<p>“That’s exactly why student loans were made non dischargeable. Because banks were lending hundreds of thousands of dollars to med students and others who promptly declared bankruptcy before starting to practice.”</p>
<p>That’s totally ass-backwards. The banks shouldn’t be letting students borrow that much. Period.</p>
<p>polar…It’s not backwards. College costs had already started spiralling out of control before the bankruptcy laws changed in 2005. You’re trying to claim the costs were a result of the bankruptcy law change, when it’s the other way around. Costs had already skyrocketed, especially for professional schools, and private institutions were the only entities willing to loan enough money to cover the costs. Because of the millions of dollars of forfeited loans due to unscrupulous borrowers the laws were changed which allowed banks to loan the funds without fear of “bankruptcies of convenience”. Simply making the loans dischargeable again will not, in and of itself, fix the problem. The bubble is already created…what do you intend to do with the millions in current loans that cannot be paid off? Let those people off the hook when they made poor decisions? People have to live with the consequences of their choices…period. As long as people keep paying these outlandish fees to get a “name” school education the system will remain broken. When people start buying the education that they can afford to get (not the one they WANT to get) things might begin to start self-correcting. It’s not like there are no other options…they’re just not as attractive to some folks.</p>
<p>The argument for having private loans dischargable after bankruptcy is to make sure private lenders are also responsible. What are the arguments for government loans? Should government loans be discharged as well? By government loans, I mean Direct Loan, Perkins Loan, and Stafford Loan.</p>
<p>chaos…In my opinion…no they shouldn’t. I believe government loans were made non-dischargeable several years earlier than the private loans were, and I can only assume there was a reason for doing that as well. We’re still talking about the same issue of borrowers having to make wise decisions…it’s just a matter of being on a much smaller scale. Government loans are limited in their amounts, but the families that qualify for these loans in many cases are also more limited in their ability to pay them back. In theory, in someone borrows $25-$30K in order to attend a local university while living at home, local CC, whatever the case may be that amount should be manageable for paying back. It’s the cost of a mid-size car these days for God’s sake!!</p>
<p>I see. So government loans are limited to make sure that the students and parents can pay back, right? </p>
<p>Regarding private loans for professional schools like medical, law, pharmacy, dental, business, optometry, etc., how about we make a compromise that says loans can only be discharged if the student cannot pay back (as in the student drops out before completing the degree, doesn’t pass the necessary exams to practice such practices, not making enough money to pay back in time which leads to defaults [this rarely happens because these professions make a lot of money]). And the said student would have to provide substantial information before declaring bankruptcy?</p>
<p>The way how I see it, private lenders are readily to lend to medical school students because they know they will make enough money to pay back so it shouldn’t be a problem. </p>
<p>Actually I just realized right now that there’s a flaw in my argument and in order for me to continue my argument, I would need someone to answer this question for me:</p>
<p>For professional schools like law, medical, dental, optometry, pharmacy, business, etc. what is the maximum amount of government loans that are given for this?</p>
<p>Chaos, in general, bankruptcy law only allows bankuptcy if the person does not have a reasoanble expectatation of paying debts. So the protection you want was put in, or strengthened in 2005. You can not go to BK court and say oh, I dont want to pay, please discharge my [dischargeable] debt (eg credit card). They will say, no we will set up a payment plan.</p>
<p>The difference between student loans and other loans was pointed out in another thread by (I believe) mom2collegekids…what a wise woman!! With student loans there is no collateral which can be recovered by the lender in the event the borrower defaults. In the case of a mortgage the bank gets the house, auto loans the lender repossesses the vehicle. What recourse does the lender have with a student loan? Are they going to somehow take away the knowledge or the diploma? These are not like other types of loans, and as such should be handled differently.</p>
<p>Wolverine, cars depreciate (so do houses these days) and banks make credit card and other unsecured debt. And banks frequently ask for guarantees from parents and others that do have assets that can be attached. The “no discharge” is way too excessive. IMHO. And if anyone here thinks the bailout coming down the road won’t touch them becuase they, or they didnt borrow, I think they are wrong. Of course the bank executives will have made a pretty penny, and some colleges will have been able to charge greater tutition.</p>
<p>Can someone answer this question for me?</p>
<p>For professional schools like law, nursing, medical, dental, optometry, pharmacy, business, etc. what is the maximum amount of government loans that are given for this?</p>
<p>kayf…With the amounts we’re talking about, I don’t think it’s excessive. What is your proposed alternative? That no one attend medical, law, pharmacy, veterinary, etc. schools? Yes, these students were able to borrow that sum of money (before and after the law change) based on their future ability to pay. It was only after bankruptcies of convenience started becoming more and more prevalent that the law (at least in the case of private lenders) was changed. These loans shouldn’t need to be dischargeable. How did every student who dropped out/failed out of a professional school in the past re-pay the loans they had taken? Did they all declare bankruptcy? I sincerely doubt it. It’s only been in the past few decades that the morals and ethics (or lack thereof) of people have plummeted to the point where fake bankruptcies became an “acceptable” practice. You may think that people need to be protected from the banks, but in reality it’s people needing to be protected from themselves.</p>
<p>Grad students can also borrow grad PLUS loans, and there is no maximum for those (although they are dependent on a credit check).</p>
<p>For Doctor of Pharmacy & Doctor of Clinical Psychology: the annual maximum Stafford loan is $33,000-$37,167 depending on the length of the program academic year. PLUS is also available.</p>
<p>For Allopathic Medicine: the annual max Stafford loan is $40,500-$47,167 depending on the length of the program academic year. PLUS is also available.</p>
<p>Graduate/Professional Students can borrow a maximum total of $138,500 (of which no more than $65,500 can be subsidized loans). Allopathic Medicine and other graduate students in certain health professions may borrow a maximum of $224,000 (of which no more than $65,500 can be subsidized). These graduate loan limits include all loans borrowed as an undergraduate.</p>
<p>Nursing students are bound by the graduate loan limits, but some schools have nursing loans available … these are often limited, though, so there is no guarantee a student will be able to get one. Again, though, the PLUS loan is available, as well.</p>
<p>Law school – 18,500 per year</p>
<p>Medica school – 40.5 per year ( Ithink)</p>
<p>Wolverine, I dont think, in general, students should borrow more than govt amounts for professional schools. You see the limits above.</p>
<p>How about this:</p>
<ul>
<li><p>Students can’t get student loans forgiven in bankruptcy for 10 years after the last loan is taken</p></li>
<li><p>After that, people with loan balances who declare bankruptcy get the following modifications:</p>
<ul>
<li>Balance is reset to only remaining balance plus accrued interest - all extra added fees are wiped out</li>
<li>Interest rate is set to zero</li>
<li>A payment plan is set up that requires 5% of the person’s yearly income to be paid toward their loan balance, until the balance is paid</li>
<li>If a year’s payments are not made, lenders may sue to reinstate the original terms.</li>
</ul></li>
</ul>
<p>In addition, a student loan balance may never be increased by fees added on by collections agents or anyone else; or conversely, student loans may never be sold.</p>
<p>It is entirely possible that some student loans may never be completely repaid if they go through bankruptcy, but high-income individuals like doctors will certainly wind up paying them off. And at least the person is paying something, and 5% should not be an undue hardship.</p>
<p>Yearly income is defined in such a way as to prevent shifting of income through S corps or PSCs.</p>
<p>kayf…I don’t disagree with that, but given the current costs those limits might be hard to stay within. From previous discussions I know we both agree that the costs are completely ludicrous, but changing the bankruptcy laws back won’t fix the issue since it wasn’t the bankruptcy laws that caused the costs to start rising well above the rate of inflation. The universities saw an opportunity to increase rates because the increased technical nature of the workplace environment has made a bachelor’s degree the minimum required in many cases. The relative prosperity in the 80’s and 90’s allowed many families to pay the higher rates, which led to increased greediness on the part of the universities, and the banks saw an opportunity to make increased profits from the high dollar loans many were now having to take out. Unfortunately, it’s a ugly display of capitalism at it’s best but none of it happens without the willing participation of the borrower. I refer again to my “vote with your wallet” approach.</p>
<p>Notrichenough – I think something like that, for private loans, makes sense.</p>
<p>Wolverine – I dont think status quo is fair, and I think it should be changed.</p>
<p>kayf…I agree with you again, but I think the change has to start with the universities dropping their rates. That’s where the ugly uptrend started in my opinion, and that’s where I think the reversal has to start.</p>
<p>As long as banks are able to loan whatever they choose, with laws that protect them but not the student borrower, there is no motivation for colleges to control costs or even evaluate the affordability of their programs. As long as someone will pay, they can charge whatever they want. However, if they see their applicant pool limited (perhaps by borrower choice, but far more effectively by borrower protection in bankruptcy) there will be a reassessment of how they spend their money as well.</p>
<p>The current upward spiral in costs and spending is begging for adjustment - right now the protection is for the institutions involved in the status quo and the 17 year old and his parents are left to weigh their options - not just with a calculator but pitted against the marketing departments of major banks, universities and for profit schools where the admissions office could more properly be labeled the sales department.</p>
<p>^lol…</p>
<p>This article says it all:</p>
<p><a href=“College Loans Weigh Heavier on Graduates - The New York Times”>College Loans Weigh Heavier on Graduates - The New York Times;
<p>I particularly love the line that college loan debt is good debt-like mortgage debt.</p>