Sunday, June 26, 2011

College Debt Freedom?

It is said that the amount of college loans in the System amounts to approximately $1 trillion. It is also said that small debts are a risk to the borrower, whilst many are a risk to the lender. Therefore, it is in the ideal interest of not only the great many college graduates struggling to balance their food, shelter and fun needs, as well as their debt burden, but also of the familiar international financial institutions, who— surprise-surprise—over-lent, to reach some sort of sensible payment accord.

Today there is legislation in both the Senate and the House to “restore fairness” in private student loans by treating them “in bankruptcy the same as other types of private debt.” The bill is introduced by U.S. Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI) and Al Franken (D-MN) today joined U.S. Representatives Steve Cohen (D-TN), Danny Davis (D-IL), George Miller (D-CA) and John Conyers (D-MI).

An article posted at Senator Durbin’s .gov website states:

Before changes were made to the bankruptcy code in 2005, only government issued or guaranteed student loans were protected during bankruptcy. This protection has been in place since 1978 and was intended to safeguard federal investments in higher education. Today’s bill would restore the bankruptcy law, as it pertains to private student loans, to the language that was in place before 2005, so that privately issued student loans will once again be dischargeable in bankruptcy.

In a culture where a college degree is celebrated as the surefire way in which to get ahead in life, protections and safety nets must be in place when graduates soon realize that, in fact, their college degrees are a dime-a-dozen, and not worth the thousands they now owe. Instead, they work menial jobs for meager wages or find themselves learning skillset’s anew, on the job, and often in the capacity of “intern.”

Representative Cohen said:

People who seek higher education to better their futures should not be dissuaded from doing so by the threat of financial ruin…The bankruptcy system should work as a safety net that allows people to get the education they want with the assurance that, should their finances come under strain by layoffs, accidents, or other unforeseen life events, they will be protected. My bill takes a modest but important step in achieving this goal.

Durbin introduced such legislation in 2007, and Congressman Cohen held a hearing on the dischargeability of student loan debt during bankruptcy in September 2009.
Said Senator Whitehouse:

By repealing special treatment for private lenders, we will hold big banks accountable, protect young people from abusive lending practices, and provide relief for graduates trapped by loans that can too often carry high interest rates and unfair terms.

Unlike government loans, private loans do not include interest rate caps, flexible repayment options, and limited cancellation rights. College loans are managed in a perverse way by big banks, who take advantage of the lack of life experience among young people in order to saddle them with debt. This serves two purposes: Either to extract wealth from baby-boomer parents who must foot the bill or towards the same outcome from those students who must pay-back the loans by themselves. Many students, with the average college debt between $20,000-$60,000, end up being asked to pay back money that cuts into their ability to shelter themselves, feed themselves, and thus begin upon a path of financial independence and family-building.

Few debts are held to such a standard by bankruptcy law, wherein discharge is only allowed in the most “extreme circumstances.” The bankruptcy code makes it especially difficult for people to escape child support responsibilities, overdue taxes, and criminal fines. College debt ought not be lumped in with these debts.
This legislation is supported by 35 groups and organizations:

The American Association of State Colleges and Universities, American Council on Education, American Federation of Teachers, Americans for Financial Reform, Consumer Federation of America, Consumers Union, The Institute for College Access and Success, National Association of Student Financial Aid Administrators, National Consumer Law Center and U.S. PIRG.

To paraphrase that which monsieur Max Keiser has recently said: people used to work for money, today they work to go into debt. This is a paralyzing social structure, not only for the individual, but for culture itself.

The bill is indeed a small step, and there is little awareness, among the public, of its presence in both houses. For such legislation to move forward, and help to create a nationwide movement intent on bankrupting the illimunist financial conglomerations, students must be aware of those attempting to protect their financial livelihoods.

There are many methods of paying back student loan debt. The only accepted one is to simply pay. But, there are other options. As the dollar weakens, for example, an indebted student will, later, have the opportunity to pay-back loans in cheaper dollars. Furthermore, commodities such as gold and silver offer interest rates that outpace the interest rates on many student loans.

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