Posted 5/04/2010 08:27:00 PM by Douglas

I whined a while back about people in over their heads with student loans and how the mean old banks won't let them walk away from them, even if they declare bankruptcy. Well help is on the way, and sadly, it's not debtor's prison.

Hundreds of thousands of Americans who fall behind in their bills and seek refuge by filing for bankruptcy get a distressing surprise: If they are willing to ruin their credit for years, they can walk away from their houses, turn in their cars, and wipe out their credit card bills, but they typically can't erase a penny of their student debts.

Is this the problem, or the solution? To get a mortgage, car note, or hell, even a credit card with a $500 limit, you have to show some sense of financial responsibility. They're not just going to give you the money if you could just walk away from it. Student loans aren't so. Anyone with a pulse can get several thousand (sometimes hundreds of thousands) in student loans. If you're going to give a 19 year old kid more than your median Texas home price for nothing more than their signature, shouldn't they come with a few more strings attached?

The government reports that 6.7 percent of those who took federal student loans in 2007 have already defaulted, up from 4.6 percent in 2005. And many analysts predict more Americans will have trouble paying their student loan bills in the coming months.

Wow, what a groundswell of defaults. Up over 2 whole percent during the worst economy since the great depression. If only we had a liberal senator talking about "this economy" and offering some help with other people's money. Al Franken?

"In this economy, we want to be encouraging people to invest in their education and their future," Franken said in a press release. "That's why it is more important than ever for people to be able to get a fresh start."

Great. Tell every 18 year old they can borrow as much as they want and get a fresh start after bankruptcy. What a great way to invest in your education.

Except it won't work that way. The only reason this money is so easy to get in the first place is because you can't default on it. Let kids just walk away, and banks will have no choice but to turn off the tap. So instead of it being available and forcing people to go to school and get a job to pay back their student loans, you've made it impossible for them to get the money. Bravo, douchebag. But how did this law come about?

When people with private loans found themselves in financial trouble and filed for bankruptcy, judges lumped those with other private debts such as credit cards, and often wiped the slate clean.

That changed in 2005, when an anonymous Congressman--no one has publicly claimed credit yet--slipped an amendment into a bankruptcy reform bill that made all private student loans, even those already made, as inescapable as federal student loans.

An anonymous Congressman? Can anyone slip language into Congressional bills? Maybe it was the janitor? What can we do about it?

TICAS president Lauren Asher noted that lenders can wipe their own books clean of bad debts by simply writing them off.

Well shit, why didn't I think of that?!? Just write it off. I wonder if the TICAS president even knows what that means. This is all sounding like a bad Seinfeld routine:



Just write it off!