Student Loans
Question: My antipathy toward student loans is based, in part, on the repeated experience of hearing from people who are at the point of desperation because they can no longer afford to make payments on their student loans, cannot afford a lawyer to help them figure out how to resolve their problem, cannot get reliable responses (or, in some cases, any responses at all) from the student lenders or guarantors, and are simply at their wits’ end.
Why don’t they just stop paying? > Though of course we need lawyers. The real answer is to reform the law, but I don’t see any evidence that that’s about to happen. We seem hell-bent on re-creating the legal system of Jarndyce v. Jarndyce. That aside, interesting if that is indeed the case. It wouldn’t be the first time a minor issue has been blown out of proportion by lobbyists and the press. But I seem tor remember seeing figures on student loans at the time that showed a high default rate.> People have to fledge at some point. We’ve pushed the onset of adulthood back relentlessly and not always with good effect. So while I agree that reform may be in order for the loan-granting system, I don’t believe that 18-year-olds should be treated differently than older adults.
Answer: Sometimes they do. But some people get really upset to get calls or letters from collection agents. They’ve been good payers all their lives; maybe they’ve looked down upon those who didn’t pay their bills; and now they’re being hounded. It’s like a mild-mannered person who suddenly gets called a “criminal”: this was the kind of terrible shame that always happened to someone else. Now you find out you don’t qualify for credit, or are getting turned down for a job, or whatever else might happen because of this student loan thing — it really upsets people.
And then there are the situations where people have assets that they really don’t want to lose. For instance, mom and pop co-sign the kid’s loan; the kid gets screwed up somehow; and now the collection agents want to put a lien on the family home. Or people find that they can’t keep a checking account because collection agents can seize it. The checking account may not remotely cover the amount of the outstanding student loans plus interest and penalties; the inability to have a checking account may cause an awful lot of chaos in the person’s life for what little bit of benefit it brings to the creditor; but that’s too bad.
That part is correct. The default rate was very high. Come to find out, however, that the default rate dipped sharply when the Department of Education began to crack down on fraudulent student loan guarantors, schools, and others who had been looting the student loan program. Big report in the early 1990s by a Senate committee headed by Sam Nunn just raked those institutions over the coals. Found that some of them were even encouraging or precipitating default because then they could collect full reimbursement from the federal government and could also then go ahead and try to collect from the borrower.
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