11 ms·

Defrauded students to receive loan forgiveness

59 points by coloneltcb 6y ago

endisneigh 6y ago
I have mixed feelings about this in general. On one hand, this is great for the students who were affected. On the other hand, what mechanisms exist to prevent this from happening again? Debt forgiveness in general is a terrible precedent to set. EDIT: Finished reading the AP article. I'm curious what constitutes harm per Cardona's quote: “A close review of these claims and the associated evidence showed these borrowers have been harmed, and we will grant them a fresh start from their debt.” Is it the lack of opportunity from the for-profit school? If so there are plenty of non-profit schools that offer useless degrees in the forms of useless/impractical majors. Is it the fact that for-profit schools often give out degrees that cannot be transferred to accredited ones? If so there are plenty schools that teach you things that aren't really transferrable like fullsail. There are also liberal arts and technical not-for-profits whose classes aren't necessarily transferrable between them. Is it questionable advertising of the benefits of the school? Again, not-for-profit accredited schools often skew the benefit of their services as well. I'm curious how exactly they have determined the "harm." Pedantically, one could argue easily that any action anyone takes that does not yield a benefit has harmed them. For example Margin Debt is at $800 billion (https://www.bloomberg.com/opinion/articles/2021-03-17/do-margin-debt-levels-predict-a-stock-market-crash https://www.bloomberg.com/opinion/articles/2021-03-17/do-mar...) - inevitably that will also lead to some catastrophe. Should that also be forgiven? One could argue that organizations such as Robinhood and Webull have been gamifying the stock market to the point of "misrepresentation" (I don't personally believe this, but you could imagine an argument being made). At one point as a civilization we draw the line and let people take responsibility for their own actions? I believe in the matters of life and death we should subsidize, but education? I'm not sure.
- ericbarrett 6y ago
  Not allowing people to discharge crushing debt, incurred under false pretenses, is the far more terrible precedent.
  - luckylion 6y ago
    Is it? If you take a loan from the government or a bank in order to buy a car, the car turns out to be a pile of trash and the seller defrauded you, should the loan be forgiven?
    - wildrhythms 6y ago
      Do you honestly believe all the debt in the world can be repaid?
      - luckylion 6y ago
        That's very meta and not very relevant to the question of who should repay some specific debt.
    - TedDoesntTalk 6y ago
      Your analogy is poor. Cars depreciate in value. A higher education with a degree supposedly increases your earnings, thereby enabling you to repay debt. Cars don’t do that. When the school lies about how many graduates are placed at SV tech companies, when they lie about who teaches and designs the courses, when they lie about their “connections” to employers, enticing students to take debt for their false product, the problem is with the school... not the victim. Do you also forgive rapists who say, “but she was wearing a miniskirt! She enticed me to do it!” The schools are the rapists here. The students are the victims.
      - splithalf 6y ago
        That is the fraud. A higher education degree doesn’t increase earnings for most people once you factor in the costs. There was a nice econ paper on this sometime in last year. Student loans of any sort are on average a bad choice in terms of lifetime wealth accumulation. Bad for student borrowers and bad for taxpayers, one should ask themselves whom it is exactly that benefits from all this carelessly issued debt.
        6y ago
- sapienwastey 6y ago
  >Debt forgiveness in general is a terrible precedent to set. How's that? Seems like the precedent was set a very long time ago: https://en.wikipedia.org/wiki/Jubilee_(biblical) https://en.wikipedia.org/wiki/Jubilee_(biblical)
  - ARandomerDude 6y ago
    The key difference is Jubilee was scheduled every 50 years, and was thus predictable. Taking on a debt at, say, year 35 meant both parties knew the remaining term was limited to 15 years, and could adjust the specifics accordingly. This situation is ad hoc, meaning both parties take on the debt assuming repayment, then one party exits, leaving unpaid debt behind. Spontaneous debt dumping, unlike the 50 year cycle in ancient Israel, is destabilizing and encourages debtors to complain loudly, and perhaps violently, to get out of the debt they owe. Doing so successfully encourages consumers to take on bad debt, which is bad for the economy (see 2008).
    - sapienwastey 6y ago
      Yeah, I think this was executed wrongly (allowing the schools who originated the debt to profit and escape unaccountable). I was specifically responding to the 'generally' aspect of the comment, where I think 'generally' debt forgiveness can be a very useful concept, and good for society. Governments don't seem to mind inflating their currency sometimes which is (if denominated in their own) essentially forgiving themselves of debt ;)
- tablespoon 6y ago
  > On one hand, this is great for the students who were effected. On the other hand, what mechanisms exist to prevent this from happening again? Debt forgiveness in general is a terrible precedent to set. I don't know if they have plans to do this, but they should turn around and attempt to collect the debt from the schools that defrauded the students rather than the students who were victims of that fraud. And frankly, debt forgiveness isn't a bad policy. It's essentially what bankruptcy relief is (relief that's available to almost all other debt holders).
  - fortran77 6y ago
    In bankruptcy the lender already factored in that possibility when creating the loan, and the Government and taxpayers aren’t left holding the bag.
    - Ancapistani 6y ago
      My wife took private student loans, which at the time were forgivable in bankruptcy, as a hedge against future financial issues. She accepted a higher interest rate to account for that. … then the federal government retroactively made them non-dischargeable. I mention this to highlight that changes in the regulatory environment don’t always favor the borrower, nor are there always concessions made to limit harm to the injured party.
      - D13Fd 6y ago
        That's also a great example of how discharge-ability and the potential for student loan forgiveness warps the actions of borrowers, and in an unfair way.
        oarsinsync 6y ago
        How is it unfair if the loan came with higher interest rates to account for that? That’s exactly the point of how debt markets are supposed to work. Higher risk borrowers are more likely to default, so pay higher interest rates to cover the % that do. If as a borrower you’re willing to pay more for your debt to give you that option (and quite frankly, all debt should be this way. There’s no debt an LLC can’t write off, why is there debt individuals can’t write off?), why is this bad?
- corty 6y ago
  In the rest of the world, the mechanisms are clear: Free education for all citizens at public universities. Those who want to be ripped off by for-profit diploma mills can go ahead, but noone with a non-lonely brain cell will.
  - TedDoesntTalk 6y ago
    > but noone with a non-lonely brain cell will. These “universities” lied to prospective students. Here is just one example: “ The FTC says the university wrongly suggested that it worked closely with high-profile companies to develop its courses. And it says the school's "Let's Get to Work" ad campaign was one example of how it hyped connections with potential employers. In one video in that campaign, a UOP student is seen driving through a school parking lot, passing spots that are filled with the iconic logos of successful companies.” https://www.npr.org/2019/12/10/786738760/university-of-phoenix-reaches-191-million-settlement-with-ftc-including-debt-rel https://www.npr.org/2019/12/10/786738760/university-of-phoen... This has nothing to do with neuron count and everything to do with fraud and lies.
  - refurb 6y ago
    Pretty sure by “rest of world” you actually mean “some European countries”
- vmception 6y ago
  It took me to the end of your post to realize that an additional Department of Education debt forgiveness criteria is the same as any debt forgiveness to you. So you think we are at the top of a slippery slope and not realizing we've been at the bottom of it for a long time. So this isn't really about the university system its about the entire fabric of society, not realizing how society already functions. Fascinating.
  - endisneigh 6y ago
    I'm not sure I understand - could you elaborate on what you mean?
    - vmception 6y ago
      you talk about margin debt in a topic about a sliver of Department of Education loans as if there is any similarity into the structure, circumstances and participants Department of Education's outcome is a unilateral decision by the confirmed head of a federal agency, the latter requiring something far more involved that nobody is asking for.
      - endisneigh 6y ago
        I state explicitly that in the article the justification and determination of "harm" is unclear so it's impossible to really have an in-depth comparison. However, I will say the fact that it's DoE related isn't really relevant at all. From the article it seems the main point was that students were misrepresented and later harmed as a result of taking a loan. Those particular circumstances do happen to be shared in some instances of taking on margin debt.
        vmception 6y ago
        I see, but that outcome requires a court of an act of Congress much more improbable than a regulator waking up on that side of the bed
- baron816 6y ago
  > there are plenty of non-profit schools that offer useless degrees in the forms of useless/impractical majors. Ugh. This again. College != vocational school. You don’t go to college to learn a trade or gain skills to get your first job. You’re building skills that you’ll use through the entirety of your career. Communication and critical thinking skills will never become obsolete.
  - nicoburns 6y ago
    > Communication and critical thinking skills will never become obsolete. True, but you don't need a college degree to learn communication or critical thinking skills. For some careers they are generally useful, but for a lot of careers they're just a tax on entry.
  - endisneigh 6y ago
    You're correct, however my point that there exists non-profit schools that offer useless degrees, stands. Are you arguing otherwise? It's unclear from your post.
  - vkou 6y ago
    This may be true in some ideal platonic universe - but for real people living in the real world, college is indeed a vocational school.
- kevingadd 6y ago
  What benefit to society comes from people being shackled with debts for decades that they cannot possibly pay back? We're not talking about someone being able to get any possible debt discharged after a year without making any effort to pay it back, here. Student loans that were basically stolen by fraudulent schools, such that the borrower gained no education they can use to possibly pay the loan back - who benefits from saddling them with that forever? Their only possible options at that point are to labor in poverty forever (the loan's still not getting paid back), or somehow take on more loans to try to get an education again, now slowly paying down two student loans instead of one. Who benefits here? In the end if lenders are somehow irreparably harmed by debt forgiveness in corner cases like this, perhaps they should be responsible and not issue loans to people who can't pay them back. It's always about "personal responsibility" until consequences come calling for financiers who make unbelievably stupid decisions and they want the taxpayer to foot the bill and bail them out.
  - rhizome 6y ago
    > Their only possible options at that point are to labor in poverty forever (the loan's still not getting paid back), The ideal state of capitalism is $0 labor costs, so: more's the better. Lots of Business majors and MBAs graduate from university under this orthodoxy every year, and have, for a long time.
  - endisneigh 6y ago
    > What benefit to society comes from people being shackled with debts for decades that they cannot possibly pay back? We're not talking about someone being able to get any possible debt discharged after a year without making any effort to pay it back, here. This is true. My point though is based on what you said, should we forgive all debt? I would imagine you would not agree to that, so then we have to discuss the circumstances in which the government should discharge debt. > Student loans that were basically stolen by fraudulent schools, such that the borrower gained no education they can use to possibly pay the loan back - who benefits from saddling them with that forever? Their only possible options at that point are to labor in poverty forever (the loan's still not getting paid back), or somehow take on more loans to try to get an education again, now slowly paying down two student loans instead of one. Who benefits here? There's a bit to digest here. There are two considerations: 1. The student didn't gain education. 2. The school took loans they shouldn't have received on behalf of the students. If we believe (2) is the crime, then we already have mechanisms to punish the school, liquidate them and make those who have been harmed whole again. I don't see why the government needs to be involved more than they already were (in giving the loans). If we believe (1) is the issue, then this is something that's not unique to for-profit schools. Given it's a subjective sort of thing I imagine it would result in anyone who majored or something they don't feel was useful or receiving an education they didn't feel was "worth it" asking for loan forgiveness. That doesn't seem sustainable either. Finally, if (2) occurred but the student did receive benefit, should the loan be forgiven? I don't know the answer but it's worth considering. All of that aside, I agree with what I believe your point to be at the end. We shouldn't be forgiving companies that make bad decisions, either.
- 8note 6y ago
  I don't think education is the spot for making people take responsibility for their actions - fundamentally, they're taking this education because they don't know better yet.
  - endisneigh 6y ago
    I believe you make a good point. So the question then is, should for-profit schools exist? Surely there should be a mechanism to prevent these scenarios from occurring. The plot twist is that there already is in the form of accreditation. Anyone can trivially look-up whether or not any school is accredited or not. So the question remains, if someone chooses to go to an unaccredited school and they get burned should the government foot the bill?
- mewse 6y ago
  From my reading of the OP (and the original news reporting that the OP is summarising), this covers the case where someone was defrauded by their school. Not just harmed, defrauded. Fraud is a well-defined crime. It requires intentional deception for a small number of specific reasons (most commonly, to gain money or something else of value). If in doubt, consult an attorney in your jurisdiction to determine whether you have been the victim of fraud according to the laws of your local area (which do vary across state lines within the US, to say nothing of internationally). But this isn’t about forgiving student loans where someone has been harmed. It’s about forgiving student loans where someone has been the victim of fraud.
  - endisneigh 6y ago
    > But this isn’t about forgiving student loans where someone has been harmed. It’s about forgiving student loans where someone has been the victim of fraud. This is a good point, however my take is that if what you're saying is true (and I believe it is) - there is less reason to forgive the debt. There already exists mechanisms to take assets from the institution that caused the harm, liquidate and compensate those who have been harmed. Is it necessary to unilaterally forgive the debt? Maybe (I'm not sure myself as I mentioned in the OP).
    - pessimizer 6y ago
      > There already exists mechanisms to take assets from the institution that caused the harm, liquidate and compensate those who have been harmed. Those people will already have leveraged debt, and purchased services and depreciated goods with the cash gained by the fraud, making the people they purchased those things from secondary beneficiaries of that fraud. The people who made the loans to the students are also secondary beneficiaries of the fraud (if those loans are paid back with interest.) The real question is whether you want to put the onus of evaluating the risk that something may be a fraud on the sellers of goods, or on people making loans. I would argue from a lot of different directions that it was obviously put in the right place in this case. To begin with, you can buy a candy bar with fraudulently obtained funds, and if every candy bar seller was required to evaluate the risk that the funds used to buy the candy bar were obtained fraudulently, the economy would grind to a halt. Since this is a pragmatic argument, it obviously becomes less valid when someone sells 10,000 candy bars; we may not mind if they have to do some minor checking, like obtaining your full name, or maybe where you work. Another is that assessing (and taking) risk is literally the only job of someone making a loan, and assessing the risk of a school being a fraud seems an obvious part of that when you're making a loan specifically for attending that school. If someone making a loan isn't doing that, they aren't doing anything. It's just a rent being collected, a concession granted by the state (as the state is expected to expend effort to enforce the debt.) This isn't a proper function for a state, this is corruption. You think you're endorsing personal responsibility here, but you're really endorsing bailouts for investors. There's a business plan here (which I think is really common in the world if you look for it) where you create a fraud, loan money to the victims of that fraud, fold up and liquidate the fraud, then use the state to pursue the victims for the loan. If you also manage to be the beneficiary of the fraud - lets say that the fraud sells all of its buildings which are then leased back to them, resulting in the fraud having a negative worth when it is liquidated, and you pay yourself large consulting fees for creating that arrangement - you've double-dipped. In the closed system of 1) the fraud, 2) the victims, 3) vendors supplying the fraud, and 4) lenders to the victim, a loan for $10,000 can't be turned into $20,000 of benefit, all ultimately sourced from the victim. This only happens if the state steps in and chooses the benefit of the lender and the vendors above the victim. This would be the state officially designating the fraud to be a currency issuer. Lastly, it doesn't set a precedent because debt forgiveness, especially in cases like this, happens all the time. It's a sign of corruption if it doesn't happen.
- an_opabinia 6y ago
  > For example Margin Debt is at $800 billion... Retail traders' margin debt is secured. However I agree the mechanics of margin debt has the ability to inflict colossal pain on normal people. > let people take responsibility for their own actions... The government already lost the money. The borrowers are already in default. They are never going to pay this money back. To put in perspective: "Only 43% of public two-year college students, and 34% of for-profit college students who entered repayment on their loans in 2011 had paid even a dollar toward their loan principal after five years." (https://elizabethwarren.com/plans/student-loan-debt-day-one https://elizabethwarren.com/plans/student-loan-debt-day-one) Is that relief? No. Is it stimulus? No. The lent money was spent long ago. You're not giving money to borrowers who are already in default. You are taking a number in a government spreadsheet, and making it smaller. If you're going to do this fauxconomics dystoplican point of view, don't warble garbage about civilization and responsibility. Focus on the mechanics of what is actually happening. Indeed, I would agree bailing people out from margin calls would significantly reduce harms, but on the other hand, that's totally politically untenable, and also actually expensive. Whereas forgiving debt that is already in default costs nothing.
  - endisneigh 6y ago
    You make some good points. However, my rebuttal is that the colleges referenced in the article were for-profit and unaccredited to begin with. In other words, the students of said schools willingly went to schools without any level of vetting (or they were vetted and failed). Given this there are two questions: 1. Did the school commit a crime? If so, there's no need to forgive the debt - the government and/or students should go after the school, and our existing legal process makes things right. 2. Were the students harmed? This is obviously more difficult to prove in general. Let's suppose the students were harmed (since the article doesn't really specify what it means by harm). Should the government continue to subsidize people who are harmed in this way? My take is if we want to reduce harm, why not just forgive all debt? Clearly if all debt is forgiven, then all harm caused by such debt is reduced to zero. As a society we have already decided people should be responsible for some things, so the question is why specifically in these circumstances are they being forgiven? And how is the government going to create the circumstances where they don't have to do this again?
- resfirestar 6y ago
  For a direct answer to your questions about how this is determined, it may help to look at the legalese, which includes a detailed definition and some examples of types of "misrepresentations" made by schools that would cause a borrower to qualify: https://www.law.cornell.edu/cfr/text/34/685.206 https://www.law.cornell.edu/cfr/text/34/685.206 and https://www.law.cornell.edu/cfr/text/34/685.222 https://www.law.cornell.edu/cfr/text/34/685.222
- ThrustVectoring 6y ago
  This is far more specifically about a debt obtained via fraud. The US court system categorically refuses to enforce debts obtained via fraud, regardless of how it came about. Owe $325 on your credit card for buying a vacuum cleaner that was fraudulently misrepresented to you? Courts will not enforce the debt, hence the existence of chargebacks. There's no fundamental difference between that case and this one; the debtor was a victim of fraud, so the debt is invalid and will not be enforced. There's no slippery slope here because it's a decision firmly within the existing status quo. If you can show that the debt was obtained via fraud, you will not be made to pay it. IIRC this has specifically come up with Robinhood, where a /r/wallstreetbets user that was accidentally given excessive amounts of leverage was not pursued for the inevitable mid-five-figure account deficit that they racked up.
  - dragonwriter 6y ago
    > This is far more specifically about a debt obtained via fraud. No, it's about a debt to obtained fairly but used to pay for something being fraudulently offered by a third party. > Owe $325 on your credit card for buying a vacuum cleaner that was fraudulently misrepresented to you? Courts will not enforce the debt, Unless the charge was fraudulent, yes, they will. > hence the existence of chargebacks. Chargebacks exist because of special legal rules applicable specifically to open-ended credit like credit cards, not a general principle that debt to one party resulting from fraud by a third party is invalid.
    - ThrustVectoring 6y ago
      > No, it's about a debt to obtained fairly but used to pay for something being fraudulently offered by a third party. There's a very big difference between using credit to obtain cash to spend as payment for goods and services, and using the credit itself to pay for goods and services. If you took on a cash advance and then used that to buy a misrepresented vacuum, you're still on the hook for the cash advance. Student loans are not a cash advance, they're an agreement to undertake a debt in exchange for a specific education. If that education was fraudulently misrepresented, the debt was simply not obtained fairly, it was obtained through fraud. > Unless the charge was fraudulent, yes, they will. The vacuum cleaner being fraudulently misrepresented makes the charge fraudulent. It was authorized under false pretenses. >not a general principle that debt to one party resulting from fraud by a third party is invalid Chase is not third-party to your credit card transactions. They're directly involved and have contracts with the merchant's processing bank governing the relationship. Every credit card transaction is an agreement of the form "I get the stuff, the merchant gets paid according to their agreement with their processing bank, and I agree to owe the credit card company some money". If the vacuum cleaner is misrepresented to you, that entire agreement is invalid due to fraud, including the obligation to pay the credit card company. The legislation enacted over chargebacks were created so that A) this class of dispute could be cheaply adjudicated by the companies involved rather than messily and with great expense via the court system, and B) to provide a streamlined way to ensure that merchants pay all the costs involved with the process.
- addicted 6y ago
  Is there any reason to believe that “debt forgiveness in general is a terrible precedent to set”? The major example of debt forgiveness I can think of is bankruptcy and as far as I am aware American bankruptcy laws are considered excellent precisely because of the forgiveness. But setting aside the general case, forgiveness for massive widespread known fraud is probably the easiest example of a case where it can be achieved successfully.
rover0 6y ago
So the schools where fraudulous, the solution is to reward the system by helping their victims and have no sanction on the school?
- tehwebguy 6y ago
  Dealing with fraud that ends up costing the federal government money will probably fall under another agency’s jurisdiction and there probably won’t be a blanket announcement that everyone who did some fraud is being investigated.
- TedDoesntTalk 6y ago
  University of Phoenix is paying $191 million in fines: https://www.ftc.gov/news-events/press-releases/2019/12/ftc-obtains-record-191-million-settlement-university-phoenix https://www.ftc.gov/news-events/press-releases/2019/12/ftc-o...
  - cosmotic 6y ago
    And the cost to tax payers?
    - TedDoesntTalk 6y ago
      Don’t know, but that’s just one school. Others were fined. Whether or not they actually pay those fines rather than declare bankruptcy... I don’t know. I would guess they just declare bankruptcy and laugh all the way to the bank.
- dragonwriter 6y ago
  > So the schools where fraudulous, the solution is to reward the system by helping their victims and have no sanction on the school? Nope, sanctions on the schools also exist (some from Department of Education, some from other agencies, some through lawsuits by students); in fact, most of the students involved, as noted by the article, were students of either ITT Technical Institute or Corinthian College, both of whom have gone out of business due almost entirely due to consequences of their fraud.
coliveira 6y ago
The only thing that I want to point out is that the federal government should prosecute these for profit "universities" to receive the loan back, since there is good evidence that they were practicing fraud against students.
pg_bot 6y ago
Student loans should be dischargeable in bankruptcy. This would provide balance in the college lending business, and a check on the ever increasing price of college tuition.
- arcticbull 6y ago
  While I agree in theory that would be nice, in practice what’s to stop someone from borrowing 100k and declaring bankruptcy on graduation day? Why would anyone lend to someone with this kind of adverse selection risk? College tuition just needs to be paid for by the state without the lending facilities, IMO. As evidenced here the state just gets left with the bag anyways.
  - ska 6y ago
    > in practice what’s to stop someone from borrowing ... the same things as any other debt that is dischargeable?
    - HideousKojima 6y ago
      The problem is with other loans there's collateral the lender can sieze like a house or a car.
      - ska 6y ago
        Not necessarily (e.g. credit cards), but that is one way to manage risk. Certainly removing this protection would likely reduce the number and/or size of loans that are approved, and other risk reduction methods applied. As it is , tuitions are being driven more by ability to pay than by costs, and ability to pay is being driven by this loan status. The system has terrible incentives for lenders and institutions.
      - Judgmentality 6y ago
        Why can't the university take back the degree? They can't take back the knowledge, but assuming the certificate itself is actually worth anything they could always revoke the diploma. And employers are already oddly adept at checking boxes, "actually has a degree" is just another checkbox to them. Anyone that says they have a degree and doesn't is untrustworthy and why would you hire that person? If someone has a job they have no need to do so. If someone doesn't, then assuming that person went to school with the intention of getting a job afterwards, then it seems the school failed (either in educating the student or choosing to accept a student who is unlikely to accept a job). It seems utterly bizarre to me anyone besides the university should be on the hook for this. If they're accepting the money, they should also be accepting the risk. It feels like nobody is willing to be held accountable for anything anymore and push the risk off onto those who are most vulnerable. This is a cancer in modern capitalism.
fuzxi 6y ago
This article is really short. What kind of fraud is it talking about? Unaccredited schools presenting themselves as accredited? The original press release (linked in the article) just says "institution[s which] engaged in certain misconduct."
IG_Semmelweiss 6y ago
the problem is that there is already a system for loan forgiveness / student redress. its called the court system if there is fault, that's the way to adjudicate. The extent that the govt is making that more difficult (not encouraging class action due to no regulation in place), then that should be done . Everything else is risky precedent
- dragonwriter 6y ago
  > the problem is that there is already a system for loan forgiveness / student redress. This is the system established by law for student loan forgiveness; it was unilaterally hamstrung administratively by the Trump Administration.
  - IG_Semmelweiss 6y ago
    are you talking about bankruptcy ? If yes, that was Bush's doing. He kneecapped it, not Trump
    - dragonwriter 6y ago
      > are you talking about bankruptcy ? No, I'm talking about the process in this article.
      - IG_Semmelweiss 6y ago
        Im not sure who's right here, you said there was a law to adjudicate student forgiveness, but the article states that congress never passed any rule reversing executive action on the matter. So, if executive action by trump's cabinet was responsible for eliminating the existing process, it follows that prior executive process brought forgiveness to life previously. A process is not a law. My point is that we already have laws to adjudicate tort / fraud claims. We don't need another (based on no law) to have unelected political operators to choose which fraud claims are to be heard, and which will not. Equality is under the law. Not under process.
temp0826 6y ago
Any way to get a refund had the student actually paid back the loans, but still felt like a victim? That nonsense set me back several years financially, I managed to claw myself out tooth and nail. It sucked.
- jl2718 6y ago
  Please explain. What was the deceit? Was it just a worthless education?
IG_Semmelweiss 6y ago
I don't understand the focus on for profit schools. All else being equal, profit vs nonprofit schools are exactly the same. Its just different people that take their pound of flesh. For profits... benefit seniors invested in ETFs or 401ks Nonprofits...benefit CEOs and school administrators. No difference. The tenured faculty usually wins. The student + taxpayer always lose.
- cosmotic 6y ago
  All else being equal, for-profit incentivizes delivering the lowest possible quality at the highest possible price.
  - IG_Semmelweiss 6y ago
    is that true ? Surely for every Corinthian College there are 50 Anytown University (which do absolutely nothing and charge effectively the same ).
    - dragonwriter 6y ago
      > Surely for every Corinthian College there are 50 Anytown University (which do absolutely nothing and charge effectively the same) Surely, you have some evidence to present supporting that “surely, there are...” claim.
      - IG_Semmelweiss 6y ago
        well i'm not the one making a claim that for profits are far worse than non profits....
- RhysU 6y ago
  Dunno how I as a taxpayer lose from having a better educated, more productive population...?
jl2718 6y ago
Who is paying for this? The government doesn’t own the debt, it just insures the loans. The schools don’t own the debt. Some bond investor does. Are they paying for it? Are they taking a loss, or is this a giant payday for the high-risk tranche, as if nobody defaulted on these super-high-risk loans, giving these shady school bonds the best returns in the business. When the government intervenes, the markets stop working. If the schools failed the students, and the government doesn’t bail them out, they’ll default and nobody will buy loans from the school. Problem solved.
- resfirestar 6y ago
  >The government doesn’t own the debt, it just insures the loans Federal Direct Loans are in fact owned by the government. This forgiveness does not apply to the pre-2010 FFELP loans that you're describing.
  - jl2718 6y ago
    Thank you. So are those schools still eligible to sell us more bad debt? I do not consent to this.
- kaminar 6y ago
  Why aren't the schools directly responsible to reimburse the student or lender? This should not be "forgiveness", but similar to a chargeback, plus a fine and possible imprisonment.
  - runawaybottle 6y ago
    Welcome to nanny state.
  - TheCoelacanth 6y ago
    The schools would be responsible if they still existed. It's exactly like a chargeback. The credit card company pays you back and then is responsible for getting the money back. You don't have to go after the merchant directly.
ffggvv 6y ago
crazy how we’re going full european without anyone protesting. maybe because of covid? where is the republicans atleast making arguments?
splithalf 6y ago
The focus should be on preventing this “fraud” in the future, but that actually runs counter to the goals of those who are issuing the debt, the same federal agency that is now forgiving the debt, debt which mind you they should not have given out so recklessly in the fist place. When the horrible costs of wanton debt issuance become clear they just scapegoat the “for profits.” Anybody can google the numbers and easily see the student debt crisis is not limited to for profits, it’s a red herring meant to distract from the real problem which is a student debt bubble that was created by a federal agency that had bad incentives.
fukmbas 6y ago
There are a ton of trump/devos sympathizers in here

59 points by coloneltcb 6y ago

I have mixed feelings about this in general. On one hand, this is great for the students who were affected. On the other hand, what mechanisms exist to prevent this from happening again? Debt forgiveness in general is a terrible precedent to set. EDIT: Finished reading the AP article. I'm curious what constitutes harm per Cardona's quote: “A close review of these claims and the associated evidence showed these borrowers have been harmed, and we will grant them a fresh start from their debt.” Is it the lack of opportunity from the for-profit school? If so there are plenty of non-profit schools that offer useless degrees in the forms of useless/impractical majors. Is it the fact that for-profit schools often give out degrees that cannot be transferred to accredited ones? If so there are plenty schools that teach you things that aren't really transferrable like fullsail. There are also liberal arts and technical not-for-profits whose classes aren't necessarily transferrable between them. Is it questionable advertising of the benefits of the school? Again, not-for-profit accredited schools often skew the benefit of their services as well. I'm curious how exactly they have determined the "harm." Pedantically, one could argue easily that any action anyone takes that does not yield a benefit has harmed them. For example Margin Debt is at $800 billion (https://www.bloomberg.com/opinion/articles/2021-03-17/do-margin-debt-levels-predict-a-stock-market-crash https://www.bloomberg.com/opinion/articles/2021-03-17/do-mar...) - inevitably that will also lead to some catastrophe. Should that also be forgiven? One could argue that organizations such as Robinhood and Webull have been gamifying the stock market to the point of "misrepresentation" (I don't personally believe this, but you could imagine an argument being made). At one point as a civilization we draw the line and let people take responsibility for their own actions? I believe in the matters of life and death we should subsidize, but education? I'm not sure.

ericbarrett 6y ago
Not allowing people to discharge crushing debt, incurred under false pretenses, is the far more terrible precedent.
- luckylion 6y ago
  Is it? If you take a loan from the government or a bank in order to buy a car, the car turns out to be a pile of trash and the seller defrauded you, should the loan be forgiven?
  - wildrhythms 6y ago
    Do you honestly believe all the debt in the world can be repaid?
    - luckylion 6y ago
      That's very meta and not very relevant to the question of who should repay some specific debt.
  - TedDoesntTalk 6y ago
    Your analogy is poor. Cars depreciate in value. A higher education with a degree supposedly increases your earnings, thereby enabling you to repay debt. Cars don’t do that. When the school lies about how many graduates are placed at SV tech companies, when they lie about who teaches and designs the courses, when they lie about their “connections” to employers, enticing students to take debt for their false product, the problem is with the school... not the victim. Do you also forgive rapists who say, “but she was wearing a miniskirt! She enticed me to do it!” The schools are the rapists here. The students are the victims.
    - splithalf 6y ago
      That is the fraud. A higher education degree doesn’t increase earnings for most people once you factor in the costs. There was a nice econ paper on this sometime in last year. Student loans of any sort are on average a bad choice in terms of lifetime wealth accumulation. Bad for student borrowers and bad for taxpayers, one should ask themselves whom it is exactly that benefits from all this carelessly issued debt.
      - 6y ago
sapienwastey 6y ago
>Debt forgiveness in general is a terrible precedent to set. How's that? Seems like the precedent was set a very long time ago: https://en.wikipedia.org/wiki/Jubilee_(biblical) https://en.wikipedia.org/wiki/Jubilee_(biblical)
- ARandomerDude 6y ago
  The key difference is Jubilee was scheduled every 50 years, and was thus predictable. Taking on a debt at, say, year 35 meant both parties knew the remaining term was limited to 15 years, and could adjust the specifics accordingly. This situation is ad hoc, meaning both parties take on the debt assuming repayment, then one party exits, leaving unpaid debt behind. Spontaneous debt dumping, unlike the 50 year cycle in ancient Israel, is destabilizing and encourages debtors to complain loudly, and perhaps violently, to get out of the debt they owe. Doing so successfully encourages consumers to take on bad debt, which is bad for the economy (see 2008).
  - sapienwastey 6y ago
    Yeah, I think this was executed wrongly (allowing the schools who originated the debt to profit and escape unaccountable). I was specifically responding to the 'generally' aspect of the comment, where I think 'generally' debt forgiveness can be a very useful concept, and good for society. Governments don't seem to mind inflating their currency sometimes which is (if denominated in their own) essentially forgiving themselves of debt ;)
tablespoon 6y ago
> On one hand, this is great for the students who were effected. On the other hand, what mechanisms exist to prevent this from happening again? Debt forgiveness in general is a terrible precedent to set. I don't know if they have plans to do this, but they should turn around and attempt to collect the debt from the schools that defrauded the students rather than the students who were victims of that fraud. And frankly, debt forgiveness isn't a bad policy. It's essentially what bankruptcy relief is (relief that's available to almost all other debt holders).
- fortran77 6y ago
  In bankruptcy the lender already factored in that possibility when creating the loan, and the Government and taxpayers aren’t left holding the bag.
  - Ancapistani 6y ago
    My wife took private student loans, which at the time were forgivable in bankruptcy, as a hedge against future financial issues. She accepted a higher interest rate to account for that. … then the federal government retroactively made them non-dischargeable. I mention this to highlight that changes in the regulatory environment don’t always favor the borrower, nor are there always concessions made to limit harm to the injured party.
    - D13Fd 6y ago
      That's also a great example of how discharge-ability and the potential for student loan forgiveness warps the actions of borrowers, and in an unfair way.
      - oarsinsync 6y ago
        How is it unfair if the loan came with higher interest rates to account for that? That’s exactly the point of how debt markets are supposed to work. Higher risk borrowers are more likely to default, so pay higher interest rates to cover the % that do. If as a borrower you’re willing to pay more for your debt to give you that option (and quite frankly, all debt should be this way. There’s no debt an LLC can’t write off, why is there debt individuals can’t write off?), why is this bad?
corty 6y ago
In the rest of the world, the mechanisms are clear: Free education for all citizens at public universities. Those who want to be ripped off by for-profit diploma mills can go ahead, but noone with a non-lonely brain cell will.
- TedDoesntTalk 6y ago
  > but noone with a non-lonely brain cell will. These “universities” lied to prospective students. Here is just one example: “ The FTC says the university wrongly suggested that it worked closely with high-profile companies to develop its courses. And it says the school's "Let's Get to Work" ad campaign was one example of how it hyped connections with potential employers. In one video in that campaign, a UOP student is seen driving through a school parking lot, passing spots that are filled with the iconic logos of successful companies.” https://www.npr.org/2019/12/10/786738760/university-of-phoenix-reaches-191-million-settlement-with-ftc-including-debt-rel https://www.npr.org/2019/12/10/786738760/university-of-phoen... This has nothing to do with neuron count and everything to do with fraud and lies.
- refurb 6y ago
  Pretty sure by “rest of world” you actually mean “some European countries”
vmception 6y ago
It took me to the end of your post to realize that an additional Department of Education debt forgiveness criteria is the same as any debt forgiveness to you. So you think we are at the top of a slippery slope and not realizing we've been at the bottom of it for a long time. So this isn't really about the university system its about the entire fabric of society, not realizing how society already functions. Fascinating.
- endisneigh 6y ago
  I'm not sure I understand - could you elaborate on what you mean?
  - vmception 6y ago
    you talk about margin debt in a topic about a sliver of Department of Education loans as if there is any similarity into the structure, circumstances and participants Department of Education's outcome is a unilateral decision by the confirmed head of a federal agency, the latter requiring something far more involved that nobody is asking for.
    - endisneigh 6y ago
      I state explicitly that in the article the justification and determination of "harm" is unclear so it's impossible to really have an in-depth comparison. However, I will say the fact that it's DoE related isn't really relevant at all. From the article it seems the main point was that students were misrepresented and later harmed as a result of taking a loan. Those particular circumstances do happen to be shared in some instances of taking on margin debt.
      - vmception 6y ago
        I see, but that outcome requires a court of an act of Congress much more improbable than a regulator waking up on that side of the bed
baron816 6y ago
> there are plenty of non-profit schools that offer useless degrees in the forms of useless/impractical majors. Ugh. This again. College != vocational school. You don’t go to college to learn a trade or gain skills to get your first job. You’re building skills that you’ll use through the entirety of your career. Communication and critical thinking skills will never become obsolete.
- nicoburns 6y ago
  > Communication and critical thinking skills will never become obsolete. True, but you don't need a college degree to learn communication or critical thinking skills. For some careers they are generally useful, but for a lot of careers they're just a tax on entry.
- endisneigh 6y ago
  You're correct, however my point that there exists non-profit schools that offer useless degrees, stands. Are you arguing otherwise? It's unclear from your post.
- vkou 6y ago
  This may be true in some ideal platonic universe - but for real people living in the real world, college is indeed a vocational school.
kevingadd 6y ago
What benefit to society comes from people being shackled with debts for decades that they cannot possibly pay back? We're not talking about someone being able to get any possible debt discharged after a year without making any effort to pay it back, here. Student loans that were basically stolen by fraudulent schools, such that the borrower gained no education they can use to possibly pay the loan back - who benefits from saddling them with that forever? Their only possible options at that point are to labor in poverty forever (the loan's still not getting paid back), or somehow take on more loans to try to get an education again, now slowly paying down two student loans instead of one. Who benefits here? In the end if lenders are somehow irreparably harmed by debt forgiveness in corner cases like this, perhaps they should be responsible and not issue loans to people who can't pay them back. It's always about "personal responsibility" until consequences come calling for financiers who make unbelievably stupid decisions and they want the taxpayer to foot the bill and bail them out.
- rhizome 6y ago
  > Their only possible options at that point are to labor in poverty forever (the loan's still not getting paid back), The ideal state of capitalism is $0 labor costs, so: more's the better. Lots of Business majors and MBAs graduate from university under this orthodoxy every year, and have, for a long time.
- endisneigh 6y ago
  > What benefit to society comes from people being shackled with debts for decades that they cannot possibly pay back? We're not talking about someone being able to get any possible debt discharged after a year without making any effort to pay it back, here. This is true. My point though is based on what you said, should we forgive all debt? I would imagine you would not agree to that, so then we have to discuss the circumstances in which the government should discharge debt. > Student loans that were basically stolen by fraudulent schools, such that the borrower gained no education they can use to possibly pay the loan back - who benefits from saddling them with that forever? Their only possible options at that point are to labor in poverty forever (the loan's still not getting paid back), or somehow take on more loans to try to get an education again, now slowly paying down two student loans instead of one. Who benefits here? There's a bit to digest here. There are two considerations: 1. The student didn't gain education. 2. The school took loans they shouldn't have received on behalf of the students. If we believe (2) is the crime, then we already have mechanisms to punish the school, liquidate them and make those who have been harmed whole again. I don't see why the government needs to be involved more than they already were (in giving the loans). If we believe (1) is the issue, then this is something that's not unique to for-profit schools. Given it's a subjective sort of thing I imagine it would result in anyone who majored or something they don't feel was useful or receiving an education they didn't feel was "worth it" asking for loan forgiveness. That doesn't seem sustainable either. Finally, if (2) occurred but the student did receive benefit, should the loan be forgiven? I don't know the answer but it's worth considering. All of that aside, I agree with what I believe your point to be at the end. We shouldn't be forgiving companies that make bad decisions, either.
8note 6y ago
I don't think education is the spot for making people take responsibility for their actions - fundamentally, they're taking this education because they don't know better yet.
- endisneigh 6y ago
  I believe you make a good point. So the question then is, should for-profit schools exist? Surely there should be a mechanism to prevent these scenarios from occurring. The plot twist is that there already is in the form of accreditation. Anyone can trivially look-up whether or not any school is accredited or not. So the question remains, if someone chooses to go to an unaccredited school and they get burned should the government foot the bill?
mewse 6y ago
From my reading of the OP (and the original news reporting that the OP is summarising), this covers the case where someone was defrauded by their school. Not just harmed, defrauded. Fraud is a well-defined crime. It requires intentional deception for a small number of specific reasons (most commonly, to gain money or something else of value). If in doubt, consult an attorney in your jurisdiction to determine whether you have been the victim of fraud according to the laws of your local area (which do vary across state lines within the US, to say nothing of internationally). But this isn’t about forgiving student loans where someone has been harmed. It’s about forgiving student loans where someone has been the victim of fraud.
- endisneigh 6y ago
  > But this isn’t about forgiving student loans where someone has been harmed. It’s about forgiving student loans where someone has been the victim of fraud. This is a good point, however my take is that if what you're saying is true (and I believe it is) - there is less reason to forgive the debt. There already exists mechanisms to take assets from the institution that caused the harm, liquidate and compensate those who have been harmed. Is it necessary to unilaterally forgive the debt? Maybe (I'm not sure myself as I mentioned in the OP).
  - pessimizer 6y ago
    > There already exists mechanisms to take assets from the institution that caused the harm, liquidate and compensate those who have been harmed. Those people will already have leveraged debt, and purchased services and depreciated goods with the cash gained by the fraud, making the people they purchased those things from secondary beneficiaries of that fraud. The people who made the loans to the students are also secondary beneficiaries of the fraud (if those loans are paid back with interest.) The real question is whether you want to put the onus of evaluating the risk that something may be a fraud on the sellers of goods, or on people making loans. I would argue from a lot of different directions that it was obviously put in the right place in this case. To begin with, you can buy a candy bar with fraudulently obtained funds, and if every candy bar seller was required to evaluate the risk that the funds used to buy the candy bar were obtained fraudulently, the economy would grind to a halt. Since this is a pragmatic argument, it obviously becomes less valid when someone sells 10,000 candy bars; we may not mind if they have to do some minor checking, like obtaining your full name, or maybe where you work. Another is that assessing (and taking) risk is literally the only job of someone making a loan, and assessing the risk of a school being a fraud seems an obvious part of that when you're making a loan specifically for attending that school. If someone making a loan isn't doing that, they aren't doing anything. It's just a rent being collected, a concession granted by the state (as the state is expected to expend effort to enforce the debt.) This isn't a proper function for a state, this is corruption. You think you're endorsing personal responsibility here, but you're really endorsing bailouts for investors. There's a business plan here (which I think is really common in the world if you look for it) where you create a fraud, loan money to the victims of that fraud, fold up and liquidate the fraud, then use the state to pursue the victims for the loan. If you also manage to be the beneficiary of the fraud - lets say that the fraud sells all of its buildings which are then leased back to them, resulting in the fraud having a negative worth when it is liquidated, and you pay yourself large consulting fees for creating that arrangement - you've double-dipped. In the closed system of 1) the fraud, 2) the victims, 3) vendors supplying the fraud, and 4) lenders to the victim, a loan for $10,000 can't be turned into $20,000 of benefit, all ultimately sourced from the victim. This only happens if the state steps in and chooses the benefit of the lender and the vendors above the victim. This would be the state officially designating the fraud to be a currency issuer. Lastly, it doesn't set a precedent because debt forgiveness, especially in cases like this, happens all the time. It's a sign of corruption if it doesn't happen.
an_opabinia 6y ago
> For example Margin Debt is at $800 billion... Retail traders' margin debt is secured. However I agree the mechanics of margin debt has the ability to inflict colossal pain on normal people. > let people take responsibility for their own actions... The government already lost the money. The borrowers are already in default. They are never going to pay this money back. To put in perspective: "Only 43% of public two-year college students, and 34% of for-profit college students who entered repayment on their loans in 2011 had paid even a dollar toward their loan principal after five years." (https://elizabethwarren.com/plans/student-loan-debt-day-one https://elizabethwarren.com/plans/student-loan-debt-day-one) Is that relief? No. Is it stimulus? No. The lent money was spent long ago. You're not giving money to borrowers who are already in default. You are taking a number in a government spreadsheet, and making it smaller. If you're going to do this fauxconomics dystoplican point of view, don't warble garbage about civilization and responsibility. Focus on the mechanics of what is actually happening. Indeed, I would agree bailing people out from margin calls would significantly reduce harms, but on the other hand, that's totally politically untenable, and also actually expensive. Whereas forgiving debt that is already in default costs nothing.
- endisneigh 6y ago
  You make some good points. However, my rebuttal is that the colleges referenced in the article were for-profit and unaccredited to begin with. In other words, the students of said schools willingly went to schools without any level of vetting (or they were vetted and failed). Given this there are two questions: 1. Did the school commit a crime? If so, there's no need to forgive the debt - the government and/or students should go after the school, and our existing legal process makes things right. 2. Were the students harmed? This is obviously more difficult to prove in general. Let's suppose the students were harmed (since the article doesn't really specify what it means by harm). Should the government continue to subsidize people who are harmed in this way? My take is if we want to reduce harm, why not just forgive all debt? Clearly if all debt is forgiven, then all harm caused by such debt is reduced to zero. As a society we have already decided people should be responsible for some things, so the question is why specifically in these circumstances are they being forgiven? And how is the government going to create the circumstances where they don't have to do this again?
resfirestar 6y ago
For a direct answer to your questions about how this is determined, it may help to look at the legalese, which includes a detailed definition and some examples of types of "misrepresentations" made by schools that would cause a borrower to qualify: https://www.law.cornell.edu/cfr/text/34/685.206 https://www.law.cornell.edu/cfr/text/34/685.206 and https://www.law.cornell.edu/cfr/text/34/685.222 https://www.law.cornell.edu/cfr/text/34/685.222
ThrustVectoring 6y ago
This is far more specifically about a debt obtained via fraud. The US court system categorically refuses to enforce debts obtained via fraud, regardless of how it came about. Owe $325 on your credit card for buying a vacuum cleaner that was fraudulently misrepresented to you? Courts will not enforce the debt, hence the existence of chargebacks. There's no fundamental difference between that case and this one; the debtor was a victim of fraud, so the debt is invalid and will not be enforced. There's no slippery slope here because it's a decision firmly within the existing status quo. If you can show that the debt was obtained via fraud, you will not be made to pay it. IIRC this has specifically come up with Robinhood, where a /r/wallstreetbets user that was accidentally given excessive amounts of leverage was not pursued for the inevitable mid-five-figure account deficit that they racked up.
- dragonwriter 6y ago
  > This is far more specifically about a debt obtained via fraud. No, it's about a debt to obtained fairly but used to pay for something being fraudulently offered by a third party. > Owe $325 on your credit card for buying a vacuum cleaner that was fraudulently misrepresented to you? Courts will not enforce the debt, Unless the charge was fraudulent, yes, they will. > hence the existence of chargebacks. Chargebacks exist because of special legal rules applicable specifically to open-ended credit like credit cards, not a general principle that debt to one party resulting from fraud by a third party is invalid.
  - ThrustVectoring 6y ago
    > No, it's about a debt to obtained fairly but used to pay for something being fraudulently offered by a third party. There's a very big difference between using credit to obtain cash to spend as payment for goods and services, and using the credit itself to pay for goods and services. If you took on a cash advance and then used that to buy a misrepresented vacuum, you're still on the hook for the cash advance. Student loans are not a cash advance, they're an agreement to undertake a debt in exchange for a specific education. If that education was fraudulently misrepresented, the debt was simply not obtained fairly, it was obtained through fraud. > Unless the charge was fraudulent, yes, they will. The vacuum cleaner being fraudulently misrepresented makes the charge fraudulent. It was authorized under false pretenses. >not a general principle that debt to one party resulting from fraud by a third party is invalid Chase is not third-party to your credit card transactions. They're directly involved and have contracts with the merchant's processing bank governing the relationship. Every credit card transaction is an agreement of the form "I get the stuff, the merchant gets paid according to their agreement with their processing bank, and I agree to owe the credit card company some money". If the vacuum cleaner is misrepresented to you, that entire agreement is invalid due to fraud, including the obligation to pay the credit card company. The legislation enacted over chargebacks were created so that A) this class of dispute could be cheaply adjudicated by the companies involved rather than messily and with great expense via the court system, and B) to provide a streamlined way to ensure that merchants pay all the costs involved with the process.
addicted 6y ago
Is there any reason to believe that “debt forgiveness in general is a terrible precedent to set”? The major example of debt forgiveness I can think of is bankruptcy and as far as I am aware American bankruptcy laws are considered excellent precisely because of the forgiveness. But setting aside the general case, forgiveness for massive widespread known fraud is probably the easiest example of a case where it can be achieved successfully.

rover0 6y ago

So the schools where fraudulous, the solution is to reward the system by helping their victims and have no sanction on the school?

tehwebguy 6y ago
Dealing with fraud that ends up costing the federal government money will probably fall under another agency’s jurisdiction and there probably won’t be a blanket announcement that everyone who did some fraud is being investigated.
TedDoesntTalk 6y ago
University of Phoenix is paying $191 million in fines: https://www.ftc.gov/news-events/press-releases/2019/12/ftc-obtains-record-191-million-settlement-university-phoenix https://www.ftc.gov/news-events/press-releases/2019/12/ftc-o...
- cosmotic 6y ago
  And the cost to tax payers?
  - TedDoesntTalk 6y ago
    Don’t know, but that’s just one school. Others were fined. Whether or not they actually pay those fines rather than declare bankruptcy... I don’t know. I would guess they just declare bankruptcy and laugh all the way to the bank.
dragonwriter 6y ago
> So the schools where fraudulous, the solution is to reward the system by helping their victims and have no sanction on the school? Nope, sanctions on the schools also exist (some from Department of Education, some from other agencies, some through lawsuits by students); in fact, most of the students involved, as noted by the article, were students of either ITT Technical Institute or Corinthian College, both of whom have gone out of business due almost entirely due to consequences of their fraud.

coliveira 6y ago

The only thing that I want to point out is that the federal government should prosecute these for profit "universities" to receive the loan back, since there is good evidence that they were practicing fraud against students.

pg_bot 6y ago

Student loans should be dischargeable in bankruptcy. This would provide balance in the college lending business, and a check on the ever increasing price of college tuition.

arcticbull 6y ago
While I agree in theory that would be nice, in practice what’s to stop someone from borrowing 100k and declaring bankruptcy on graduation day? Why would anyone lend to someone with this kind of adverse selection risk? College tuition just needs to be paid for by the state without the lending facilities, IMO. As evidenced here the state just gets left with the bag anyways.
- ska 6y ago
  > in practice what’s to stop someone from borrowing ... the same things as any other debt that is dischargeable?
  - HideousKojima 6y ago
    The problem is with other loans there's collateral the lender can sieze like a house or a car.
    - ska 6y ago
      Not necessarily (e.g. credit cards), but that is one way to manage risk. Certainly removing this protection would likely reduce the number and/or size of loans that are approved, and other risk reduction methods applied. As it is , tuitions are being driven more by ability to pay than by costs, and ability to pay is being driven by this loan status. The system has terrible incentives for lenders and institutions.
    - Judgmentality 6y ago
      Why can't the university take back the degree? They can't take back the knowledge, but assuming the certificate itself is actually worth anything they could always revoke the diploma. And employers are already oddly adept at checking boxes, "actually has a degree" is just another checkbox to them. Anyone that says they have a degree and doesn't is untrustworthy and why would you hire that person? If someone has a job they have no need to do so. If someone doesn't, then assuming that person went to school with the intention of getting a job afterwards, then it seems the school failed (either in educating the student or choosing to accept a student who is unlikely to accept a job). It seems utterly bizarre to me anyone besides the university should be on the hook for this. If they're accepting the money, they should also be accepting the risk. It feels like nobody is willing to be held accountable for anything anymore and push the risk off onto those who are most vulnerable. This is a cancer in modern capitalism.

fuzxi 6y ago

This article is really short. What kind of fraud is it talking about? Unaccredited schools presenting themselves as accredited? The original press release (linked in the article) just says "institution[s which] engaged in certain misconduct."

IG_Semmelweiss 6y ago

the problem is that there is already a system for loan forgiveness / student redress. its called the court system if there is fault, that's the way to adjudicate. The extent that the govt is making that more difficult (not encouraging class action due to no regulation in place), then that should be done . Everything else is risky precedent

dragonwriter 6y ago
> the problem is that there is already a system for loan forgiveness / student redress. This is the system established by law for student loan forgiveness; it was unilaterally hamstrung administratively by the Trump Administration.
- IG_Semmelweiss 6y ago
  are you talking about bankruptcy ? If yes, that was Bush's doing. He kneecapped it, not Trump
  - dragonwriter 6y ago
    > are you talking about bankruptcy ? No, I'm talking about the process in this article.
    - IG_Semmelweiss 6y ago
      Im not sure who's right here, you said there was a law to adjudicate student forgiveness, but the article states that congress never passed any rule reversing executive action on the matter. So, if executive action by trump's cabinet was responsible for eliminating the existing process, it follows that prior executive process brought forgiveness to life previously. A process is not a law. My point is that we already have laws to adjudicate tort / fraud claims. We don't need another (based on no law) to have unelected political operators to choose which fraud claims are to be heard, and which will not. Equality is under the law. Not under process.

temp0826 6y ago

Any way to get a refund had the student actually paid back the loans, but still felt like a victim? That nonsense set me back several years financially, I managed to claw myself out tooth and nail. It sucked.

jl2718 6y ago
Please explain. What was the deceit? Was it just a worthless education?

IG_Semmelweiss 6y ago

I don't understand the focus on for profit schools. All else being equal, profit vs nonprofit schools are exactly the same. Its just different people that take their pound of flesh. For profits... benefit seniors invested in ETFs or 401ks Nonprofits...benefit CEOs and school administrators. No difference. The tenured faculty usually wins. The student + taxpayer always lose.

cosmotic 6y ago
All else being equal, for-profit incentivizes delivering the lowest possible quality at the highest possible price.
- IG_Semmelweiss 6y ago
  is that true ? Surely for every Corinthian College there are 50 Anytown University (which do absolutely nothing and charge effectively the same ).
  - dragonwriter 6y ago
    > Surely for every Corinthian College there are 50 Anytown University (which do absolutely nothing and charge effectively the same) Surely, you have some evidence to present supporting that “surely, there are...” claim.
    - IG_Semmelweiss 6y ago
      well i'm not the one making a claim that for profits are far worse than non profits....
RhysU 6y ago
Dunno how I as a taxpayer lose from having a better educated, more productive population...?

jl2718 6y ago

Who is paying for this? The government doesn’t own the debt, it just insures the loans. The schools don’t own the debt. Some bond investor does. Are they paying for it? Are they taking a loss, or is this a giant payday for the high-risk tranche, as if nobody defaulted on these super-high-risk loans, giving these shady school bonds the best returns in the business. When the government intervenes, the markets stop working. If the schools failed the students, and the government doesn’t bail them out, they’ll default and nobody will buy loans from the school. Problem solved.

resfirestar 6y ago
>The government doesn’t own the debt, it just insures the loans Federal Direct Loans are in fact owned by the government. This forgiveness does not apply to the pre-2010 FFELP loans that you're describing.
- jl2718 6y ago
  Thank you. So are those schools still eligible to sell us more bad debt? I do not consent to this.
kaminar 6y ago
Why aren't the schools directly responsible to reimburse the student or lender? This should not be "forgiveness", but similar to a chargeback, plus a fine and possible imprisonment.
- runawaybottle 6y ago
  Welcome to nanny state.
- TheCoelacanth 6y ago
  The schools would be responsible if they still existed. It's exactly like a chargeback. The credit card company pays you back and then is responsible for getting the money back. You don't have to go after the merchant directly.

ffggvv 6y ago

crazy how we’re going full european without anyone protesting. maybe because of covid? where is the republicans atleast making arguments?

splithalf 6y ago

The focus should be on preventing this “fraud” in the future, but that actually runs counter to the goals of those who are issuing the debt, the same federal agency that is now forgiving the debt, debt which mind you they should not have given out so recklessly in the fist place. When the horrible costs of wanton debt issuance become clear they just scapegoat the “for profits.” Anybody can google the numbers and easily see the student debt crisis is not limited to for profits, it’s a red herring meant to distract from the real problem which is a student debt bubble that was created by a federal agency that had bad incentives.

fukmbas 6y ago

There are a ton of trump/devos sympathizers in here