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My reading of it is that their contract claimed student debt with the school could not be discharged with bankruptcy similar to federal student loans. This is n

My reading of it is that their contract claimed student debt with the school could not be discharged with bankruptcy similar to federal student loans. This is not true, and it's doubtful that the people writing the contract didn't know that it wasn't true. If they were being intentionally deceitful, which I believe is the claim here, it would be to prevent loss of loan-repayment in the case that a student finds the debt to be too burdensome and wishes to instead file for bankruptcy. Why else would they include it in the contract if it weren't to their benefit to discourage the student from discharging their debt? All that's left is to prove the intent to decieve.

imgabe 6y ago
But Lambda already forgoes loan repayment if the student doesn't get a job making at least $50k. So why would they go about trying to collect loans from people declaring bankruptcy when they already give up on loans in other circumstances where they would be much easier to pursue? It seems like Lambda was just genuinely confused about what the regulations were regarding their loans and whether they could be discharged in bankruptcy. The regulator clarified that they could, and they updated their agreement to reflect that.
- dragonwriter 6y ago
  > But Lambda already forgoes loan repayment if the student doesn't get a job making at least $50k. No, it doesn’t, ever, for the California Retail Installment Contract at issue. Their ISA, defers for five years and then discharges.
  - pbreit 6y ago
    I think you're right. The California regulator forced Lambda to make the agreement much worse for California students. Can we fine the regulator (which is totally useless, btw)? https://www.forbes.com/sites/prestoncooper2/2020/08/21/california-greenlights-income-share-agreements-but-with-a-caveat-that-will-hurt-students/?sh=ad38e9970022 https://www.forbes.com/sites/prestoncooper2/2020/08/21/calif...
  - imgabe 6y ago
    What does it mean that it defers for five years and then discharges? To me, defers means you are not required to make payments during that time. Discharges means that the obligation is removed and you never have to make any payments. So...if you go five years without getting a job that makes 50k, the ISA defers ... and is then discharged? You never pay it back? How is that different from what I said?
    - dragonwriter 6y ago
      > How is that different from what I said? Its different from what you said (or alternatively, what tou said is a nonsequitur to the discussion of the article, hard to tell which) because it applies only to their ISA, which for legal reasons isn’t used in California and is not what they are in trouble for lying about. They are in trouble for misrepresenting the Retail Installment Contract, which is used exclusively in California, and which is deferred when income is under $50K, but is never discharged/forgiven except by full payment.
      - imgabe 6y ago
        So basically, California specifically forced them to create a special contract, different from the one they use everywhere else, that couldn't be discharged and then censured them for not clearly enough stating that the special California contract couldn't be discharged? Sounds very California.
        dragonwriter 6y ago
        > So basically, California specifically forced them to create a special contract, different from the one they use everywhere else, that couldn't be discharged and then censured them for not clearly enough stating that the special California contract couldn't be discharged? No, not at all. They choose not to automatically discharge the California contracts after 60 months of deferment for low income (I believe as a backhanded protest against the fact that they got in trouble with ISAs in California, IIRC because there was no up-front pricing; the up-front statement that $30,000 is the price is specific to California.) They got in trouble for lying and saying the California contracts were “qualified education loans” under federal law, with the associated restrictive terms for discharge in bankruptcy.
pbreit 6y ago
Treatment of student loans in bankruptcy not limited to government loans. The clause makes Lambda appear less attractive so not clear why it would be included. Would be nice to hear Lambda’s side.
- dragonwriter 6y ago
  > The clause makes Lambda appear less attractive so not clear why it would be included. It’s designed to dissuade people from seeking bankruptcy to discharge the debt.
  - pbreit 6y ago
    I doubt it. Who would seek bankruptcy for 17% of their salary? And it also make Lambds FAR more unattractive.
    - kelnos 6y ago
      The problem is if you can't get a job above a certain salary threshold. While Lambda's non-CA contracts allow for discharging the debt after 5 years of no job or low enough salary, it seems their contract for CA students does not allow for discharging the debt, ever. Regardless, people don't necessarily go into bankruptcy over a single loan. It could be the combination of credit card debt, a mortgage, a car loan, plus the Lambda loan that puts them over the edge.

imgabe 6y ago

But Lambda already forgoes loan repayment if the student doesn't get a job making at least $50k. So why would they go about trying to collect loans from people declaring bankruptcy when they already give up on loans in other circumstances where they would be much easier to pursue? It seems like Lambda was just genuinely confused about what the regulations were regarding their loans and whether they could be discharged in bankruptcy. The regulator clarified that they could, and they updated their agreement to reflect that.

dragonwriter 6y ago
> But Lambda already forgoes loan repayment if the student doesn't get a job making at least $50k. No, it doesn’t, ever, for the California Retail Installment Contract at issue. Their ISA, defers for five years and then discharges.
- pbreit 6y ago
  I think you're right. The California regulator forced Lambda to make the agreement much worse for California students. Can we fine the regulator (which is totally useless, btw)? https://www.forbes.com/sites/prestoncooper2/2020/08/21/california-greenlights-income-share-agreements-but-with-a-caveat-that-will-hurt-students/?sh=ad38e9970022 https://www.forbes.com/sites/prestoncooper2/2020/08/21/calif...
- imgabe 6y ago
  What does it mean that it defers for five years and then discharges? To me, defers means you are not required to make payments during that time. Discharges means that the obligation is removed and you never have to make any payments. So...if you go five years without getting a job that makes 50k, the ISA defers ... and is then discharged? You never pay it back? How is that different from what I said?
  - dragonwriter 6y ago
    > How is that different from what I said? Its different from what you said (or alternatively, what tou said is a nonsequitur to the discussion of the article, hard to tell which) because it applies only to their ISA, which for legal reasons isn’t used in California and is not what they are in trouble for lying about. They are in trouble for misrepresenting the Retail Installment Contract, which is used exclusively in California, and which is deferred when income is under $50K, but is never discharged/forgiven except by full payment.
    - imgabe 6y ago
      So basically, California specifically forced them to create a special contract, different from the one they use everywhere else, that couldn't be discharged and then censured them for not clearly enough stating that the special California contract couldn't be discharged? Sounds very California.
      - dragonwriter 6y ago
        > So basically, California specifically forced them to create a special contract, different from the one they use everywhere else, that couldn't be discharged and then censured them for not clearly enough stating that the special California contract couldn't be discharged? No, not at all. They choose not to automatically discharge the California contracts after 60 months of deferment for low income (I believe as a backhanded protest against the fact that they got in trouble with ISAs in California, IIRC because there was no up-front pricing; the up-front statement that $30,000 is the price is specific to California.) They got in trouble for lying and saying the California contracts were “qualified education loans” under federal law, with the associated restrictive terms for discharge in bankruptcy.

pbreit 6y ago

Treatment of student loans in bankruptcy not limited to government loans. The clause makes Lambda appear less attractive so not clear why it would be included. Would be nice to hear Lambda’s side.

dragonwriter 6y ago
> The clause makes Lambda appear less attractive so not clear why it would be included. It’s designed to dissuade people from seeking bankruptcy to discharge the debt.
- pbreit 6y ago
  I doubt it. Who would seek bankruptcy for 17% of their salary? And it also make Lambds FAR more unattractive.
  - kelnos 6y ago
    The problem is if you can't get a job above a certain salary threshold. While Lambda's non-CA contracts allow for discharging the debt after 5 years of no job or low enough salary, it seems their contract for CA students does not allow for discharging the debt, ever. Regardless, people don't necessarily go into bankruptcy over a single loan. It could be the combination of credit card debt, a mortgage, a car loan, plus the Lambda loan that puts them over the edge.