work that way.
  - vanniv 7y ago
    It actually does -- y'see Congress gets to make the laws, and if judges decide the laws mean really destructive things, Congress writes new laws.
    - david927 7y ago
      Destructive to the organization making money off of the interest is not destructive "in general". If you make a loan, it comes with risk. End of story.
sudoaza 7y ago
Free Public Education anyone? It amazes me how countries like USA and Chile indebt their youth basically for life, specially nowadays that having a degree doesn't even guarantee a decent job anymore.
- daenz 7y ago
  Can we stop calling it "free"? It is never free unless everyone is doing the work for $0. If people are still being paid, then someone is paying. I'm fine with the idea of socially investing in future generations, but it's an investment, not "free stuff."
  - RHSeeger 7y ago
    Borrowing from the labeling for health care, Universal Public Education might make sense. Of course, then you'd have to contend with all the people rabidly against Universal Health Care, by association.
  - heavyset_go 7y ago
    > Can we stop calling it "free"? It is never free unless everyone is doing the work for $0 Can we stop pretending this point is insightful? Nobody thinks a free lunch is truly free.
    - daenz 7y ago
      >Nobody thinks a free lunch is truly free. And because of that, we don't call things "free lunches" (except maybe satirically), which is my point.
      - heavyset_go 7y ago
        And yet my local firehouse has "free breakfasts" every other weekend, and I can find "buy one get one free" deals everywhere.
        7y ago
mrfusion 7y ago
How big of a deal is this on a scale of 1-10?
- swagasaurus-rex 7y ago
  How big is your scale on a scale of 0 to crippling debt?
  - mrfusion 7y ago
    Just wondering if it’s a minor legal curiosity or does it mean a large portion of student debt will now be discharged?
twic 7y ago
The article doesn't go into any legal detail. If anyone has a link to a non-paywalled article that does, i'd be interested to see it!
- phonon 7y ago
  https://images.law.com/contrib/content/uploads/documents/292/59748/RosenbergBankruptcy.pdf https://images.law.com/contrib/content/uploads/documents/292... https://www.law.com/2020/01/09/law-grads-221k-loan-discharge-has-bankruptcy-bar-buzzing/ https://www.law.com/2020/01/09/law-grads-221k-loan-discharge...
dragonwriter 7y ago
It's black and white in law that student loan debt is dischargeable in bankruptcy, and the newsworthy thing here is apparently the judge applying the main legal test as articulated in the case in which it was created rather than pretending to apply it while adding new and perversely punitive terms.
- sida 7y ago
  Could you explain more? I don’t really understand. I thought it is written in law that student loans are not dischargeable
  - jrs235 7y ago
    Probably not the thorough and detailed answer you are looking for but... Student loans are dischargeable, it's just typically extremely difficult to get them discharged. Partly because the method and law regarding when they may discharged and the process to prove/show they should be discharged isn't clearly defined and the determination is quite subjective.
    - sida 7y ago
      So this judge changed the interpretation of the laws which made student loans more easily dischargeable. Any chance to make it into the supreme court? Cos arguably, this could make student loan widely dischargeable for people who need it
      - jrs235 7y ago
        I don't believe the judge changed the interpretation of the law. I believe the judge agreed with the arguments of the debtor that the facts involving his particular case warranted the ability to discharge his debt. that's it. The ruling affects this case and only this case. Other people who wish to discharge their student loan debt in bankruptcy may want to analyze the arguments and findings of this case to be better equipped to prevail in their own cases. But there is still no guarantee that a judge will agree with their arguments as every situation is different.
jefftk 7y ago
The ruling: https://www.scribd.com/document/442408640/In-Re-Rosenberg-Bankruptcy-Decision https://www.scribd.com/document/442408640/In-Re-Rosenberg-Ba...
stevespang 7y ago
SURELY the US Gov't will appeal this all the way to the Supreme court - - they have too much to loose (and the corporate banks that hold all these loans are rattling their money cups right now at the Gov't.)
mberning 7y ago
People claim this is a huge problem, and at this point I suppose it is, but it was not always so. The government should get out of the business of giving and guaranteeing education loans and this debt should be disposable in bankruptcy. The problem would go away very quickly. Lenders would have to take a close look at the borrower, their academic record, their major, career prospects, etc. before making these loans. Which is how it should be in the first place. Of course there will those that whine about access to higher education, but I think that argument has already failed spectacularly. We are witnessing first hand that higher education is not for everybody and for many degree programs has zero bearing on future financial success.
3fe9a03ccd14ca5 7y ago
Students are blindingly taking on debt that they won’t have any reasonable path of repaying. The government — and by extension the taxpayer — is underwriting loans that are manifestly toxic. So if neither the student or the taxpayer is coming out ahead, who is? The pain in loan reform should fall on those who benefited from the loans.
- anoxor 7y ago
  College has become massively political to the point that professors swing 90+% in one political direction often without 1 in 100 or 1000 registered in the other direction. The political side that college swings now wants college free and more common. I got a phd and then taught at college for a number of years. Professors preach political stances as much as some religions. I'm probably clinically centrist / not aligned either way, and it was clear that was an unacceptable if not heretical position to hold as a professor. Students of different politics than their professors frequently feel like they have to lie in papers to parrot their professors worldview to get a good grade. I left I'm part because I got sick of my coworkers mocking people who don't think like them or aren't a proud atheist as stupid, and the opposite politics is frequently demonized. If you want to know who is coming out ahead, that part can't be removed. If you want to maximize the number of people who are preached a particular set of politics and worldview, our current policy would be in line with that. Even if that's not the core reasoning, it's too tightly aligned to be removed. If college is free next election it played like a football every 8 years back and forth.
lolc 7y ago
> After he graduated in 2004, Rosenberg consolidated his loans and held a little more than $116,000 in student debt as of April 2005. That number ballooned to about $221,000 over the next 14 years. Legal usury. The article doesn't say how much they extracted of him before he got free.
- creato 7y ago
  That's a rate between 4% and 5% per year.
  - lolc 7y ago
    I didn't know how much he paid back in the fourteen years so I checked out the ruling which says "From April 2005 until April 5, 2015, the loan was in deferment or forbearance. " So yes your 5% figure seems about right.
- hn_throwaway_99 7y ago
  In fairness to his lenders, a lot of this debt was for getting his law degree, but then he decided not to become a lawyer. That is, the assumption was he would have a (relatively) high paying job to pay back his loans, but, by his choice, he did not. Note, though, that lenders still loan multiple 10s of thousands of dollars for students going to cookie school or getting art degrees, largely because discharging student loans is so difficult.
  - endothrowho333 7y ago
    A decade of JD underground, and various other law school forums, yet there are still those that believe law school -- much less anything outside of Top 5 -- to be a worthwhile investment.
gchamonlive 7y ago
Isn't the fact that you can go bankrupt in the first place displaying a problem in our financial system? The system should be such to protect the citizens from going bankrupt, at least with efforts comparable to what lengths government go through to save banks from bankruptcy.
- bb88 7y ago
  So there's this term called "Moral Risk". It means if there's no consequence for one's financial actions, then a person is likely going to do it over and over again. Bankruptcy is one form of this. Corporate and bank bailouts are another form. I'm not going to go into the politics and history like debtor's prisons, but to be honest, bankruptcy is not a cakewalk either.
- travbrack 7y ago
  Suppose someone invests all of their savings into a restaurant that flops and they end up to their eyeballs in debt and declare bankruptcy. What did the government do wrong?
- kube-system 7y ago
  Bankruptcy is a consumer protection. It gives people buried in debt an out, and it also discourages the banking system from making predatory loans. I can’t think of any alternatives that accomplish both of these things.
- Sangama34 7y ago
  Bankruptcy protects the citizens. In fact it should be simpler to go bankrupt and come back.
a-dub 7y ago
this is huge. this terrible bush era provision set up some really perverse incentives for college administrators. if you think about it, it's really pretty sick. let's soak young people who know nothing about money with nondischargable debt in the name of something that is supposed to be good before they're even eligible for a credit card. if you ask me, i think people should be losing their jobs and/or going to jail for this sort of predatory behavior.
- egdod 7y ago
  Since the Brunner test for deciding whether student loan debt is dischargeable is from a 1985 case[0], I don’t think this can be said to have anything to do with either Bush. [0] https://www.lexisnexis.com/community/casebrief/p/casebrief-in-re-brunner https://www.lexisnexis.com/community/casebrief/p/casebrief-i...
  - a-dub 7y ago
    nope. https://www.npr.org/templates/story/story.php?storyId=9803213 https://www.npr.org/templates/story/story.php?storyId=980321...
    - ianai 7y ago
      Next let’s fix glass-steagall! There were some very good regulations in place before they got dismantled...
      - a-dub 7y ago
        this was a political fail. had to be patched by the courts. :(
    - StillBored 7y ago
      That whole law was a giant middle finger to the population. It wasn't like judges were handing out debt forgiveness like candy. Yet, the law acts like they were and creates a means test that removes ~50% of the population from being eligible. There are thousands of really ugly laws like this. This is why I think the democrats are incompetent. Its Obamacare's bad marketing, where if you ask random people what the law did, overwhelmingly most people aren't going to remember the positive things, only the individual mandate and all the negative things being used to reduce its public appeal. The entire democratic party has this problem, partially because they don't have a #1 propoganda channel running reminding people of these failings.
mrnobody_67 7y ago
Anybody have any good data as to what % of a $200K 4-year degree actually goes to pay faculty and classrooms, vs. stadium, $2m/year football coach, etc.?
- chrisco255 7y ago
  None. Football programs have their own income in the form of tickets, licensing, retail sales, broadcast rights, etc...
  - burkaman 7y ago
    Only the very best Division I programs generate positive revenue: https://www.ncaa.org/about/resources/media-center/news/growth-division-i-athletics-expenses-outpaces-revenue-increases https://www.ncaa.org/about/resources/media-center/news/growt...
    - bb2018 7y ago
      I think it is a bit misleading. A college may reasonably come to the conclusion that a certain percentage of their alumni contributions are because of a high-profile sports program. Additionally, at many schools alumni networking revolves around large football and other sporting events. I admit I do not have the numbers to back it up, so attack it all you want, but it is undeniable a high amount of social cohesion is created by these sporting events at many schools. Is it ideal - no - but like marketing, it is often about what people want rather than what they say they want.
    - chrisco255 7y ago
      That article is mixing football revenue and sports overall. Lots to parse there, and it is from 2014. But to OP's point about $2 million salaries, that only occurs in the best Division I teams. And those teams pull in upwards of $214 million a year in revenue: https://247sports.com/ContentGallery/College-sports-top-25-money-makers-by-gross-revenue-119496046/#119496046_1 https://247sports.com/ContentGallery/College-sports-top-25-m...
  - 7y ago
tanilama 7y ago
It always a surprise to me why US college education is SO expensive, like order of magnitude than the rest of the world. I mean if it isn't that expensive, it will surely not lead to this student loan crisis.
- pg_is_a_butt 7y ago
  Lot of crybaby students in the US eating up every resource, and demanding the campus revolves around their every whim. Also, they are mostly dumb and expect college to make them smart rather than teach them how to apply smarts.
- adventured 7y ago
  That's a recent phenomenon. As recently as the late 1990s, that was not the case. You can track the explosion in university costs directly in line with a chart showing the growth in student loan debt. Student loan debt went from ~$250 billion in 2002 to $1.2 trillion in 2015, approximately. You won't see very many people asking the obvious questions: what the hell caused that sudden extreme spike in costs and who is responsible? Mostly what you see is complaints about it. The system worked before (pre cost explosion), then they broke it. The government caused it by incentivizing the ability of universities to perpetually raise tuition prices, even against the extreme economic destruction of the great recession; they did that via loan guarantees that kept inflating (and as they inflated, the schools raised prices right along with it). The outcome of perpetually raising loan guarantees was obvious and they did it anyway. Being able to discharge student loan debt more easily, will help deflate the government's bubble. It can't happen soon enough. For decades the US had a cost effective, wildly successful university system nationally. It was the envy of the world, to put it mildly. Every other developed region on the planet spent the post WW2 era trying to copy its extraordinary results in terms of economic and scientific output. The rest of the world still has nothing to compete with the top 100 US universities as a whole. These days, as far as quality of education goes, public schools in-state still provide tremendous value at a modest cost compared to what it does for your job and income earning prospects for life.
- TomVDB 7y ago
  Somebody has to pay for a climbing gym that will impress potential student candidates.
jmpman 7y ago
Does this now result in no more private student loans? If I were a lender, there’s no way I’d now lend on a student loan.
- asdfasgasdgasdg 7y ago
  I wouldn't bet on it. First of all, this ruling could be appealed. Second of all, it seems like the bar for whether student loan debt can be discharged may still be much higher than typical debt. Third, since this isn't an appeals court, I don't believe it sets any kind of binding precedent. It's also not entirely clear that this ruling even represents a divergence from the general pattern. There are circumstances where student loans may be discharged, but it is rare for those circumstances to be satisfied. Perhaps this was just one case where they were.
- lykr0n 7y ago
  My guess it'll cause the lenders to tighten up a bit, but won't be earth shattering.
clarkmoody 7y ago
The non-dischargeability of student loan debt is the linchpin of the higher education bubble. Let's play out a causal chain: 1. If it becomes possible to get out of student debt through bankruptcy, then there must be additional collateral posted by the debtors. 2. This will cause fewer loans to be made, which will reduce the available pool of money sloshing into higher ed. 3. Enrollment and revenues will fall, forcing universities to: a. Fight for some other form of government-ensured revenue stream (beyond the funds that state schools already receive). Get the popcorn out for this political rhetoric. b. Reduce scope and conserve the more limited funds coming in the door. This probably starts with eliminating the endless program offices and initiatives that serve to swell the ranks of non-teaching staff. c. Compete on price and return on investment by improving quality and employment rates of graduates.
- allovernow 7y ago
  D. Fire bloated administration and maybe get rid of tenured professors who aren't pulling their weight.
  - rosybox 7y ago
    How do you determine which tenured professors aren't pulling their weight? How do you pull your weight as a professor of some non-employable field of learning? Higher learning isn't vocational training, it's about creating an educated workforce.
    - beatgammit 7y ago
      Well, I think that's pretty easy: - student reviews - consistency with publishing - faculty peer review If a professor isn't liked by the students and is lagging in publishing, there's a good chance they're mostly dead weight. Likewise, if their peers consider the professor's research worthless and teaching ineffective, they could actually be harmful for the University. In essence, does the professor still fit the reasons they were granted tenure? That being said, I don't think that's the right place to focus. I heard that there's a ton of overhead that could be trimmed, such as administration overhead (probably dealing with financials). It would be interesting to compare private and public schools to see what their costs look like and see if maybe we can simplify things to cut costs.
ryeights 7y ago
No, no, no! A judge ruled in one specific case that a certain individual’s student loan debt was dischargeable under the Brunner test for undue hardship. Yes, it is a more lenient application than usual, but this does not mean that anyone’s student loan debt is now dischargeable!
- turkthrower123 7y ago
  Precedent has been set, now other judges can refer to this ruling while making their decisions. Everybody should just stop paying their student debt. Let the system crumble.
  - ordinaryperson 7y ago
    That's not how the law works. The "Brunner test" that the OP commenter mentioned looks at 3 things: 1) Based upon your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if you are forced to repay your loans. 2) Your current financial situation is likely to continue for a big part of the repayment period. 3) You have made a good faith effort to repay your student loans In this specific instance the judge ruled the litigant had passed the Brunner test. It may have been a lenient application of the test, but the law remains the same. Other judges cannot look at this case and abandon the Brunner test, which is what you seem to be implying should/will happen here. If you want the system changed you'll need Congress to pass a law.
    - turkthrower123 7y ago
      The problem with the Brunner test is that it is very rarely applied, and applied inconsistently. The test itself is incredibly vague in specifics and is pretty much at the discretion of the judges, who generally always rule on the side of the government, which makes sense, the government pays their salary. I have one friend who is permanently disabled and spent 4 years trying to get his student loans forgiven. He gave up and fled the USA. The courts have fought tooth and nail in the interest of their corporate overlords to prevent the Brunner test being invoked. If more judges do the right thing and allow the Brunner test to actually be applied, it will have a significant impact.
shard972 7y ago
Here is a novel idea, why have student loans? As a society we managed to have universities before universal student loans, why must we have them now?
deleted 7y ago
[deleted]
turkthrower123 7y ago
This is huge! Student debt in the USA is slavery. Donald Trump is allowed to write off $150m for a failed casino, but I'm not allowed to write off $100k if I'm disabled and will never be able to pay back. That's not right. America just cut our education budget by 10% ($7bn), while increasing our holy-war budget by $30bn. Considering we give $4bn per year to Israel to fight it's wars, I'm starting to wonder what the hell I get for the $50k I give Uncle Sam every year. No education, no healthcare, no housing, but more war, more welfare for billionaires and big-oil/big-agriculture, but NOTHING for the average Joe. Maybe it's time for a #calexit, or just a civil war.
0898 7y ago
This could be an epic house of cards. A speaker I follow made this one of his predictions for this decade [Source: https://www.perrymarshall.com/52453/10-predictions-for-2020-2029 https://www.perrymarshall.com/52453/10-predictions-for-2020-...] "A charismatic college grad drenched in debt will stand up and shout: “I’m NOT paying back my student loans. You can repossess my car, evict me from my house, revoke my diploma, throw me in debtors prison… but I’m not paying. EVER. Who’s with me?” "When the Mall in Washington DC is jammed with Millennials standing together in solidarity, the dominoes of higher education will fall." "The art of manipulating 18 year olds into non-dischargeable loans leading to dead-end careers has driven tuition into the stratosphere." "Schools and banks are guaranteed their dinero, even if the student never lands a job, even if the degree is in Elizabethan poetry… and not even bankruptcy gets you out of hock." "This runaway train WILL crash. The bubble WILL pop… this decade."
turkthrower123 7y ago
Curious question, however. If he was a naval officer, he not only qualifies to a $73k hand-out for the Montgomery bill, but the military will put you through university as an officer handout. Soldiers also get an (unfair) entitlement financially. They are allowed to get special mortgage terms backed by the VA, which allows them to walk away from mortgages with no penalty, no ding on the credit report. I'm surprised this doesn't exist for student loans.
pmorici 7y ago
“Finally, Rosenberg advised borrowers to understand what kind of loans they had since federal loans are treated differently from private loans.” The article doesn’t ever say what type of loans were discharged in this case but ends with the above statement. If this case wasn’t about federal loans then that doesn’t help many people because most student debt is federal. Private debt is only ~10% of the market.
nojvek 7y ago
American system of predatory student loans is really weird. Almost as if they went generations of students to be in debt for most of their life. That, healthcare and gun violence. These are all pretty well solved problems in other modern countries like Australia and Canada. The state of politics really baffles me. Like FUUUUUUUU (meme)
hurricanetc 7y ago
Income Share Agreement. The financial value of a college education varies wildly from degree to degree and from school to school so why shouldn’t the loan structure? We created this student loan debt problem by pretending we live in a fantasy of equality that does not, never has, and never will exist. Not all degrees are equal. Not all colleges are equal. Stop pretending otherwise. Price student loans based on the school and path of study and let the numbers-nerds crunch the numbers.
bensonn 7y ago
I hear the term predatory used with school loans but I don't get it, what is predatory about them? Almost all of these people are HS graduate adults. These adults have choices- no college, trade schools, community college, online college, state, private, etc. Most (the normal non-star athletes or geniuses) people who choose college pursue the college, the college doesn't pursue the person. Those who choose college normally apply to a few different colleges because they may not get in. The student has to fill out a lot of paper work that takes time, this isn't some ToS agreement where looking at a college means you accept any loan and debt. If colleges cold called prospective students and lied about the cost of education that would be predatory. The borrowers are not passive victims- it is only by their overt choices and actions that they go into debt. 250k for a 40k per year job is a bad investment but simply being a bad investment isn't predatory. A TV is a bad investment, Starbucks is a bad investment- they aren't predatory. What is it about student loans that makes them predatory? For those who believe people 18-24 are still developing and need special protection- do you think the voting age should be raised?
- LorenPechtel 7y ago
  What's predatory is the for-profit colleges that generally turn out students with basically worthless credentials. In plenty of cases it's even been found the signatures on the loan documents were forged.
- geekster777 7y ago
  I always saw the lenders themselves as predatory. If a student tried to take out a mortgage, the bank would look at their ability to feasibly pay back the loan before denying them or approving them at a lower amount. It seems like folks just get their student loans rubber stamped. Since it's so easy to get lent more money, colleges are incentivised to charge more. I'd be interested to see a world where your degree itself was factored into the equation. Pursuing biology? Nope, we've got too many of those and biologists don't make enough money on average. You'll only get lent a safe amount. Pursuing law? Now that's a safe loan with good payback odds! This would likely incentivize schools to put more scholarships in the less lucrative fields, and potentially keep those fields from becoming overpopulated. Or maybe folks will need to start their education in a community college or state school to build credibility. I'm sure the implications would be more nuanced than that, but I think that the incentive system for lenders is currently not working as intended.
apta 7y ago
Ah yes, interest strikes again. There's a reason that (practicing) Jews don't lend each other money with interest. Interest is also prohibited in Christianity and Islam. When will people learn? It seems that greed is so powerful that it blinds many.

480 points by jrs235 7y ago

One would hope this will result in universities having to drop there absurdly high fees. The ability to pay absurd fees is dependent on the loan providers providing huge amounts of debt - but they only do it because they know that that debt can never be escaped. If it becomes established that student debt is dischargeable, then they availability of credit will be reduced. Ideally that would put downwards pressure on university fees. That said this absurd “pay by semester” model taken by US universities - which further inflates fees, while limiting the ability to work at the same time forces students into debt, so maybe universities will start recognizing that that isn’t tenable in the long term.

Google234 7y ago
Maybe universities in the US will finally get rid of the huge number of administrators and non-academic staff that they have bloated themselves with. Maybe they could also start providing fewer unnecessary services to students for free. Dorm rooms where much less opulent if you go back 30 years or more.
- olliej 7y ago
  Agree about the excessive admin, but don’t get the dorms comment - they’re not significantly fancier (outside the ivy leagues that all have a tonne of money, and for which most students have rich families). Also: 30 years ago the public universities also had substantially more government funding. By drastically cutting the tax rates for the wealthy (and in CA prop13 essentially was a variant of that), state and federal governments were “forced” to cut education funding, thus putting more pressure on universities to increase fees. Honestly I’d be all for a platform to return taxes to the levels that the boomer generation got to benefit from.
  - zaroth 7y ago
    Educational funding has not been cut in the slightest. It’s grown rapidly for decades, even in terms of “constant” (inflation adjusted) dollars — from ~$3,000 per pupil in the 60s to about $14,000 per pupil today for primary and secondary education. [1] Research “cost disease”. [1] - https://nces.ed.gov/programs/digest/d17/tables/dt17_236.55.asp https://nces.ed.gov/programs/digest/d17/tables/dt17_236.55.a...
    - olliej 7y ago
      The per student cost has many contributory factors, the most obvious are: * historically underfunded education for minority groups, disguising the reason for reduced cost * In CA at least use to underfund many schools, until the state Supreme Court ruled that all children were entitled to equal education resources - literally same $ amount per student, which again significantly increased the average cost per student, so the story is more “rural and poor communities subsidized education of other areas” * cost of living increasing at above inflation rates - teachers need to be paid enough to cover the cost of living, so if your funding increases at a rate lower than cost of living your actual funding has decreased. That said the relevant measure is tertiary education - that’s the part of education we’re talking about, and that’s the part that is bound by legally mandated free access.
      - zaroth 7y ago
        $14,000 per pupil means we are paying for a class of 20 students, on average nationwide, $280,000 for a K-12 education per school year. That’s an insane amount of money to teach a small group of kids the things which the average K-12th grader are actually being taught. The problem is definitely not that the cost of living for the average teacher for that class of 20 average students is anywhere near even $60k. Or that the depreciation on the capex for the portion of the facilities used by those 20 kids and 1 teacher is anywhere near $20k. The problem is the other $200k is being burned in an administrative and political dumpster fire.
        olliej 7y ago
ethbro 7y ago
This is absolutely right. The entire current system is rigged to increase leverage on students' futures to provide more profit (or "non"-profit) for educational institutions, while providing the least possible transparency that this is being done to benefit institutions. Simplifying and making the transfer of wealth more transparent are required first steps. Only after that's done should subsidies be evaluated to promote desired outcomes. The entire "wholesale paying off all student debt" plan is a terrible giveaway to entities that have contributed very little to the process.

irjustin 7y ago

It is interesting that bankruptcy does not discharge the debt as in normal cases. Apparently home mortgage is difficult as well[0]. The reasoning is if it is hard to get rid of the debt, then it keeps investment money flowing in because the loans are 'secured'. Clearly the whole system is inflated and needs to find a new 'norm' on the student side. Loans for school are too easy, so schools charge more, faculty charge more, etc etc. Vicious loop. [0] https://www.forbes.com/sites/stephendash/2015/10/25/why-student-loans-are-so-difficult-to-discharge-in-bankruptcy/#4a08468f7202 https://www.forbes.com/sites/stephendash/2015/10/25/why-stud...

syshum 7y ago
Mortgages are not hard to discharge if the person wants to, however they are secured debt so if you discharge the debt you have to give up the asset. It should not be possible to discharge the debt AND keep the asset, that is recipe of disaster
- freeone3000 7y ago
  So if you go bankrupt with student loans, the government repossesses your degree?
  - deleted 7y ago
    [deleted]
  - syshum 7y ago
    The government should not be in the loan business in the first place. Further a degree is not a hard asset thus can not be "repossessed" a degree is simply proof of knowledge (or rather that is what a degree should be, modern degree's that is not so clear) thus it would be and is today treated as unsecured debt for the purposes of bankruptcy
  - teamspirit 7y ago
    What then is the value of: Education: University of Higher Eductaion, M.S. Computer Science, (repossessed) on a resume? I ask only half jokingly.

anoxor 7y ago

It reads like the guy had the ability to pay off the debt, but left a job he didn't like. I feel like he made a mistake going into a field he didn't like or just started at a bad company and could have used those skilled he borrowed to get to pay it off and made a decision not to. The student loan situation isn't great, but this doesn't seem better. If this becomes common, so will having to secure loans against likely the assets of your family, which a lot of people don't have that as an option. The current situation of 70k a year college is predatory, but a student accepting that cost should be smart enough to know what that means.

RandomInteger4 7y ago
That would be a good thing, not a bad thing. It would force colleges to conform to the rules of capitalism, making the market for education sane again. Student loans should not be handed out as easily as they currently are.
- mschuster91 7y ago
  The problem is that, trades aside, higher education is a must for earning money that one can actually live on. The US needs public funding for universities. It's not impossible - Germany's universities are all free of charge, most even for foreigners.
  - toasterlovin 7y ago
    Attending a state university as a resident is actually well within reach for almost everyone. And people who can’t afford it usually qualify for financial aid and grants. The problem is that too many people overspend on higher education. And most people are only able to do this with access to humungous student loans.
  - linuxftw 7y ago
    Right, the problem is higher education is required. Reform secondary education so higher education is not required, and only fund public institutions that give people additional skills to help 'live on.' As long as public money is subsidizing 4 years of 'drama camp' or whatever it those kids do, we should be investing in people that want to do actual work for a living.

syshum 7y ago

One of the biggest problems I have with the "student loan" problem is there was/is no accountablity for how the money was actually spent. More than a few people have taken out student loans, then used that money not for tuition or even books, but for anything from housing to vacations to car payments, to paying of higher interest credit card debt Privately Held Student loan debt should ABSOLUTELY be discharged under bankruptcy. However I refuse to agree that tax payers should be on the hook for it.

gravypod 7y ago
Are housing and transportation not valid applications of a student loan? I am currently close to graduating from college. During my last 3 years I haven't had a stable enough family life to consider living with my parents. I'm very fortunate in that I've spent a large amount of time, throughout my childhood, developing a skill set that is highly valued and I also had the energy required to work full time as a SWE while doing my degree. Had any of those cases not been true I'd have to either give up on getting a degree and live with the sunk costs or I would have had to take out larger loans to cover housing. It feels like if I was someone with a chronic medical condition that made it impossible for me to work 75hr to 90hr I would have effectively been barred from getting a degree.
- syshum 7y ago
  >>Are housing and transportation not valid applications of a student loan? IMO, no >> I would have effectively been barred from getting a degree. One thing we need to get away from as a society is this belief that everyone should get and/or is entitled to a degree. I am very much in Mike Rowe's camp on this issue, the idea that the default position is every child should spent until the age of 24 in schooling costing in general about $500,000 to "educate" a single child is a complete waste of resources. We need to refocus the work force and have more opportunities for people that do not have a degree. The vast majority of jobs in society should not (and do not in reality) need a degree. Sure Doctors, Engineers, etc may still need that level, but one should not need a 100K+ Computer Science degree to write LOB apps in python, or to be a mid level manager in some office.
7y ago

Traster 7y ago

The weird legal protections for student loans seems bizarre to me. The effect of making these loans exempt from bankruptcy just inflates their value which puts colleges into a position where they can inflate their fees - safe in the knowledge that banks will lend practically anything and students have very little choice. But I'm still left wondering- what is the reason that bankruptcy exists at all, and if there is a good reason, why does that reason not extend to student loans?

toasterlovin 7y ago
The argument for bankruptcy protection for student loans is that, at the end of college, students are in a uniquely advantageous position to file for bankruptcy. They don’t have any assets, they don’t have any significant income earning history, etc. I think the original intent was to incentivize more lending, and thus more access to higher education, by giving lenders more protection. It was a mistake, IMO.
- whyenot 7y ago
  It seems like having a bankruptcy on your credit report for the next seven years would be disincentive enough, especially now when everyone from the phone company, to your landlord, to your employer may look at your report.
  - ouid 7y ago
    why would any of those people care if you have declared bankruptcy? It's much worse for your credit to have a bunch of debt that has higher priority than what a creditor might extend to you. If I'm selling you a cell phone on a payment plan, I would much rather it be the case that you don't have 100k of student loans to pay for first.
    - heavyset_go 7y ago
      > why would any of those people care if you have declared bankruptcy? Landlords aren't in the business of providing housing for free, and seek restitution for damages and unpaid rent through the courts. A low credit score or bankruptcy shows that a potential tenant could incur significant damages and unpaid rent, and leave the landlord high-and-dry when the bill comes due. In today's owner's market, there are plenty of other potential tenants without a poor credit history or bankruptcies.

burfog 7y ago

This ruling can't stand. It would crush the economy. You can't just wipe out $1.5 trillion in debt without consequence. That is about 7% of our GDP, or 1/3 of our federal budget. Drastic and desperate measures would be required to stabilize the economy. We would need to get about $10,000 in tax from every family for the bailout and probably to avoid hyperinflation. As of now, the economic devastation is limited only by the slowness of our soon-to-be-clogged bankruptcy courts and by the feeling some people have that bankruptcy is immoral.

chrisseaton 7y ago
> only by the slowness of our soon-to-be-clogged bankruptcy courts and by the feeling some people have that bankruptcy is immoral Doesn't bankruptcy also have long-lasting effects on your credit and other factors? I'm often asked in applications for all sorts of things if I've ever been bankrupt. I'm not sure what they do if you answer yes but I bet it's not great.
- david927 7y ago
  My understanding is that it lowers your credit score for a few years. Not ideal but not formidable either.
david927 7y ago
>This ruling can't stand. It would crush the economy. Law doesn't work that way.
- vanniv 7y ago
  It actually does -- y'see Congress gets to make the laws, and if judges decide the laws mean really destructive things, Congress writes new laws.
  - david927 7y ago
    Destructive to the organization making money off of the interest is not destructive "in general". If you make a loan, it comes with risk. End of story.

sudoaza 7y ago

Free Public Education anyone? It amazes me how countries like USA and Chile indebt their youth basically for life, specially nowadays that having a degree doesn't even guarantee a decent job anymore.

daenz 7y ago
Can we stop calling it "free"? It is never free unless everyone is doing the work for $0. If people are still being paid, then someone is paying. I'm fine with the idea of socially investing in future generations, but it's an investment, not "free stuff."
- RHSeeger 7y ago
  Borrowing from the labeling for health care, Universal Public Education might make sense. Of course, then you'd have to contend with all the people rabidly against Universal Health Care, by association.
- heavyset_go 7y ago
  > Can we stop calling it "free"? It is never free unless everyone is doing the work for $0 Can we stop pretending this point is insightful? Nobody thinks a free lunch is truly free.
  - daenz 7y ago
    >Nobody thinks a free lunch is truly free. And because of that, we don't call things "free lunches" (except maybe satirically), which is my point.
    - heavyset_go 7y ago
      And yet my local firehouse has "free breakfasts" every other weekend, and I can find "buy one get one free" deals everywhere.
      - 7y ago

mrfusion 7y ago

How big of a deal is this on a scale of 1-10?

swagasaurus-rex 7y ago
How big is your scale on a scale of 0 to crippling debt?
- mrfusion 7y ago
  Just wondering if it’s a minor legal curiosity or does it mean a large portion of student debt will now be discharged?

twic 7y ago

The article doesn't go into any legal detail. If anyone has a link to a non-paywalled article that does, i'd be interested to see it!

phonon 7y ago
https://images.law.com/contrib/content/uploads/documents/292/59748/RosenbergBankruptcy.pdf https://images.law.com/contrib/content/uploads/documents/292... https://www.law.com/2020/01/09/law-grads-221k-loan-discharge-has-bankruptcy-bar-buzzing/ https://www.law.com/2020/01/09/law-grads-221k-loan-discharge...

dragonwriter 7y ago

It's black and white in law that student loan debt is dischargeable in bankruptcy, and the newsworthy thing here is apparently the judge applying the main legal test as articulated in the case in which it was created rather than pretending to apply it while adding new and perversely punitive terms.

sida 7y ago
Could you explain more? I don’t really understand. I thought it is written in law that student loans are not dischargeable
- jrs235 7y ago
  Probably not the thorough and detailed answer you are looking for but... Student loans are dischargeable, it's just typically extremely difficult to get them discharged. Partly because the method and law regarding when they may discharged and the process to prove/show they should be discharged isn't clearly defined and the determination is quite subjective.
  - sida 7y ago
    So this judge changed the interpretation of the laws which made student loans more easily dischargeable. Any chance to make it into the supreme court? Cos arguably, this could make student loan widely dischargeable for people who need it
    - jrs235 7y ago
      I don't believe the judge changed the interpretation of the law. I believe the judge agreed with the arguments of the debtor that the facts involving his particular case warranted the ability to discharge his debt. that's it. The ruling affects this case and only this case. Other people who wish to discharge their student loan debt in bankruptcy may want to analyze the arguments and findings of this case to be better equipped to prevail in their own cases. But there is still no guarantee that a judge will agree with their arguments as every situation is different.

jefftk 7y ago

The ruling: https://www.scribd.com/document/442408640/In-Re-Rosenberg-Bankruptcy-Decision https://www.scribd.com/document/442408640/In-Re-Rosenberg-Ba...

stevespang 7y ago

SURELY the US Gov't will appeal this all the way to the Supreme court - - they have too much to loose (and the corporate banks that hold all these loans are rattling their money cups right now at the Gov't.)

mberning 7y ago

People claim this is a huge problem, and at this point I suppose it is, but it was not always so. The government should get out of the business of giving and guaranteeing education loans and this debt should be disposable in bankruptcy. The problem would go away very quickly. Lenders would have to take a close look at the borrower, their academic record, their major, career prospects, etc. before making these loans. Which is how it should be in the first place. Of course there will those that whine about access to higher education, but I think that argument has already failed spectacularly. We are witnessing first hand that higher education is not for everybody and for many degree programs has zero bearing on future financial success.

3fe9a03ccd14ca5 7y ago

Students are blindingly taking on debt that they won’t have any reasonable path of repaying. The government — and by extension the taxpayer — is underwriting loans that are manifestly toxic. So if neither the student or the taxpayer is coming out ahead, who is? The pain in loan reform should fall on those who benefited from the loans.

anoxor 7y ago
College has become massively political to the point that professors swing 90+% in one political direction often without 1 in 100 or 1000 registered in the other direction. The political side that college swings now wants college free and more common. I got a phd and then taught at college for a number of years. Professors preach political stances as much as some religions. I'm probably clinically centrist / not aligned either way, and it was clear that was an unacceptable if not heretical position to hold as a professor. Students of different politics than their professors frequently feel like they have to lie in papers to parrot their professors worldview to get a good grade. I left I'm part because I got sick of my coworkers mocking people who don't think like them or aren't a proud atheist as stupid, and the opposite politics is frequently demonized. If you want to know who is coming out ahead, that part can't be removed. If you want to maximize the number of people who are preached a particular set of politics and worldview, our current policy would be in line with that. Even if that's not the core reasoning, it's too tightly aligned to be removed. If college is free next election it played like a football every 8 years back and forth.

lolc 7y ago

> After he graduated in 2004, Rosenberg consolidated his loans and held a little more than $116,000 in student debt as of April 2005. That number ballooned to about $221,000 over the next 14 years. Legal usury. The article doesn't say how much they extracted of him before he got free.

creato 7y ago
That's a rate between 4% and 5% per year.
- lolc 7y ago
  I didn't know how much he paid back in the fourteen years so I checked out the ruling which says "From April 2005 until April 5, 2015, the loan was in deferment or forbearance. " So yes your 5% figure seems about right.
hn_throwaway_99 7y ago
In fairness to his lenders, a lot of this debt was for getting his law degree, but then he decided not to become a lawyer. That is, the assumption was he would have a (relatively) high paying job to pay back his loans, but, by his choice, he did not. Note, though, that lenders still loan multiple 10s of thousands of dollars for students going to cookie school or getting art degrees, largely because discharging student loans is so difficult.
- endothrowho333 7y ago
  A decade of JD underground, and various other law school forums, yet there are still those that believe law school -- much less anything outside of Top 5 -- to be a worthwhile investment.

gchamonlive 7y ago

Isn't the fact that you can go bankrupt in the first place displaying a problem in our financial system? The system should be such to protect the citizens from going bankrupt, at least with efforts comparable to what lengths government go through to save banks from bankruptcy.

bb88 7y ago
So there's this term called "Moral Risk". It means if there's no consequence for one's financial actions, then a person is likely going to do it over and over again. Bankruptcy is one form of this. Corporate and bank bailouts are another form. I'm not going to go into the politics and history like debtor's prisons, but to be honest, bankruptcy is not a cakewalk either.
travbrack 7y ago
Suppose someone invests all of their savings into a restaurant that flops and they end up to their eyeballs in debt and declare bankruptcy. What did the government do wrong?
kube-system 7y ago
Bankruptcy is a consumer protection. It gives people buried in debt an out, and it also discourages the banking system from making predatory loans. I can’t think of any alternatives that accomplish both of these things.
Sangama34 7y ago
Bankruptcy protects the citizens. In fact it should be simpler to go bankrupt and come back.

a-dub 7y ago

this is huge. this terrible bush era provision set up some really perverse incentives for college administrators. if you think about it, it's really pretty sick. let's soak young people who know nothing about money with nondischargable debt in the name of something that is supposed to be good before they're even eligible for a credit card. if you ask me, i think people should be losing their jobs and/or going to jail for this sort of predatory behavior.

egdod 7y ago
Since the Brunner test for deciding whether student loan debt is dischargeable is from a 1985 case[0], I don’t think this can be said to have anything to do with either Bush. [0] https://www.lexisnexis.com/community/casebrief/p/casebrief-in-re-brunner https://www.lexisnexis.com/community/casebrief/p/casebrief-i...
- a-dub 7y ago
  nope. https://www.npr.org/templates/story/story.php?storyId=9803213 https://www.npr.org/templates/story/story.php?storyId=980321...
  - ianai 7y ago
    Next let’s fix glass-steagall! There were some very good regulations in place before they got dismantled...
    - a-dub 7y ago
      this was a political fail. had to be patched by the courts. :(
  - StillBored 7y ago
    That whole law was a giant middle finger to the population. It wasn't like judges were handing out debt forgiveness like candy. Yet, the law acts like they were and creates a means test that removes ~50% of the population from being eligible. There are thousands of really ugly laws like this. This is why I think the democrats are incompetent. Its Obamacare's bad marketing, where if you ask random people what the law did, overwhelmingly most people aren't going to remember the positive things, only the individual mandate and all the negative things being used to reduce its public appeal. The entire democratic party has this problem, partially because they don't have a #1 propoganda channel running reminding people of these failings.

mrnobody_67 7y ago

Anybody have any good data as to what % of a $200K 4-year degree actually goes to pay faculty and classrooms, vs. stadium, $2m/year football coach, etc.?

chrisco255 7y ago
None. Football programs have their own income in the form of tickets, licensing, retail sales, broadcast rights, etc...
- burkaman 7y ago
  Only the very best Division I programs generate positive revenue: https://www.ncaa.org/about/resources/media-center/news/growth-division-i-athletics-expenses-outpaces-revenue-increases https://www.ncaa.org/about/resources/media-center/news/growt...
  - bb2018 7y ago
    I think it is a bit misleading. A college may reasonably come to the conclusion that a certain percentage of their alumni contributions are because of a high-profile sports program. Additionally, at many schools alumni networking revolves around large football and other sporting events. I admit I do not have the numbers to back it up, so attack it all you want, but it is undeniable a high amount of social cohesion is created by these sporting events at many schools. Is it ideal - no - but like marketing, it is often about what people want rather than what they say they want.
  - chrisco255 7y ago
    That article is mixing football revenue and sports overall. Lots to parse there, and it is from 2014. But to OP's point about $2 million salaries, that only occurs in the best Division I teams. And those teams pull in upwards of $214 million a year in revenue: https://247sports.com/ContentGallery/College-sports-top-25-money-makers-by-gross-revenue-119496046/#119496046_1 https://247sports.com/ContentGallery/College-sports-top-25-m...
- 7y ago

tanilama 7y ago

It always a surprise to me why US college education is SO expensive, like order of magnitude than the rest of the world. I mean if it isn't that expensive, it will surely not lead to this student loan crisis.

pg_is_a_butt 7y ago
Lot of crybaby students in the US eating up every resource, and demanding the campus revolves around their every whim. Also, they are mostly dumb and expect college to make them smart rather than teach them how to apply smarts.
adventured 7y ago
That's a recent phenomenon. As recently as the late 1990s, that was not the case. You can track the explosion in university costs directly in line with a chart showing the growth in student loan debt. Student loan debt went from ~$250 billion in 2002 to $1.2 trillion in 2015, approximately. You won't see very many people asking the obvious questions: what the hell caused that sudden extreme spike in costs and who is responsible? Mostly what you see is complaints about it. The system worked before (pre cost explosion), then they broke it. The government caused it by incentivizing the ability of universities to perpetually raise tuition prices, even against the extreme economic destruction of the great recession; they did that via loan guarantees that kept inflating (and as they inflated, the schools raised prices right along with it). The outcome of perpetually raising loan guarantees was obvious and they did it anyway. Being able to discharge student loan debt more easily, will help deflate the government's bubble. It can't happen soon enough. For decades the US had a cost effective, wildly successful university system nationally. It was the envy of the world, to put it mildly. Every other developed region on the planet spent the post WW2 era trying to copy its extraordinary results in terms of economic and scientific output. The rest of the world still has nothing to compete with the top 100 US universities as a whole. These days, as far as quality of education goes, public schools in-state still provide tremendous value at a modest cost compared to what it does for your job and income earning prospects for life.
TomVDB 7y ago
Somebody has to pay for a climbing gym that will impress potential student candidates.

jmpman 7y ago

Does this now result in no more private student loans? If I were a lender, there’s no way I’d now lend on a student loan.

asdfasgasdgasdg 7y ago
I wouldn't bet on it. First of all, this ruling could be appealed. Second of all, it seems like the bar for whether student loan debt can be discharged may still be much higher than typical debt. Third, since this isn't an appeals court, I don't believe it sets any kind of binding precedent. It's also not entirely clear that this ruling even represents a divergence from the general pattern. There are circumstances where student loans may be discharged, but it is rare for those circumstances to be satisfied. Perhaps this was just one case where they were.
lykr0n 7y ago
My guess it'll cause the lenders to tighten up a bit, but won't be earth shattering.

clarkmoody 7y ago

The non-dischargeability of student loan debt is the linchpin of the higher education bubble. Let's play out a causal chain: 1. If it becomes possible to get out of student debt through bankruptcy, then there must be additional collateral posted by the debtors. 2. This will cause fewer loans to be made, which will reduce the available pool of money sloshing into higher ed. 3. Enrollment and revenues will fall, forcing universities to: a. Fight for some other form of government-ensured revenue stream (beyond the funds that state schools already receive). Get the popcorn out for this political rhetoric. b. Reduce scope and conserve the more limited funds coming in the door. This probably starts with eliminating the endless program offices and initiatives that serve to swell the ranks of non-teaching staff. c. Compete on price and return on investment by improving quality and employment rates of graduates.

allovernow 7y ago
D. Fire bloated administration and maybe get rid of tenured professors who aren't pulling their weight.
- rosybox 7y ago
  How do you determine which tenured professors aren't pulling their weight? How do you pull your weight as a professor of some non-employable field of learning? Higher learning isn't vocational training, it's about creating an educated workforce.
  - beatgammit 7y ago
    Well, I think that's pretty easy: - student reviews - consistency with publishing - faculty peer review If a professor isn't liked by the students and is lagging in publishing, there's a good chance they're mostly dead weight. Likewise, if their peers consider the professor's research worthless and teaching ineffective, they could actually be harmful for the University. In essence, does the professor still fit the reasons they were granted tenure? That being said, I don't think that's the right place to focus. I heard that there's a ton of overhead that could be trimmed, such as administration overhead (probably dealing with financials). It would be interesting to compare private and public schools to see what their costs look like and see if maybe we can simplify things to cut costs.

ryeights 7y ago

No, no, no! A judge ruled in one specific case that a certain individual’s student loan debt was dischargeable under the Brunner test for undue hardship. Yes, it is a more lenient application than usual, but this does not mean that anyone’s student loan debt is now dischargeable!

turkthrower123 7y ago
Precedent has been set, now other judges can refer to this ruling while making their decisions. Everybody should just stop paying their student debt. Let the system crumble.
- ordinaryperson 7y ago
  That's not how the law works. The "Brunner test" that the OP commenter mentioned looks at 3 things: 1) Based upon your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if you are forced to repay your loans. 2) Your current financial situation is likely to continue for a big part of the repayment period. 3) You have made a good faith effort to repay your student loans In this specific instance the judge ruled the litigant had passed the Brunner test. It may have been a lenient application of the test, but the law remains the same. Other judges cannot look at this case and abandon the Brunner test, which is what you seem to be implying should/will happen here. If you want the system changed you'll need Congress to pass a law.
  - turkthrower123 7y ago
    The problem with the Brunner test is that it is very rarely applied, and applied inconsistently. The test itself is incredibly vague in specifics and is pretty much at the discretion of the judges, who generally always rule on the side of the government, which makes sense, the government pays their salary. I have one friend who is permanently disabled and spent 4 years trying to get his student loans forgiven. He gave up and fled the USA. The courts have fought tooth and nail in the interest of their corporate overlords to prevent the Brunner test being invoked. If more judges do the right thing and allow the Brunner test to actually be applied, it will have a significant impact.

shard972 7y ago

Here is a novel idea, why have student loans? As a society we managed to have universities before universal student loans, why must we have them now?

deleted 7y ago

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turkthrower123 7y ago

This is huge! Student debt in the USA is slavery. Donald Trump is allowed to write off $150m for a failed casino, but I'm not allowed to write off $100k if I'm disabled and will never be able to pay back. That's not right. America just cut our education budget by 10% ($7bn), while increasing our holy-war budget by $30bn. Considering we give $4bn per year to Israel to fight it's wars, I'm starting to wonder what the hell I get for the $50k I give Uncle Sam every year. No education, no healthcare, no housing, but more war, more welfare for billionaires and big-oil/big-agriculture, but NOTHING for the average Joe. Maybe it's time for a #calexit, or just a civil war.

0898 7y ago

This could be an epic house of cards. A speaker I follow made this one of his predictions for this decade [Source: https://www.perrymarshall.com/52453/10-predictions-for-2020-2029 https://www.perrymarshall.com/52453/10-predictions-for-2020-...] "A charismatic college grad drenched in debt will stand up and shout: “I’m NOT paying back my student loans. You can repossess my car, evict me from my house, revoke my diploma, throw me in debtors prison… but I’m not paying. EVER. Who’s with me?” "When the Mall in Washington DC is jammed with Millennials standing together in solidarity, the dominoes of higher education will fall." "The art of manipulating 18 year olds into non-dischargeable loans leading to dead-end careers has driven tuition into the stratosphere." "Schools and banks are guaranteed their dinero, even if the student never lands a job, even if the degree is in Elizabethan poetry… and not even bankruptcy gets you out of hock." "This runaway train WILL crash. The bubble WILL pop… this decade."

turkthrower123 7y ago

Curious question, however. If he was a naval officer, he not only qualifies to a $73k hand-out for the Montgomery bill, but the military will put you through university as an officer handout. Soldiers also get an (unfair) entitlement financially. They are allowed to get special mortgage terms backed by the VA, which allows them to walk away from mortgages with no penalty, no ding on the credit report. I'm surprised this doesn't exist for student loans.

pmorici 7y ago

“Finally, Rosenberg advised borrowers to understand what kind of loans they had since federal loans are treated differently from private loans.” The article doesn’t ever say what type of loans were discharged in this case but ends with the above statement. If this case wasn’t about federal loans then that doesn’t help many people because most student debt is federal. Private debt is only ~10% of the market.

nojvek 7y ago

American system of predatory student loans is really weird. Almost as if they went generations of students to be in debt for most of their life. That, healthcare and gun violence. These are all pretty well solved problems in other modern countries like Australia and Canada. The state of politics really baffles me. Like FUUUUUUUU (meme)

hurricanetc 7y ago

Income Share Agreement. The financial value of a college education varies wildly from degree to degree and from school to school so why shouldn’t the loan structure? We created this student loan debt problem by pretending we live in a fantasy of equality that does not, never has, and never will exist. Not all degrees are equal. Not all colleges are equal. Stop pretending otherwise. Price student loans based on the school and path of study and let the numbers-nerds crunch the numbers.

bensonn 7y ago

I hear the term predatory used with school loans but I don't get it, what is predatory about them? Almost all of these people are HS graduate adults. These adults have choices- no college, trade schools, community college, online college, state, private, etc. Most (the normal non-star athletes or geniuses) people who choose college pursue the college, the college doesn't pursue the person. Those who choose college normally apply to a few different colleges because they may not get in. The student has to fill out a lot of paper work that takes time, this isn't some ToS agreement where looking at a college means you accept any loan and debt. If colleges cold called prospective students and lied about the cost of education that would be predatory. The borrowers are not passive victims- it is only by their overt choices and actions that they go into debt. 250k for a 40k per year job is a bad investment but simply being a bad investment isn't predatory. A TV is a bad investment, Starbucks is a bad investment- they aren't predatory. What is it about student loans that makes them predatory? For those who believe people 18-24 are still developing and need special protection- do you think the voting age should be raised?

LorenPechtel 7y ago
What's predatory is the for-profit colleges that generally turn out students with basically worthless credentials. In plenty of cases it's even been found the signatures on the loan documents were forged.
geekster777 7y ago
I always saw the lenders themselves as predatory. If a student tried to take out a mortgage, the bank would look at their ability to feasibly pay back the loan before denying them or approving them at a lower amount. It seems like folks just get their student loans rubber stamped. Since it's so easy to get lent more money, colleges are incentivised to charge more. I'd be interested to see a world where your degree itself was factored into the equation. Pursuing biology? Nope, we've got too many of those and biologists don't make enough money on average. You'll only get lent a safe amount. Pursuing law? Now that's a safe loan with good payback odds! This would likely incentivize schools to put more scholarships in the less lucrative fields, and potentially keep those fields from becoming overpopulated. Or maybe folks will need to start their education in a community college or state school to build credibility. I'm sure the implications would be more nuanced than that, but I think that the incentive system for lenders is currently not working as intended.

apta 7y ago

Ah yes, interest strikes again. There's a reason that (practicing) Jews don't lend each other money with interest. Interest is also prohibited in Christianity and Islam. When will people learn? It seems that greed is so powerful that it blinds many.