For how long have student loans been non-dischargeable in bankruptcy?

I had heard that back in the 1970's a small number of graduates who were gainfully employed as lawyers and doctors gamed the system by declaring bankruptcy and having their loans discharged. Hence the laws were changed. But I have yet to see any evidence that this actually happened. All I have heard are the anecdotes.

I can see the logic: a car or a house can be repossessed, a college degree that has already been earned cannot be revoked for financial reasons. If loans could be discharged in bankruptcy that would add an element of risk to those loans for the lenders that does not presently exist. After all, the government insures all student loans, ensuring that the lenders will ultimately get paid. If student loans could be discharged, the result would be that banks might be more stingy about making the loans in the first place or the government would no longer automatically insure all student loans. Then again, that might not be such a bad thing.

This scam of loading down people with students loans is another part of the out of control financial industry (or should I say crime wave.)

Or, at the very least, certain educational paths most important to the well-being of this country should be free to those who are qualified and able to pursue them.

I know that my NDSL loans weren't dischargeable in most bankruptcies. It was spelled out in the paperwork.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=1733662&mesg_id=1733698

Knowing that you have signed up for indentured servitude is one thing, but what about those who didn't know that when they signed for the loans?

It is really shocking to think that this has happened here in America.

You're making a very different (and good)point.

But with Fat Tony and his gang at SCOTUS, it isn't likely to go very far.

the Bush administration. I'm not sure of the exact year.

There was a change.

http://money.cnn.com/2005/04/20/pf/bankruptcy_bill/

BAPCPA amended § 523(a)(8) to broaden the types of educational ("student") loans that cannot be discharged in bankruptcy absent proof of “undue hardship.” The nature of the lender is no longer relevant. Thus, even loans from “for-profit” or “non-governmental” entities are not dischargeable.

http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act

with no intention of paying them back.

I knew 3 or 4 people who openly said they wouldn't pay their student loans. At the time student loans did not figure into credit ratings and they didn't pursue them.

If you don't pay them now, you can not receive an income tax refund.

They tried to Garnish my Social Security Disability check, but I found a lawyer to take my case pro bono and had my Doctor certify me as permanently and totally disabled. It took two years, but my Student loans were finally discharged because of my disability. Also during the court proceedings the judge stopped my Social security check from being garnished waiting the outcome of the trial.

The lenders can require a cosigner, a lein on property, etc. to insure that the borrower is incented to pay the loans back.

Lending money to the parent/guardian/associates of the 18 year old may or may not be a good idea.

If the government is going to give money away, it should be for scholarships in areas where we need more qualified workers.

I didn't make the rules, but I took the loans and paid them back.

From 77 - 81 and never had anyone sign for me.

$10K was a lot of money at the time. Now kids think nothing of $100K

The whole scam is out of control. On all fronts.

Actually, where I grew up it was the prevailing attitude. Most of the people I knew had their college paid for by their parents, and they thought their parents were insane for paying the loans back. Those few people I knew who had to get their own student loans had no intention of paying them back and were pissed off at their parents for not being able to get the loans for them to begin with.

What was really unusual is that they didn't feel the same way about other kinds of loans like a mortgage or car loan, etc. Those they believed should be paid back. Even more unusual is that for some reason the prevailing attitude was also that student loans should be thrown out the window if one attended a college or university, but those student loans for some other kind of higher education should be paid back. I clearly remember trying to argue this point with a table full of people at school because I couldn't for the life of me see the difference between a student loan for a university and a student loan for, say, an electronics school or hairdressing school... or for that matter the difference between a student loan and a car loan, mortgage, etc. They looked at me like I was a nut. But not a one of them could even begin to explain why they felt there was any difference though I clearly recall how they looked at me like I suddenly sprouted several additional heads.

I probably remember this because it was the turning point to not really hanging out with them anymore... it was sort of the catalyst that made me realize that my attitudes about things and theirs were usually very far apart, and that frankly, they were stuck up nasty people for the most part. After that I became rather a loner. Still am, generally speaking.

But with hardships attached to it.

Sadly, Delaware (along with South Dakota) is a haven for credit card issuers to incorporate because of their lax banking rules. And yes, our very own VP was at the forefront of pushing this through. Back then we referred to him as Biden (D-MNBA)

(MBNA is now part of Bank of America)

that possibly had to do with education was during the Bush regime -- 2005 I think.

http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act

I do note correction on the timing of student loans vs the Protect the Credit Card Issues act in the Clinton era.

Love Joe, but still hold a grudge against him for that one. Only one I have against him, so there is that.

"Effective October 8, 1998, your obligation to repay Title IV, HEA student loan and grant liabilities can no longer be canceled (discharged) due to bankruptcy, unless you can successfully prove that repayment of the debt would cause "undue hardship" as defined by case law in your jurisdiction."

It was exactly the behavior you describe that led to the changes in the law.

That said, there is technically a hardship exception, but it's extremely difficult to qualify for. You pretty much have to be totally disabled to get it in most jurisdictions. In some jurisdictions, a bankruptcy court judge might discharge a student loan if there is essentially no chance that the person will be able to ever pay it prior to retirement.

I agree with the change in the law, there are a lot of people out there asking the rest of us to pay for educations that will be financially useless.

DH has student loan money taken out of his SS Check. He earned the degree in 1994 and he is 65 now and drawing Social Security.


It's not a joke.

with a bank as the mediary. And the government has a great amount of power to collect on debts owed to them. Don't screw with the IRS or student loans, these cannot be shaken, even in a bankruptcy.

But then again, if one student does not pay a loan back, that means that money is not available to the next student. It really hurts the students coming down the line when these loans are not repaid.

That was under Bush I or Clinton. People who had defaulted and were past the old 7 year statute of limitation and bought property got caught thinking they were clear.

The time period to file for bankruptcy went from 5 years to 7 years to never. The effect is to recreate indentured servitude for those who had problems repaying the loans.

Considering that people had come here from other parts of the world to escape indentured servitude in the past, the student loan laws are very unAmerican.

... is the RIDICULOUS cost of a college education. It's like health care where they just name their price and because of supply and demand they can get away with it. For now.

Typically, they blamed the victims: The students who couldn't get good jobs with their educations. They talked about doctors and lawyers not paying, when in reality it was people who didn't finish degrees, or had other problems. I met a waitress who still had problems from some beauty school she attended.

Yes, education does cost too much here, but the loans themselves inflate the price, just like easy credit inflated the housing market. In Europe the cost is less, and in some places the students are actually paid to get their degrees. The idea is that it enriches the nation as a whole if their are educated people, so it should be encouraged and rewarded.

Imagine that?

...due to misappropriation of tuition monies (often due to trade school fraud), school closure, or some other situation which leads to the inability of the student to complete his or her studies, which have supposedly been paid for by the loans: do not give up fighting, even after they place you in default and are threatening to garnish wages, or have already stolen tax refunds from you.

I was in that situation, for over 16 years. The State of California Student Aid Commission refused to do anything about the fact that I had been defrauded by a trade school, whose owner stole much of the tuition money and transported it to his home country of India, which ultimately forced the closure of the school.

The original loan amount was around $6000.00 (for a nine month, full-time audio/video recording engineering program), but 16+ years later, even after garnishing my tax refunds, they still wanted over 20 Grand, due to (usurious) interest rates and penalties.

I appealed the State's decision, year after year, and finally moved up the food chain to EdFund (Federal regulator of student loans), and after almost two decades, the loan was discharged. The over $4000.00 taken from tax refunds I should have received during the period of time I contested the legitimacy of the loan debt, was fully refunded to me, (without interest of course), thanks to the EdFund decision.

So, if you think you've been defrauded, and can make a case, do it. You have nothing to lose, but maybe a lot to gain.

anything but a high-paying corporate job once they've taken on a six-figure debt to pay for their education? You almost need to treat college like a vocational / tech school for it to make any sense anymore. We need to do more to make education affordable for everyone.