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Banks have made no new loans since 2010, and apparently carried none of the credit risk even before then -- so there's never been any private-risk based discipl

Banks have made no new loans since 2010, and apparently carried none of the credit risk even before then -- so there's never been any private-risk based discipline to granting of loans. >Initially, private banks provided capital for students loans, with parameters set by the government under the FFEL Program. These loans were owned by lenders and guaranteed by the government; in the case of default, lenders were reimbursed. In 1992, the DL program was created under which loans were directly made by the US Treasury. For many years, both the FFEL and DL programs existed side by side, and colleges could choose the source of funds. Despite the different source of funds and ownership, FFEL and DL loans were otherwise identical in terms of limits, interest rates, and repayment plans available, and many students likely were unaware of the different source of funds when taking loans through their schools’ financial aid offices. In 2010, following analysis and a bribery scandal of college administrators, the Health Care and Education Reconciliation Act of 2010 eliminated new loans under the FFEL program. Since 2010, all federal student loans have been made under the DL program. https://www.nber.org/system/files/working_papers/w31247/w31247.pdf https://www.nber.org/system/files/working_papers/w31247/w312...

anonymouskimmer 3y ago
Those are federal student loans. Private student loans continue to be available[1], and important, as GP states, non-dischargeable[2] (until some recent court cases[2, 2nd]). [1] - https://www.forbes.com/advisor/student-loans/best-private-student-loans/ https://www.forbes.com/advisor/student-loans/best-private-st... > Private student loans are best used to pay college costs after you’ve borrowed the maximum you qualify for in both subsidized and unsubsidized federal student loans. Private student loans come from banks, credit unions and online lenders, and unlike federal student loans for undergraduates, they require a credit check. That means most undergrads will need a co-signer in order to qualify. Private loans also are more expensive than federal loans and typically don’t offer the flexible repayment options their federal counterparts do. [2] - https://www.bankrate.com/loans/student-loans/private-student-loan-bankruptcy/#can https://www.bankrate.com/loans/student-loans/private-student... > Before 1976, borrowers could discharge private and federal student loans in a bankruptcy, just like credit card debt or medical debt. But the introduction of the U.S. Bankruptcy Code in 1978 caused a major shift with regard to student debt. > At the time, the intent of Congress was to protect educational loans from bankruptcy abuse. The amended bankruptcy code stated that funds received as an educational benefit would no longer be discharged unless the borrower could demonstrate undue hardship, which is no easy feat. [2, 2nd] > One notable case came to the U.S. Court of Appeals for the 2nd Circuit from the U.S. Bankruptcy Court for the Eastern District of New York. In the original case, U.S. Bankruptcy Judge Elizabeth S. Stong concluded that private student loans were not part of the Bankruptcy Code Section 523(a)(8)(A)(ii), which states that any “obligation to repay funds received as an educational benefit, scholarship or stipend” is typically not eligible for discharge. > She maintained that the section of code did not define student loans or educational benefit, and that referring to a loan as an educational benefit would be “an unconventional way to discuss a loan.” The appeals court affirmed the lower court’s ruling, arguing the U.S. Bankruptcy Code did not prohibit the discharge of a private student loan in bankruptcy. > Some see the 2nd Circuit decision as hope for a loosening of the criteria in private student loan bankruptcy discharge. However, in June 2021, the U.S. Supreme Court refused to hear the case of a Texas woman who sought to have her private student loans discharged under a different standard — so it appears that the undue hardship requirement may still be in effect.

anonymouskimmer 3y ago

Those are federal student loans. Private student loans continue to be available[1], and important, as GP states, non-dischargeable[2] (until some recent court cases[2, 2nd]). [1] - https://www.forbes.com/advisor/student-loans/best-private-student-loans/ https://www.forbes.com/advisor/student-loans/best-private-st... > Private student loans are best used to pay college costs after you’ve borrowed the maximum you qualify for in both subsidized and unsubsidized federal student loans. Private student loans come from banks, credit unions and online lenders, and unlike federal student loans for undergraduates, they require a credit check. That means most undergrads will need a co-signer in order to qualify. Private loans also are more expensive than federal loans and typically don’t offer the flexible repayment options their federal counterparts do. [2] - https://www.bankrate.com/loans/student-loans/private-student-loan-bankruptcy/#can https://www.bankrate.com/loans/student-loans/private-student... > Before 1976, borrowers could discharge private and federal student loans in a bankruptcy, just like credit card debt or medical debt. But the introduction of the U.S. Bankruptcy Code in 1978 caused a major shift with regard to student debt. > At the time, the intent of Congress was to protect educational loans from bankruptcy abuse. The amended bankruptcy code stated that funds received as an educational benefit would no longer be discharged unless the borrower could demonstrate undue hardship, which is no easy feat. [2, 2nd] > One notable case came to the U.S. Court of Appeals for the 2nd Circuit from the U.S. Bankruptcy Court for the Eastern District of New York. In the original case, U.S. Bankruptcy Judge Elizabeth S. Stong concluded that private student loans were not part of the Bankruptcy Code Section 523(a)(8)(A)(ii), which states that any “obligation to repay funds received as an educational benefit, scholarship or stipend” is typically not eligible for discharge. > She maintained that the section of code did not define student loans or educational benefit, and that referring to a loan as an educational benefit would be “an unconventional way to discuss a loan.” The appeals court affirmed the lower court’s ruling, arguing the U.S. Bankruptcy Code did not prohibit the discharge of a private student loan in bankruptcy. > Some see the 2nd Circuit decision as hope for a loosening of the criteria in private student loan bankruptcy discharge. However, in June 2021, the U.S. Supreme Court refused to hear the case of a Texas woman who sought to have her private student loans discharged under a different standard — so it appears that the undue hardship requirement may still be in effect.