Originally Posted by
nicholasblonde
The Dems actually had it in the last higher ed reauthorization act to include private student loans as loans that could be discharged in bankruptcy (they currently are not). The Repubs blocked it, but it almost made it in there. Apparently their argument was that it would make private student loans harder to obtain and more expensive, but the statistics don't really support that claim...most people w/ private student loans actually do pay them off pretty quickly and on-time (but then again, most people don't become pilots after college!!!)...maybe they should have had the "pilot bankruptcy authorization act."
I agree that they student loans not be dischargeable in BK. Nobody would ever be able to get another student loan without parents who are wealthy and willing to co-sign. Here's why...
Most loans issued to consumers incorporate three things that give the lender confidence that he has a good chance of getting repaid...
1) Credit history...most borrowers have one, and they want to keep it intact.
2) Collateral, most large loans involve assets which can be repossesed if needed (car, house, widescreen TV, etc)
3) Employment...ie source of income.
A typical student has none of these when he applies to college, so a lender would have no collateral, no wages to rely on, and no history of financial responsibility (or any other responsibility for that matter).
But it gets worse...a bankruptcy only stays on your record for seven years. The obvious thing for many new college graduates with a large debt would be to NOT find a job, but pretend to be looking. After a few months they could declare BK, and discharge their student loans...since they own nothing (or have hidden anything they do own), the student has nothing to lose. By age 30 when they might want to buy a house the BK is off their record, and they can get on with their life...debt free!
There would be enough bad apples jumping on this opportunity to ruin it for everybody else.