The “Loan Wolves” Expose
It was suggested that I watch the NBC expose on the Student Loan debacle in the last quarter of the century called the “Loan Wolves”. I did, a couple of times.
It is a travesty what happened. Let me be clear on that. The little sneaky addendum it makes it very hard to discharge a student loan through bankruptcy. Yet, further research I have done has shown that it is not quite as impossible as the documentary implied although it is very hard. As an aside, I was intrigued by the fact that the author of that little piece of B.S. is now a truckdriver in the upper mid-west. Go figure.
On the surface, the real meaning of this was not real clear, not really. Because it was stated that the bankruptcy occurrences prior to this change for student loans was less than 1%, it did not give a real clear picture as to why the current default and/or problem level on student loans is so high now. Honesty, the cost of the general public education has not demonstrably risen based upon inflation figures (see Student Loans – Part 1) and the government fixes the interest rates for student loans. Now, I know that there are personal student loans but that cannot be factored in for much of this conversation simply because they do not fall under the same guidelines and are not generally part of the “loan forgiveness” discussion.
Part of the issue, of course, is the feeling my many that they just have to get a higher education at any cost in order to have a decent career. Sadly, there is some truth to this. But this does not abrogate their responsibilities in making sure that the have an honest, responsible, and reasonable plan to pay the loans off.
The public sector schools, while still at a more reasonable cost, are still darned expensive. And that is before you even factor in room, board, and other expenses. Also, as the schools expand to meet the demands for a higher education, there are less opportunities for students to find outside employment to help pay their way, thus causing them to incur even higher debt loads. Additionally, the relatively high paying “summer” labor jobs do not exist, so once again, the student has to depend more and more on borrowed money. Thus, the debt load, even with the tuition levels not rising greatly above historical norms, will be higher than in times past.
Another big issue is the “for pay” schools and institutions. Before, I start in on them, please keep in mind that many are honest, sincere, upright business. But not all are. Many are in it for the money. They charge significantly higher than non-profit institutions and are, shall we say, not as discriminating regarding admission standards as those non-profit institutions. I will use one example: for pay law schools; those suckers charge the students an exorbitant amount of tuition and fees, with a let us say modest number of students passing the bar exam. Added to that, the legal system is, sadly, full of lawyers who cannot make a living practicing law.
What is the backbone of all of this? The students going to “for pay” schools and the people who are borrowing money to go to regular schools all have one thing in common. They are borrowing money that they have absolutely no idea how they are going to pay back. Ask 100 students how much their monthly payment will be and 99 of them will not have the slightest clue and the other 1 will underestimate it by probably 80%. Trust me.
And the lenders know this. Yes, they do. And despite the claims by people under the gun for student loan debt, they charged government sanctioned loan rates and there is no usury. They do not have to because they have your butt.
The “Loan Wolves” documentary focused on the mess created by the lack of ability to declare bankruptcy but seemed to skim lightly upon the reason for the real reason for the student loan crisis. They mention it in passing, but they were focused on the government and the lending agencies; albeit they do deserve the blame.
The underlying cause of the student loan crisis is truly caused by the bankruptcy clause because it caused the lenders to lend money to people who:
- Had no way to ever pay the money back.
- Was borrowing way too much money to fund their education.
- Were poor credit risks given their past history.
- Given their education history, were highly unlikely to complete their schooling.
In times past, those would have been factored in the lending agency determination for offering a loan. Now, they had your butt for live. You don’t pay on time? More late payment fees, higher interest rates, paycheck garnishment. They have you.
Yes, the “Loan Wolves” documentary points out a hard, vicious change in the law that has negatively affected way, way too many people. Legislation should be enacted to correct this as soon as possible, giving people access to bankruptcy in the most severe cases.
Now here is a question on how students could have and should have avoided this problem.
NEVER FART HIGHER THAN YOUR ASS!!!
DO NOT BORROW MONEY WITHOUT A SOLID PLAN ON HOW AND WHEN YOU ARE GOING TO PAY IT BACK.
YOU ARE NOT SCARLETT O’HARA — WORRY ABOUT IT NOW!!!
YES, I KNOW UNFORSEEN THINGS HAPPEN, BUT REALLY, MOST OF THIS IS YOUR OWN DOING
