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Could someone explain why private student loans are unregulated yet still benefit from the bankruptcy exclusion?

A

AndrewR

Lifer
Private student loans are garbage, first off. However, given the unreasonable monetary limits of federal loans (Stafford, Perkins), they are becoming necessary for many to attend college and particularly graduate school.

However, I am troubled by the fact that interest rates on these private loans are not regulated, yet the loan holders benefit from the exclusion from bankruptcy protection. I can understand why federal loans would be protected since they have a lower interest rate and certain protections for the borrowers built in to them. For private loans, it's all of the bad and none of the good.

Can anyone conceive of a reason for this? And please leave the "Bush sucks" statements for somewhere else.
 
Originally posted by: AndrewR
Private student loans are garbage, first off. However, given the unreasonable monetary limits of federal loans (Stafford, Perkins), they are becoming necessary for many to attend college and particularly graduate school.

However, I am troubled by the fact that interest rates on these private loans are not regulated, yet the loan holders benefit from the exclusion from bankruptcy protection. I can understand why federal loans would be protected since they have a lower interest rate and certain protections for the borrowers built in to them. For private loans, it's all of the bad and none of the good.

Can anyone conceive of a reason for this?
Click to expand...

People are the new oil in the U.S.

Endentured servants to the bank corporations 4ever

Take a guess who set this up.
 
well Democrats were talking about regulating it and cutting the interest rate in half for student loans.
I never heard anything else from them. Bastards.

I am paying whatever the prime rate is + 2.5% I believe (lowest possible). Which means around 8-9%. Woo Hoo. 🙁
 
Originally posted by: Aimster
well Democrats were talking about regulating it and cutting the interest rate in half for student loans.
I never heard anything else from them. Bastards.

I am paying whatever the prime rate is + 2.5% I believe (lowest possible). Which means around 8-9%. Woo Hoo. 🙁
Click to expand...

Will you admit who raised interest rates on students and took away the bankruptcy option?

I'll give to a hint.

He is in the elephant party.
 
Originally posted by: AndrewR

Can anyone conceive of a reason for this?
Click to expand...

To know whether or not I will be wasting my time here...can you first tell me if you are the sort who agrees or disagrees in the idea of free markets and capitalism, along with supply/demand economics of capital outlays?

Do you perceive the FED and the FOMC as evil? Feel paranoid that Bernanke is specifically out to screw you over?

If your question is genuine and you are not a raving idiot when it comes to the foundations of economic capital outlays for risk vs. reward assessments then your answer lies in connecting the dots, something that I'd be willing to help you do.

If your question is more of just a rabid attempt to claim evil do'ers are out there looking to rape your wallet over a student loan then I am not here to attempt to eliminate your pursuit of arrogence driven ignorance.
 
Originally posted by: Idontcare
Originally posted by: AndrewR

Can anyone conceive of a reason for this?
Click to expand...

To know whether or not I will be wasting my time here...can you first tell me if you are the sort who agrees or disagrees in the idea of free markets and capitalism, along with supply/demand economics of capital outlays?

Do you perceive the FED and the FOMC as evil? Feel paranoid that Bernanke is specifically out to screw you over?

If your question is genuine and you are not a raving idiot when it comes to the foundations of economic capital outlays for risk vs. reward assessments then your answer lies in connecting the dots, something that I'd be willing to help you do.

If your question is more of just a rabid attempt to claim evil do'ers are out there looking to rape your wallet over a student loan then I am not here to attempt to eliminate your pursuit of arrogence driven ignorance.
Click to expand...

His question was not about the free market at all... it was about selective regulation that seemed to disproportionately favor the lenders.
 
Originally posted by: senseamp
Just glad I did college during Clinton years, and got all subsidized federal loans. 😀
Click to expand...

Me too, I think mine was 3-4% that does seem high for the protection they get, isn?t it pretty much guaranteed to be paid unless death or dismemberment.

 
It's the price you pay for wanting to improve yourself coming from a middle class family. The rich guys are all taken care of by their elders and the poor people are all taken care of by my tax dollars, which leaves people like me out in the cold. The only way I could pay for school was to sell my soul to CitiBank for the low, low price of $100k. Thankfully grad school is paid for or I would have had to sit out and get a real job. 😀 Last I checked, my interest rate is about 7.5%. I don't think I should be able to declare bankruptcy to get out of this debt, whether it's in federal or private loans.

I do, however, think that schools should go back to a mix of merit-based and need-based financial aid rather than only need-based, which seems to be the norm nowadays. MIT will only give you a scholarship if you're poor (regardless of ethnicity) or an ethnic minority (regardless of family ability to pay). There is no longer any merit-based assistance there. Many other schools are trending the same way. That's ok though, because by the time I've worked my way through school and lived on minimum wage, I'll be used to living like a pauper and won't have to change my lifestyle when I get my (perhaps) last engineering degree. 😛
 
Originally posted by: eskimospy
Originally posted by: Idontcare
Originally posted by: AndrewR

Can anyone conceive of a reason for this?
Click to expand...

To know whether or not I will be wasting my time here...can you first tell me if you are the sort who agrees or disagrees in the idea of free markets and capitalism, along with supply/demand economics of capital outlays?

Do you perceive the FED and the FOMC as evil? Feel paranoid that Bernanke is specifically out to screw you over?

If your question is genuine and you are not a raving idiot when it comes to the foundations of economic capital outlays for risk vs. reward assessments then your answer lies in connecting the dots, something that I'd be willing to help you do.

If your question is more of just a rabid attempt to claim evil do'ers are out there looking to rape your wallet over a student loan then I am not here to attempt to eliminate your pursuit of arrogence driven ignorance.
Click to expand...

His question was not about the free market at all... it was about selective regulation that seemed to disproportionately favor the lenders.
Click to expand...

Exactly. If it's a free market, then allow bankruptcy to cover everything, and the lenders will take that into account when making loans. If it's not a free market, then regulate the interest rates that private loans can carry and protect the lenders with the bankruptcy code. The "screwed at both ends" situation right now for students is deplorable.

My private loans are only around 8% right now, but the stories I've read recently about 10+% rates on private loans are amazing.

Will you admit who raised interest rates on students and took away the bankruptcy option?

I'll give to a hint.

He is in the elephant party.
Click to expand...

Care to disclose who has control over Congress right now and could easily introduce legislation to fix the situation? The current administration does shoulder some blame here, but so does the ass party (ok, donkey) in control of Congress. Seems like there's some blame on all sides, which is exactly why I stated:
And please leave the "Bush sucks" statements for somewhere else.
Click to expand...
 
Originally posted by: AndrewR
Care to disclose who has control over Congress right now and could easily introduce legislation to fix the situation?

The current administration does shoulder some blame here, but so does the ass party (ok, donkey) in control of Congress.

Seems like there's some blame on all sides, which is exactly why I stated:
And please leave the "Bush sucks" statements for somewhere else.
Click to expand...
Click to expand...

:laugh: Bahahahahahaha

now look who's crying and whining for the Democrats to save them
 
Originally posted by: dmcowen674
Originally posted by: AndrewR
Care to disclose who has control over Congress right now and could easily introduce legislation to fix the situation?

The current administration does shoulder some blame here, but so does the ass party (ok, donkey) in control of Congress.

Seems like there's some blame on all sides, which is exactly why I stated:
And please leave the "Bush sucks" statements for somewhere else.
Click to expand...
Click to expand...

:laugh: Bahahahahahaha

now look who's crying and whining for the Democrats to save them
Click to expand...


What he is stating is that the companies who handle private loans should not be protected.
Let the free market handle the issue.

Right now the companies are getting a free ride on the backs of those who have student loans.

It may be unfair that the companies are protected. Congress has the power (if they choose to) to correct the situation.

Do they want to?


Are the Dems going to save the compaines by inaction or help the people by forcing fairness upon those that are predators by forcing the same risk.


However, by removing the safety net for the companies; it could cause higher rates and/or reduce the amount of funds availalbe for student loans.

So you expose the company to the free market at the cost of the preson that obtains the loans.

Which is better?
 
Simple student loans are made to people who are effectively bankrupt at the time the loan is made. They are backed by the future earnings of the student. Bankruptcy doesn't look at future earnings it looks at current income and assets.
 
Originally posted by: CycloWizard
It's the price you pay for wanting to improve yourself coming from a middle class family. The rich guys are all taken care of by their elders and the poor people are all taken care of by my tax dollars, which leaves people like me out in the cold. The only way I could pay for school was to sell my soul to CitiBank for the low, low price of $100k. Thankfully grad school is paid for or I would have had to sit out and get a real job. 😀 Last I checked, my interest rate is about 7.5%. I don't think I should be able to declare bankruptcy to get out of this debt, whether it's in federal or private loans.

I do, however, think that schools should go back to a mix of merit-based and need-based financial aid rather than only need-based, which seems to be the norm nowadays. MIT will only give you a scholarship if you're poor (regardless of ethnicity) or an ethnic minority (regardless of family ability to pay). There is no longer any merit-based assistance there. Many other schools are trending the same way. That's ok though, because by the time I've worked my way through school and lived on minimum wage, I'll be used to living like a pauper and won't have to change my lifestyle when I get my (perhaps) last engineering degree. 😛
Click to expand...

Or you could have gone to a school where tuition is less than $25,000 per year.
 
Is undergrad learning at a $5K school that much poorer than at a $25K school.

When I was going to school, it was the Grad programs that made the school in terms of learning.

The undergrad school difference was mainly status.

Engineering, not the arts
 
Originally posted by: Common Courtesy
Originally posted by: dmcowen674
Originally posted by: AndrewR
Care to disclose who has control over Congress right now and could easily introduce legislation to fix the situation?

The current administration does shoulder some blame here, but so does the ass party (ok, donkey) in control of Congress.

Seems like there's some blame on all sides, which is exactly why I stated:
And please leave the "Bush sucks" statements for somewhere else.
Click to expand...
Click to expand...

:laugh: Bahahahahahaha

now look who's crying and whining for the Democrats to save them
Click to expand...


What he is stating is that the companies who handle private loans should not be protected.
Let the free market handle the issue.

Right now the companies are getting a free ride on the backs of those who have student loans.

It may be unfair that the companies are protected. Congress has the power (if they choose to) to correct the situation.

Do they want to?


Are the Dems going to save the compaines by inaction or help the people by forcing fairness upon those that are predators by forcing the same risk.


However, by removing the safety net for the companies; it could cause higher rates and/or reduce the amount of funds availalbe for student loans.

So you expose the company to the free market at the cost of the preson that obtains the loans.

Which is better?
Click to expand...

How can you loan students (most of which have basically no collateral) money for their education and then trust them not to declare bankruptcy to try and get out of it?
 
Could someone explain why private student loans are unregulated yet still benefit from the bankruptcy exclusion?
Click to expand...

Because SallieMae and similar lenders have really good lobbyists, and/or they bribed the right politicians with campaign donations.
 
Originally posted by: ebaycj
Or you could have gone to a school where tuition is less than $25,000 per year.
Click to expand...
Did I complain about paying $25k/year? I don't think so. I lost an athletic scholarship after I got hurt my freshman year, so loans were the order of the day. I picked an expensive school because it was the one that I wanted to go to and I knew that I would be able to afford to pay off the loans once I had an engineering degree in hand. I knew what I was getting into. My only complaint is that the situation is far from equitable, with the result that my interest rate is 3-5% higher than people who qualified for government loans.

Now, the real problem: why was my school $25k/year? I'll argue that the reason education costs have increased so dramatically is because of government loans. People will borrow as much as they can to pay for school since the government is effectively giving them a loan at a rate below inflation. The schools know that the government will give them as much as they ask for, so they raise the prices. Then, the only people really getting screwed on the deal are the people who have to take out private loans, since we have to pay back our loans with interest that is significantly higher than inflation. When it's all said and done, my tax dollars have subsidized colleges with the net effect of raising my own debt level.
 
Originally posted by: AndrewR
Private student loans are garbage, first off. However, given the unreasonable monetary limits of federal loans (Stafford, Perkins), they are becoming necessary for many to attend college and particularly graduate school.

Can anyone conceive of a reason for this? And please leave the "Bush sucks" statements for somewhere else.
Click to expand...

I don't think bankruptcy should EVER excuse you from your obligations. It merely should force you into a payment plan that you can meet with an austere lifestyle.

The very idea you can offload YOUR responsibility to others is sickening.
 
Bankruptcy has its reason and place. There's no point in trying to squeeze blood out of a turnip, we don't want to go back to the bad old days of debtors prisons and poor farms, and quite frankly, a lender who makes such a poor lending decision deserves it.

However, the OP's question has already been answered. College kids don't have anything (or not much) to lose by declaring bankruptcy.
 
Originally posted by: Vic
Bankruptcy has its reason and place. There's no point in trying to squeeze blood out of a turnip, we don't want to go back to the bad old days of debtors prisons and poor farms, and quite frankly, a lender who makes such a poor lending decision deserves it.
Click to expand...

However I do believe that if you come into the means to pay off past debts within a set number of years, say 7, you should be REQUIRED to do so.



 
Originally posted by: Shivetya
Originally posted by: Vic
Bankruptcy has its reason and place. There's no point in trying to squeeze blood out of a turnip, we don't want to go back to the bad old days of debtors prisons and poor farms, and quite frankly, a lender who makes such a poor lending decision deserves it.
Click to expand...

However I do believe that if you come into the means to pay off past debts within a set number of years, say 7, you should be REQUIRED to do so.
Click to expand...

Which would simply have the effect of discouraging those people from restarting the lives. Sorry, no good. Like I said, the lender in those cases deserves it. And it's in the beneficial interest of everyone else to help those people get back on their feet and doing business again.
 
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