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Making student loans dischargeable in bankruptcy

[ 89 ] August 31, 2012 |

Student loans aren’t dischargeable in bankruptcy except under extraordinary circumstances. This unjust, inefficient, and socially destructive exception to the bankruptcy laws was extracted from Congress by shills for the financial industry, who in the 1970s began mounted an effective propaganda campaign based on classic Nixonland tropes about dirty hippies flipping off the man and then making millions off the system anyway etc. etc.

Getting rid of this exception is going to be a long hard political battle. A good place to start is with professional degrees in general, and law degrees in particular. The law school scam is in some ways an ideal launching pad for a campaign to make student loans dischargeable.

(1) More than any other supposedly respectable institutions of higher education, law schools have taken full advantage of the combination of federal loan financing and non-dischargeability to price-gouge naive students, through highly deceptive marketing practices, that would never be tolerated if engaged in by ordinary businesses.

(2) As a result, law school graduates carry truly extraordinary levels of student debt. A recent estimate puts the percentage of student loan debtors who carry balances of $100,000 or more in student loans as around three percent. Yet the average (mean) educational debt of people currently enrolled in law school is going to be about $150,000 at graduation.

(3) A professional degree that is a prerequisite for obtaining a license to practice that profession is a perfect candidate for discharge through bankruptcy. This is because essentially all of whatever net positive economic value that degree has is captured by whatever value it adds by enabling those who have it to obtain that professional license. This creates an opportunity for a simple, eminently fair trade: A graduate can give up his or her license to practice the profession in exchange for making the graduate’s student loans dischargeable.

Creating this opportunity would create real-world consequences for offering degrees that end up having negative net present value. (Omniscience isn’t a prerequisite for determining the net present value of an asset. A degree has negative net present value if the holder of it is at present willing to in effect give it back in return for consideration less than that which the holder paid for it. Obviously the right to discharge student loans in bankruptcy is much less valuable than actually getting your direct costs and opportunity costs incurred while attending law school refunded). In addition, allowing people to discharge student loans in exchange for renouncing their law licenses would begin to reduce the massive oversupply of lawyers in the American economy at present.

A law degree has economic value to the extent that the right to practice law has economic value. (It’s to say the least extremely unclear if a law degree is on net a positive on the typical law school graduate’s resume if that person isn’t practicing law). If holders of law degrees are willing to go to the extreme of renouncing the latter right, then what argument could there be for not allowing them to in effect treat the degree as a toxic asset, whose toxic effects should be able to be — very partially — ameliorated through bankruptcy?

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  1. Ramon A. Clef says:

    But a law degree != license to practice law. Granted, in most places the former is a prerequisite for the latter, but I don’t see how forfeiting the right to obtain a license is the same thing as “giving back a toxic asset.”

    Assuming, however, that the two are the same, doesn’t it sets a precedent that only those degrees which lead to licensing may be subject to bankruptcy discharge? How does setting such a precedent help someone who majored in History, for example? It’s not like you can “give back” a Bachelor of Arts in any meaningful way.

    • David Hunt says:

      I got the impression that Paul’s argument was that making law school debt dischargeable through bankruptcy was a foot-in-the-door tactic to start chipping away at the whole of student loans. So that would make the giving up the law license a method to make discharge more politically attractive. My impression was that Paul thought that all student loan debt should be dischargable and that law school debt was simply a place that showed reasons why that should be the case most graphically.

  2. Corey says:

    I seriously don’t understand how student loans can be made dischargeable at this point. Every liberal blog seems to love Tkacik’s piece, but no one seems to understand that the political tactic a lobby uses to get a law passed is not necessarily the reason the law was passed in the first place.

    Discargeability made sense in the era before widespread college attendance, when those who needed loans were likely to come from a certain class and – even if they needed financial help to attend college – likely had family that could pitch in in case of default risk. That functioned as collateral of sorts and the generally-smaller sums of money involved in student loans lowered the risk even further.

    Now everyone expects a spot in college, which is a good thing. But those “everyones” are now 18 year olds with no collateral and a much higher risk of default, not men of a certain class with rich uncles waiting in the wings to bail them out. If you’re a lender, you have to compensate by either raising interest rates or by making your loans non-dischargeable, and I’d say raising the price of education financing is the greater evil here.

    • Malaclypse says:

      Given that loans are federally guaranteed, that kind of shoots holes in your OMG RISK PREMIA!!! argument. Leaving untouched your assumption that “people of a certain class” would never engage in activity as déclassé as strategic default.

      • Corey says:

        I’m not talking about strategic default, I’m talking about normal, plain old, don’t have any more money default.

        The existence of a federal guarantee doesn’t reduce the overall default risk, it just reduces the risk of default from the perspective of the lending institution.

        • Malaclypse says:

          The existence of a federal guarantee doesn’t reduce the overall default risk, it just reduces the risk of default from the perspective of the lending institution.

          So, you are admitting that there is no risk from the perspective of the institution that you just claimed would be forced to charge a risk premium?

          • Corey says:

            No, the point is that someone has to charge some sort of risk premium (non-dischargeability guarantees, higher interest rates, or something) or potentially lose a ton of money.

            In your scenario (interest rates constant, loans dischargeable), it’s the federal government that loses a ton of money. Unless you think that there is no risk whatsoever in forking over upwards of six figures to 18-year-olds with no assets and no real plan to pay it back.

            • ajay says:

              The question wouldn’t even arise if the fees weren’t so fantastically high. Changes to bankruptcy law aren’t going to solve a problem created by the amazing greed of a generation of academics and administrators.

            • Scott Lemieux says:

              it’s the federal government that loses a ton of money.

              Your point being? I’d prefer more direct subsidies to education myself, but if degrees turn out to have substantially less value than they cost, one of the things government should do is ensure that the cost of this does not fall entirely on individuals.

              • David M. Nieporent says:

                Or, alternatively, we could have no subsidies, so that people would only pay as much as the value, and institutions would have to find a way to provide the service for that price.

                • John says:

                  Could you provide any examples of this model of higher education in actual practice?

                • Scott Lemieux says:

                  And post-secondary education would be mostly reserved for the affluent! What a wonderful world that would be.

                • Malaclypse says:

                  And post-secondary education would be mostly reserved for the affluent!

                  Minor correction: the children of the affluent. And if history tells us anything, it is that caste systems are the bestest, most fairest systems of all. You can almost taste the Liberty!

              • National Standard says:

                We’ll meet again,
                Don’t know where,don’t know when.
                But I know we’ll meet again, some sunny day.

                • RhZ says:

                  Boo hoo hoo. The poor government isn’t supposed to ‘lose’ money.

                  So I suppose disaster relief is no longer a government function, right? That’s the government ‘losing’ money.

                  Same thing for the military. Government doesn’t make money by supporting a standing army. Private companies do, though, and we call them parasites.

                  Same thing for government-backed science research. Government, ‘losing’ money.

                  Your argument is weak sauce, dude or dudette as the case may be, today.

                • National Standard says:

                  We’ll meet again,
                  Don’t know where,don’t know when.
                  But I know we’ll meet again, some sunny day.

            • Malaclypse says:

              In your scenario (interest rates constant, loans dischargeable), it’s the federal government that loses a ton of money.

              Okay, small words: you said banks would need to charge MASSIVE RISK PREMIA!!! to cover losses due to dischargeability. I pointed out banks would not lose any money under dischargeability, because of federal guarantees. That statement is a factual truth.

              And if interest rates rise, 1) it is not because of increased costs to banks, because of guarantees, 2) it is pure profit to banks, who are doing nothing but extracting rents, and 3) it will increase defaults, and costs to the government, because people got no jobs. People got no money.

              Now, the obvious economic lesson is to cut out the rent extractor, but that interferes with the Libertarian Solution of privatized profits and socialized costs.

              • Corey says:

                Yes, it’s a literal factual truth, but sort of irrelevant because of the way student loans are structured (private money, federal guarantees).

                I agree that it’d make a lot more sense for the feds to just loan the money directly – perhaps even at a loss, as Scott says – but that isn’t the system we have; my point was that under this system, some entity at some point in the chain has to charge some kind of risk premium out of economic necessity. These people weren’t snookered by Nixonland-style class warfare, although that may have played a part.

                • Malaclypse says:

                  under this system, some entity at some point in the chain has to charge some kind of risk premium out of economic necessity.

                  Or, as Lemieux points out, we can treat the ignored risk premium as a backdoor way to subsidize education.

                  Which is a side issue to the basic fact that you stated that banks would be forced to charge risk premia and interest rates would, of necessity, rise, which, for the eleventy-bagillionth time, was an incorrect statement on your part.

                  But keep fucking this walrus, if you want.

                • Corey says:

                  Which is a side issue to the basic fact that you stated that banks would be forced to charge risk premia and interest rates would, of necessity, rise, which, for the eleventy-bagillionth time, was an incorrect statement on your part.

                  Insofar as the federal government relies on non-dischargeability as a way of limiting its default liability, then yes, additional risk premia would have to be imposed to maintain a constant default risk. This is the system we have now, that Tkacik believes is the result of people being bamboozled by anecdata about hippie students making strategic defaults. I think it’s a lot more likely that the decision was about limiting the direct monetary costs of education; dischargeability wasn’t a big deal because the assumption was that there’d be jobs for people who graduated from college.

                  Now yes, if we had some other system, in some other alternate universe, where the feds had a higher tolerance for risk, we could strike non-dischargability and simply subsidize education by operating direct student lending facilities, likely at a loss. It’s a great alternate universe! One I like! But it isn’t the one we live in.

                • Malaclypse says:

                  Insofar as the federal government relies on non-dischargeability as a way of limiting its default liability, then yes, additional risk premia would have to be imposed to maintain a constant default risk

                  Only if you share the stupid, stupid assumption that government should be, somehow, “like a business.”

                • National Standard says:

                  We’ll meet again,
                  Don’t know where,don’t know when.
                  But I know we’ll meet again, some sunny day.

                • Murc says:

                  It’s a LOAN.

                  Loans are supposed to be paid back.

                  Not if paying them back involves being in debt peonage for the rest of your life.

                  Once upon a time, it did. Then we decided that, as a society, we didn’t support that, and allowed people to declare bankruptcy rather than treating debtors as criminals.

                • National Standard says:

                  We’ll meet again,
                  Don’t know where,don’t know when.
                  But I know we’ll meet again, some sunny day.

                • Murc says:

                  It’s not a crime to owe money.

                  Not anymore, no. It used to be, though. And the reason it no longer is, the rationale behind eliminating things like debtors prisons and allowing people to declare bankruptcy, is that people decided it was both morally monstrous and practically counterproductive to have people in debt peonage all of their days.

                • National Standard says:

                  We’ll meet again,
                  Don’t know where,don’t know when.
                  But I know we’ll meet again, some sunny day.

                • Murc says:

                  What lie?

                  I said that we allowed people to declare bankruptcy rather than treating debtors as criminals. That’s true, is it not? That’s… basically the reason we HAVE bankruptcy.

                • Malaclypse says:

                  Murc, you are forgetting: JenBob is a moron.

                • RhZ says:

                  I think Murc might be the most patient regular commentator on this site. I started to notice it after he and I got into a small scrum re: the scumbaggery of A Sullivan.

                  That’s a compliment, mind you. To Murc, not Sully of the leftist enclaves.

                • Murc says:

                  It’s not so much that I’m patient as that I’m pretty committed to the dialectic and that I often consider myself, in a public forum such as this one, to be writing for fence-sitting lurkers.

                  Which is maybe a little arrogant of me, I know, but way I figure it, it’s a win-win. If I’m arguing with someone in good faith, either I or they may come to some sort of insight, either about ourselves or our opponents. If I’m arguing with someone who is either a troll or a sociopath, being patient eventually exposes their insanity for all the world to see.

                  And to toot my own horn, probably the moment I’m most proud of here is back in 2010 when SEK tried to argue that Guinness couldn’t be considered an Irish beer, and patient questioning on my part sort of undermined his unspoken central thesis.

    • Furious Jorge says:

      Now everyone expects a spot in college, which is a good thing.

      I’m not so sure it is, actually. College isn’t for everyone, and there are a shit-ton of career paths that shouldn’t – and didn’t used to – require it.

      Discargeability made sense in the era before widespread college attendance

      So if college is so much more widely-attended now, why are the costs exponentially higher than they used to be? If higher education costs had followed a standard supply-and-demand type model for a normal good, the price to attend should have fallen.

      But what has happened instead is that costs have risen significantly. If widespread attendance had actually had the effect of driving down costs, then you might be on solid ground there.

      • liberal says:

        If higher education costs had followed a standard supply-and-demand type model for a normal good, the price to attend should have fallen.

        They seem instead to follow the model of goods which are in fixed supply, like land.

      • Confused says:

        ??
        If demand for college degrees has risen significantly over several decades, why should we be surprised to see prices rise?

        It seems more likely that increasing participation has been demand driven (higher willingness to pay for college because of increasing wage premium for college – because there are few decent jobs left without it) than that it has been supply driven.

        • Holden Pattern says:

          Aargh. Because universities (except for the profoundly corrupt bottom-feeder for-profit degree mills) ARE NOT FOR-PROFIT INSTITUTIONS. They don’t set market-clearing prices.

          Good lord, the last 30 years of propaganda have broken the brains of a generation.

          • Murc says:

            To be fair, even if you’re not setting a market-clearing price, if you’re suddenly providing your service to a lot more people than you were before, your costs ARE going to rise.

            However, you also are able to take economies of scale into consideration. While having twice as many students does require twice as many professors (or at least it ought to, if you have an interest in effective pedagogy) it doesn’t require twice as much of other stuff.

            • Holden Pattern says:

              Yes, costs rise, but they don’t get more expensive PER-STUDENT, which is what would happen if universities actually operated along the fabled demand curve.

            • RhZ says:

              Your costs are going to rise in absolute terms, but not necessarily in marginal terms.

              Here, we have the price of tuition, the marginal price paid, going up. So those are different terms.

              Plus, as you say, economies of scale. What is the additional cost of cramming another student into that 200 seat intro to poli sci?

            • Bijan Parsia says:

              While having twice as many students does require twice as many professors (or at least it ought to, if you have an interest in effective pedagogy) it doesn’t require twice as much of other stuff.

              Well, maybe? I don’t know that it’s proportionate in that way, esp. if you have a mix of staff (e.g., teaching focused and research focused…even if you think research intermingles with teaching usefully (as I do), it’s not necessarily the case that every teacher must have a heavy research aspect).

              Similarly, for many classes the marginal cost (in terms of teaching staff) of an additional student is low (e.g., many lecture classes; very small classes) or might benefit from technological or pedagogic innovation (inverted classes, peer assessment, etc.).

              Obviously, the core point that merely throwing double the students at existing teaching staff is unlikely to work out well is very true.

    • mpowell says:

      If college financing cannot be afforded with debt dischargeability then not everyone who pursues a debt financed degree needs one. Period.

  3. psp says:

    Little steps.

    Debtors with student loans face other problems besides non-dischargeability. It might be easier to work on fixing the problems caused by the 2005 Act means test first. This is an issue that only consumer bankruptcy lawyers face, and no one else seems to give a damn about.

    The Federal government has a strong tendency to make any debts to it non-dischargeable. Most taxes, fines, and a whole bunch of stuff related to the savings and loan crisis are non-dischargeable. Changing that will be an uphill fight. But, it shouldn’t be so hard to get chAnges to the Bankruptcy Code that make it harder to pay the loans.

    Alone among the non-dischargeable debts to the government, student loans are not incorporated into the means test and cannot be classified separately in a Chapter 11 or 13 plan.

    Oversimplifying (even if what follows does not seem like it), the means test does two things for debtors above the state median income. It determines whether the debtor is eligible for Chapter 7 liquidation, and sets the minimum amount of the Chapter 13 Plan if the Debtor is ineligible. Taxes, payments to secured creditors, and minimum living expenses are deducted from average gross income to determine if money remains to pay unsecured creditors. But, there is No deduction for student loan payments.

    As a result, a student loan payment can prevent a debtor from filing Chapter 7 even if there is no money after paying student loans to pay any other creditors. If forced into a 13 by the means test, the cases generally say student loans cannot be classified separately and continue to be paid. So, Chapter 13 forces a default on the student loans and the non-dischargeable obligation actually grows while the debtor’s plan payments are applied to other unsecured debt (think credit cards).

    In other words, it would be nice if the Bankruptcy Code didn’t make it harder to pay student loans as well as making the loans non-dischargeable.

    • Anonymous says:

      The 2005 Act was naked class warfare. There is no other way I can think of it, and the fact that it contains the phrase “Consumer Protection” in its short name is simply Orwellian.

  4. rea says:

    I don’t like the idea of requiring surrender of any law license as a requirement for discharge in bankruptcy. The last thing we need is to reinforce the barriers to entering the profession if you’re not already rich.

    • John says:

      Yeah, I agree. Basically, in exchange for bankruptcy, a person is supposed to agree to never use their degree ever?

      Firstly, this seems like it would make it harder, not easier, to end non-dischargeability for non-professional degrees. If the idea is that it’s a quid pro quo, how can you persuade people that others, who have no quid, should still be able to get the quo?

      And if we ever do get to the point where other student loans stop being non-dischargeable, will lawyers who want to declare bankruptcy still have to give up their license? Why?

      This feels like it’s creating a new injustice as much as it’s remedying an old one. Bankruptcy is already a pretty big trade off – in exchange for getting out of (some of) your debts, you ruin your credit score more or less forever, among other things. Paul is saying that in addition to this, people should have to give up their right to practice their profession. Obviously, some people have no interest in practicing law, anyway. But those people shouldn’t be the only ones to be able to discharge their student loans in bankruptcy. And I don’t see why we should be setting a policy that encourages people who do have an interest in practicing law to give up any possibility of doing so for a financial reward.

      • David M. Nieporent says:

        Moreover, the justification for professional licensing (of any sort) is supposed to be protecting the public: making sure that unqualified people don’t enter the profession. (Stop laughing at that! On paper, that’s the reason.) Given that, licenses should be conditioned on being qualified. Not on whether one pays child support, taxes, student loans, or the like, or anything else unrelated to ability to perform the job.

        • David M. Nieporent says:

          To be clear, I’m not saying that there oughtn’t to be sanctions for those things — I’m just saying that revoking a license shouldn’t be one of those sanctions. A license isn’t a reward, and yanking it shouldn’t be for punishment.

        • Lurker says:

          Actually, being financially afloat is part of “being able to perform a job”. At least in other civilised countries, bad personal finances can prevent a lawyer from getting into the bar. The lawyer will not be able to care for the client and to carry out his fiduciary duty, if he is underwater and lives hand-to-mouth. The temptation to play with client’s money is much larger then than if you are financially stable.

          • rea says:

            The temptation to play with client’s money is much larger then than if you are financially stable.

            Similarly, people without lots of money shouldn’t be allowed to work for McDonalds, due to the temptation to steal food.

            • Just Dropping By says:

              I know you think you’re being clever, but AFAICT, the attorneys who steal their clients’ trust accounts are overwhelmingly the guys scraping by on nickle and dime legal practices, not the successful firms. It’s because attorneys virtual never set out to deliberately steal clients’ funds, but rather because their practices hit some sort of financial snag and they think, “I’ll just ‘borrow’ a few thousand bucks from the trust account to cover my costs right now and I’ll repay it next months when [fill in the blank fortuitous event] happens,” and in a solo practice or small firm, there typically aren’t many (if any) accounting controls in place to prevent that kind of behavior.

            • L2P says:

              I don’t think the fry cook at McDonalds is a hamburger fiduciary for the guy ordering a big mac. And that fry cook has a bunch of assistant managers and shift leaders watching over. But yeah, nice analogy.

              Lawyers are different from other professions. They act like insurer/banker/consultants. Would you deposit your savings at a bank where every employee had a negative balance in their checking account? How could you possibly trust them?

          • jalrin says:

            Are you out of your mind? If this rule were adopted, then any financial setback would make people unemployable. How are people ever supposed to recover if they are deemed unemployable because they are too poor to be trusted to work? Does no one fear God anymore?

            • Informant says:

              While I would agree with your point in the abstract, there’s a very strong argument for treating people in fiduciary positions (lawyers, accountants, etc.) differently because of the amount of power they can wield over their clients’ lives and money.

            • Hogan says:

              too poor to be trusted to work

              It’s not that; it’s “too poor to be trusted to handle other people’s money without supervision.” Most work doesn’t involve that.

              • jalrin says:

                So if you go to work in one of these fields and have any sort of disaster hit you, your life is over because we now punish on suspicion? A society that writes people off because it is convenient to just get rid of people instead of taking actual measures to protect our client’s money is not one I want to be a part of. Besides, it is not as if there are not measures that the Bar can take to prevent embezzlement (the state I practice in has procedures to to monitor trust funds and strengthening them would be a much more effective strategy than just guessing poor = crook.

    • psp says:

      Defaulting on student loans is already a reason you can lose your license in NJ.

    • Anonymous says:

      I theoretically agree, but in practice, with today’s market, I’m with Paul.

      There’s a lot of people in law school, or recently graduated, who would gladly make that trade right now. They have tons of debt and no realistic chance of paying it off as a lawyer, and if they could just wipe the slate clean they would.

      Having been involved in the last big bankruptcy reform I can tell you there’s zero chance of getting all student loans made dischargeable, but there’s some support for making loans dischargeable if those deadbeats lose something. This could actually work, and make people’s lives better.

      • Nathanael says:

        All student loans need to be dischargeable.

        I don’t think the people in political power understand the level of social toxicity of the situation they’ve generated. This is the sort of situation which generates armed overthrow of the government. Yes, the bright young students in debt peonage will try other things first — political campaigns, etc. — but eventually they are precisely the class of people who usually start revolutions.

        Fucking with them was a bad, bad move.

  5. Njorl says:

    A good place to start is with professional degrees in general, and law degrees in particular.

    This is politically inconceivable. Even with the forfeiture of the potential license, it is so easily demagogued that it will never go anywhere.

    If you want to sell it, start with medical school bills for people who can’t qualify as doctors. You can sell that as removing a deterrent to qualified people going to med school. You can argue that people who would be good doctors are not going to med school for fear that they may not make it, and would have six figure debt to deal with.

  6. Nicholas says:

    I think law schools and medical schools themselves need to shoulder more of the risk of student loan defaults. That is, students should be able to discharge their loans in bankruptcy and the law school should have to eat some of the discharged loan.

    As it is, law school is almost entirely divorced from preparing students to be practitioners. If law schools had some skin in the game, they may be more likely to prepare students and we might see a decrease in the number of J.D. mills.

    • Law Spider says:

      THIS. The internal raison d’etre of the bottom-50 to bottom-75 law schools are, in most cases, to fund other University programs; that is the known, indisputable reason for the acceleration of tuition. If the universities were forced to shoulder 40-50% of the discharged debt, most of those schools would disappear and higher ranking schools would be more cautious about larger entering classes and increasing their tuition.

  7. Dave says:

    The congressman I work for sponsored a bill to make private loans dischargeable. It didn’t get a ton of support. But there’s at least someone trying to get something done on this issue.

  8. RhZ says:

    So here is how I see things:

    Government gives a great sop to the banks. They give out the loans, their risk is non-existent because of Fed guarantees. That’s free money for them, period.

    So what do they do? They take that free money, send it to the lobby shops, and push to make the loans non-discharageable.

    Now, on top of their free money, they get to go after the defaulters even though they already got paid the principle and the interest by the Fed.

    Wow. There is a lesson here, if I could just put my finger on it…

  9. chris says:

    More than any other supposedly respectable institutions of higher education, law schools have taken full advantage of the combination of federal loan financing and non-dischargeability to price-gouge naive students, through highly deceptive marketing practices, that would never be tolerated if engaged in by ordinary businesses.

    My sympathy for this is, I admit, slightly impaired by their desire to enter the profession that *invented* the “it’s all there in the contract, so don’t blame us if you misunderstood the thing we deliberately designed to be incomprehensible and then lied to you about what was in it” doctrine.

    Sauce for the gander, and all that.

    …So maybe we shouldn’t start with lawyers; start with someone more sympathetic and then generalize, sweeping the fact that this includes lawyers under the rug.

  10. For our economy to recover, it is vital for student loans to be discharged in bankruptcy. It is absolutely discriminatory to allow all other forms of debt to be discharged in bankruptcy except for student loans. Post-bankruptcy, people will be able to flourish and the economy as a whole will improve drastically. Unfortunately, too many people are overburdened with debt resulting from student loans.

  11. [...] Guns, and Money details why you should be able to discharge student loans in bankruptcy. While I won’t take a stance on the author’s claim, I am heartily in favor of more [...]

  12. [...] has become much more savage. It says a lot about contemporary American politics that law students can have their lives ruined by undischargeable debt while the executives of a failing company can use bankruptcy laws to line [...]

  13. Charles Lundquist says:

    I am almost 58 years old, unemployed, and currently under extreme economic financial hardship and unable to pay the total of over $50,000 on a secured government Stafford guaranteed student loan from the fall of 1984 to the spring of 1986 while attending the SUNY Binghamton Watson School of Engineering graduate school attempting to get a master’s degree in computer science. I don’t see my situation getting any better in the near future. This guaranteed student loan has ruined my Life. I originally received this guaranteed student loan from Marine Midland Bank in Johnson City, New York in September, 1984. After I defaulted on this guaranteed student loan on April 1, 1989, the New York Sate Higher Educational Services Corporation (NYSHESC) took over the loan. I was making small payments to NYSHESC; but they sold me this sold this guaranteed student loan to the Educational Credit Management Corporation (ECMC) in October, 2009.
    I attended SUNY Binghamton as a part-time non-matriculated student from the fall, 1982 semester to the spring, 1984 semester. In the spring, 1984 semester, I asked the Chairman of the SUNY Binghamton Mathematics Department, Shelemyahu Zacks, to admit me into their undergraduate Bachelors Degree Program in Computer Science because I had a 3.60 GPA. I was unfairly denied by both Binghamton University Mathematics Department and NYSHESC to get a Bachelor’s Degree in Computer Science because I already had a Bachelor’s degree in General Studies from Oneonta State College in 1977. One undergraduate computer science college professor named James Ryder wrote on my last program in my very first undergraduate level introduction to computer programming class (CS 130) in the summer of 1982 semester, “This is probably the best program I graded all semester and I am saying so after looking at about 150 programs. If you keep this pace up you’ll be out with a 4.0!” I still have this final computer science program written in Pascal computer language on green and white perforated print paper from an IBM 370 mainframe computer from the spring, 1982 semester. The Binghamton University Mathematics Department Chairman, Shelemyahu Zacks, told me that I didn’t qualify to pursue a 2nd Bachelor’s Degree in Computer Science at the SUNY Binghamton Mathematics Department because I already had a Bachelors Degree in General Studies – Liberal Arts from Oneonta State College of New York in 1977. I just wanted to get a 2nd Bachelor’s Degree in Computer Science; but the Binghamton University Mathematics Department said I had to get a Master’s Degree in Computer Science instead even though I had never taken 1 class in Computer Science while I attended Oneonta State College from the fall of 1973 to the spring of 1977. I received a Bachelor’s Degree in General Studies from Oneonta State College in December, 1977. I found Dr. Shelemyahu Zacks, the SUNY Binghamton Math Department Professor who refused to accept me into the School of Mathematics B.S. in Computer Science Program because I already had a Bachelor of Arts in General Studies from Oneonta State College in 1977 and instead recommended that I pursue a Master’s Degree in Computer Science at the Watson School of Engineering back in 1984:
    http://www.math.binghamton.edu/shelly/
    I didn’t think I was qualified to pursue a Master’s Degree in Computer Science at Binghamton University in the first place; but was told that this was my only degree option by both Binghamton University Mathematics Department and NYSHESC. I was accepted into the Watson School of Engineering Graduate School Master’s Degree in Computer Science program on July 23, 1984. I told some of my Watson School of Engineering professors from 1984-86 that I didn’t think I was qualified to pursue a Master’s Degree in Computer Science; but they all told me not to give up. After 2 years of studying Computer Science at Binghamton University at the graduate school level I was told that I didn’t meet their minimum standards and was discharged from their program on August 12, 1986. I requested an incomplete grade in my final 2 classes at the Watson school of Engineering in the spring, 1986 semester and the teachers agreed to let me do that in order to have more time to catch up; but the Chairman of the Watson School of Engineering, Thomas Piatkowski, refused it. I received a letter on August 12, 1986, that I was discharged from the Binghamton Watson School of Engineering for failing to meet their minimum requirements. In retrospect, I think that Binghamton University and the NYSHESC just wanted me to spend twice as much money as a graduate student to try get a Computer Science Master’s Degree rather than allow me to get a Computer Science Bachelor’s degree. When I was working as a senior product technology specialist at Circuit City in Vestal, New York, in 2005, I once met a Circuit City customer named Victor Skormin, who told me that he was the Director of Information Technology Studies at Binghamton University Watson School of Technology at the time. I told him about my experience at the Watson School of Technology from 1984-86 and his response to me was, “Back then, they accepted anybody. You were used as a guinea pig. Maybe someday you can use that knowledge to help your children”. Victor Skormin wasn’t there when I attended the Watson School of Engineering; but I thought it was interesting to see that the culture of the there hadn’t changed. On July 1, 2012, I wrote a letter to the Watson School of Engineering and Applied Science and asked, “Please tell me what are the minimum requirements for acceptance for admission to pursue a Master’s of Science degree in Computer Science at the Watson School of Engineering graduate school studies program”. I received a letter response from Leslie C. Lander, Associate Professor and Director of the Graduate Studies for Computer Science in the Department of Computer Science with the Binghamton University letterhead saying that you have to have taken and passed: CS 110, CS 120, CS140, CS 220, CS 240, Math 314, and CS 375 which could take 4 semesters. Provided these courses are all passed with at least a B grade, admission to the MS program would normally follow and the MS program takes 3 or 4 semesters”. I took a CS 342 class from Leslie Landers in the spring, 1986 semester and requested an Incomplete grade from him. He said that he would give me an Incomplete grade; but the chairman, Thomas Piatkowski, over-ruled this and I received a F grade instead. I also received a F grade in CS 328 in the spring, 1986 semester. The only Computer Science classes that I completed as an undergraduate from the spring, 1982 semester and spring, 1984 semester were: CS 120, CS130, and CS 212. I should never have been accepted into the SUNY Binghamton Watson School of Engineering Graduate School in the fall, 1984 semester because I didn’t have the minimum requirements to be accepted. I had no chance of succeeding without the necessary 6 background Computer Science classes. I had only completed 3 Computer Science classes. I should have been allowed my NYSHESC and SUNY Binghamton to pursue and complete a Bachelor’s degree in Computer Science, rather than pursue a Master’s degree in Computer Science. I found the document from 1984 explaining what the requirements for admission into the Thomas J Watson School of Engineering for the Master of Science in Computer Science requirement were back then. The undergraduate pre-requisites were: CS 200 Programming, CS 212 Intro to Computer Architecture, and SS 200 Fundamentals of Math. While I was at Oneonta State College and Binghamton University as an undergraduate, I had never taken any 200 level Computer Science or Math classes. I don’t think that I was qualified to be accepted into the Binghamton University Watson School of Engineering Graduate School studies program and was just talked into doing that by Binghamton University Mathematics Department Chairman, Shelemyahu Zacks so that I would have to pay twice as much money to get a Master’s Degree in Computer Science, when all that I originally wanted was a Bachelor’s Degree in Computer Science.
    I have never made enough money to have a successful marriage or have any children and the 1 wife that I did marry left me 1 year ago after the Educational Credit Management Corporation began to garnish my wages 15%. As a result of never being able to receive a Computer Science College Degree, I have never been able to obtain a good paying entry level job as a Computer Programmer or any Information Technology related job. I was earning only $10.20/Hour working a 40 Hour full-time work week (and sometimes less than that) for a total annual average salary of $21,216 working for Apex Systems, Inc. as a technical support specialist sub-contracting for Unisys technical services as a Computer Field Repair Technician sub-contractor. I didn’t receive any employee benefits like vacation pay, sick pay, standby pay, or paid time off. I had to drive my own automobile at my own expense (gasoline, repairs) while averaging driving over 1,000 miles/week. The Educational Credit Management Corporation (ECMC) was garnishing my wages at 15% which reduced my hourly wage from $10.20/Hour to only $8.67/Hour while trying to pay back a guaranteed student loan of over $50,000 from over 28 years ago. I don’t have a 2nd form of income and my wife left me on November 26, 2011. Because of the passage of time of 28 Years that has occurred since I attended the SUNY Binghamton Watson School of Engineering as a Masters Degree candidate in Computer Science back in 1984-86, the inability to find a good paying job with benefits, deceased parents, my economic undue hardship, my current age of almost 58 Years old, slim prospects of ever paying back the Guaranteed Student Loan of over $50,000 in this lifetime, I request that this Guaranteed Student Loan be forgiven so that I can have a second fresh start chance in life. It now appears hopeless that I will ever be able to pay back this Guaranteed Student Loan and I don’t see my situation getting any better now. I never intended to abuse the US federal Guaranteed Student Loan program. I also really don’t think that the US federal Guaranteed Student Loan program was really designed to financially ruin economically poor college students who were just trying to better educate himself to get a better job for the rest of his/her life? Some form of relief has to be necessary for honest debtors who are unable to service their student loan debt in order to free hard working debtors to once again become responsible and productive members of society. Despite the fact that I will never have any chance of repaying this guaranteed student loan from over 28 years ago, no lawyer will even attempt to help me declare bankruptcy on this loan. I think that this is a violation equal protection clause of the 14th Amendment of the US Constitution which says, “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” In my opinion, the bar to qualify for bankruptcy protection shouldn’t be higher for college students on a government secured loan than it is for any other US citizens on a private unsecured loan. This is a discriminatory practice on students. A pre-eminent bankruptcy scholar made precisely this argument under oath before Congress. In December 1975, when Congress was debating the first law that made student loans non-dischargeable in bankruptcy, University of Connecticut law professor Philip Shuchman testified that students “should not be singled out for special and discriminatory treatment. I have the further very literal feeling that this is almost a denial of their right to equal protection of the laws … Nor do I think has any evidence been presented that these people, these young people just beginning their years on the whole should be singled out for special and as I view it discriminatory treatment. I suggest to you that this may at least in spirit be a denial of their right to equal protection with the virtual pole star of our constitutional ambit.” By 1977 even the American Bankers Association had joined the conference of bankruptcy judges in lobbying – formally, anyway – against the cruel and unusual punishment of making student debt non-dischargeable. As James O’Harra, the congressman who had commissioned the GAO study, pointed out in his testimony, to enact such a law would be tantamount to “treating students, all students, as though they were suspected frauds and felons” while according arbitrary second-class creditor status to “the grocery store, the tailor or the doctor to whom the same student may also owe money.” In 1978 the House of Representatives voted to pass a bankruptcy reform bill that specifically restored student loans to their original status as equivalent to any other form of unsecured debt. According to The Project on Student Debt, it estimated that two-thirds of college seniors who graduated in 2010 had an average of $25,250 in loans. The current School Loan System is not a sustainable economic system, it creates debt slavery and it cannot continue. Student loans are quickly becoming like the current subprime mortgages. Forgiving all school loans is the only way to end the crushing burden of “boot to throat” debt.
    I have been unemployed since July 30, 2012 when I was released from my contract as an Apex Systems/Unisys Subcontractor Computer Field Repair Technician after working for 3 years and 11 months and am currently receiving $301/week in Unemployment Insurance. I have sent out 90 resumes looking for employment since then. This happened to me after filed a complaint with the New York State Department of Labor Standards Investigator, Philp Pisani, for unpaid labor because it was taking me about 2 hours every Saturday to enter my hours worked, miles driven, and expenses on 3 different payroll web sites. This decision was ruled in my favor because it was determined by the NYS Dept. of Labor Standards that I was legally an “hourly employee” and not really a “sub-contractor” worker. The week after this decision, my work hours went from 40+ hours/week to only 16.5 hours the week after the Memorial Day Weekend until I was released from my contract on July 30, 2012. I asked if this was “employer retaliation”; but was told that Phil Pisani had resigned because of retirement. After I lost my job as an Apex Systems/Unisys Computer Field Repair Technician subcontractor on July 30, 2012, I was collecting $301/week unemployment insurance and received $200/month in expedited emergency food stamps. On August 28, 2012, I received a letter from the Broome County Department of Social Services saying that my food stamps were discontinued on August 24, 2012. I have spent the $200 in food stamps that I received. They said that I don’t qualify for any more food stamps because they said that my countable monthly income of $1,304.33 is more than the limit of $1,180.00. Actually, $301 x 4 = $1,204. I have emailed about 84 resumes; but the Information Technology jobs all require at least a Bachelor’s Degree in Computer Science, which is all that I ever wanted to get in the first place back in 1984. The only jobs that I seem to qualify for are those that just require a high school degree and pay a little above minimum wage. I don’t see my situation getting any better in the near future. Any assistance that you can provide to me in this matter of getting this student loan debt discharged would be greatly appreciated. If you aren’t able to provide any assistance to me, then please let me who can? The bankruptcy protection option on government-secured student loans must be restored the way it used to be to prevent them from ruining other student’s lives like they have ruined mine

  14. Tim says:

    I would give up my law license in a New York minute if I could obtain discharge of my law school loans in bankruptcy – but I want to obtain discharge of my MBA loans as well!!! Both are pretty much useless degrees these days.

  15. recruiting says:

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    Making student loans dischargeable in bankruptcy – Lawyers, Guns & Money : Lawyers, Guns & Money

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