<p>I, too, think many here are missing key points.</p>
<p>Long ago…when I was young and dinosaurs roamed the earth…student loans could be discharged in bankruptcy. Some baby boomers promptly defaulted right after getting admitted to the bar or getting their medical licenses. The problem wasn’t limited to lawyers and doctors, but they were the worst offenders. So, the law was amended and you couldn’t discharge loans in bankruptcy. However, this provision only applied to FEDERAL student loans. The amount of such loans students can get is limited to reasonable levels. These levels were not sufficient to pay full COA. So, some students also took out private loans. Private lenders were cautious in giving out such loans. You were unlikely to be able to borrow $150,000 to become a librarian or social worker. </p>
<p>Then, the “no discharge in bankruptcy for student loans” rule was extended to private loans. In theory, this was to benefit students by making higher education more accessible to everyone.</p>
<p>In reality, it benefited both banks and colleges and universities, especially private colleges and universities, more than it benefited students. Banks no longer cared if the loans “made sense,” since there is no way folks can discharge them in bankruptcy. They co-operated with schools that steered the poor lambs (a/k/a students) to them by giving the schools kick backs. Moreover, colleges were able to hike up tuition rates much, much faster than they were in the days when fewer students could get private loans from banks. Loans made more cash available to pay tuition and helped drive the cost up. </p>
<p>Back when I finished law school, the COA at the most expensive law schools in the nation was less than $5,000 per year. The starting salary at BIGLAW was $20,000 per year, i.e, pre-tax more than the cost of 3 years at law school. Almost nobody borrowed that amount, because almost everyone worked the summer after the second year in law school and earned pre-tax about $4,500. Most people had some sort of job the summer after first year. Most had some other summer or full time earnings as well. So, I don’t think anyone was more than about $10,000 in debt going into a job that paid $20,000. </p>
<p>Now, the cost of attending a private law school or OOS public is more like $210,000. Even BIGLAW doesn’t pay that much to start. BIGLAW jobs are much harder to come by. If you do get a summer job after second year, it’s for 8 weeks instead of the 10-12 that was the norm in the 70s. And more and more universities are opening law schools because they are cash cows for universities. While fewer and fewer law school graduates can get jobs, more and more law schools are being opened. </p>
<p>It’s not just lawyers either. The social workers and librarians are going into debt too. The cost of getting a master’s in either is more than the annual starting salary of either at many schools. If students could default on these loans, private lenders wouldn’t make them. </p>
<p>And, in the old days, you could get part time jobs. Now, you’re lucky if you get an unpaid “internship.” And, you’re even luckier if your school doesn’t force you to pay tuition for that “internship.” </p>
<p>Again, that’s the result of the law. Employers were using “interns,” who did scut work and got paid nothing. So, Congress cracked down. Now, for the employers to be able to avoid paying minimum wage, the interns have to be getting “course credit.” That’s because Congress thought universities would make sure that the internships were real learning experiences. But, one heck of a lot of schools charge tuition for that “experience.” Internships are a HUGE cash cow for schools. Some colleges, including some highly ranked ones, actually REQUIRE internships to get a degree. In theory, that sounds smart. In reality, this means that kids are borrowing money they pay to the school to work for employers for free. </p>
<p>The system is broken. It needs to be fixed. You can blame the kids for bad decisions, just as you can blame home purchasers in the subprime mortgage mess. But the REAL culprits, in both cases are the banks and the legislators who allowed these situations to occur. PLEASE don’t think that the lenders are the victims here–the idea is ludicrous.</p>
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