NYT: Student loan debt may prevent lawyer from being admitted to bar

Parents Forum
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<p>“but he has two legs to stand on”</p>

<p>In my opinion he doesn’t have any leg to stand on. :-)</p>

<p>I’ll admit to just skimming the responses. I wouldn’t believe anything the aspiring lawyer has to say but I wouldn’t believe anything Sallie Mae has to say either. They have a terrible reputation, I need to see documentation before I’ll believe anything they are telling me.</p>

<p>As far as Sallie Mae being irresponsible by lending to whatever his name is, this is the kind of person they want to loan to. The lenders of this country make most of their money from the people who have difficulty paying them back, they make their living from the interest and penalties they tack on to the loan amounts. Although in this case they may have overplayed that hand. :-)</p>

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<p>“Getting a college degree took 10 years because he had spent nearly six in rehabilitation, relearning how to walk after an all-terrain vehicle hit him while he was stopped on his motorcycle. The accident nearly cost him his left leg;” </p>

<p>True he did not lose the leg, but apparently did lose function. The rehab for a motorcycle wreck can be expensive and extensive. </p>

<p>But Queen’s Mom’s situation is much more tragic, and a good example of the levels of abuse the edudebt companies will descend to; "After my sister’s premature death in car accident at the age of 48, I had to deal with collection calls for her student loans for 2 years. I sent numerous copies of the death certificate to successive collection agencies, but they kept calling. Finally after one hapless collector happened to call on the second anniversary of her death, I was in no mood to cooperate and I told him that:

  1. I have sent the death certificate and therefore they knew her date of death
  2. Calling on that date constituted intentional infliction of emotional distress
  3. If I get one more phone call, I will file a lawsuit
    They haven’t called since." </p>

<p>Its very indicative of the abusive nature of these companies that even a death certificate is not enough. </p>

<p>And the 25%x2 fees levied in Bowman’s case are not unknown in other contexts. The resale, fee enhancements, for student loans are a legendary abuse. Bowman may have been less than responsible. But increasing the amount of debt by 50% is a form of usury which has to come whispering right out of the Devils maw. </p>

<p>It’s interesting that many who’d defend these companies on ethical grounds, never seem to address the issue of how often these loans are blown out of reason by unethical means…</p>

<p>So if we are to look at if from an ethical view who gets consigned to a deeper hell. Someone who individually borrows more than they can pay? Or the people who rig a system which virtually ensures most decent people cannot pay what they borrowed?</p>

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<p>Atana, I’d have more sympathy for your position if you had any evidence that the collections folks for student loans are any more obnoxious or unethical than any other collection folks.</p>

<p>For about two years after one of my parents passed away, I got harrassing phone calls from an insurance company for the premiums on a now-lapsed long term care policy. Let’s repeat. The policy lapsed because the insured was dead. OK? Parent had never collected a dime on the policy (died during the waiting period to establish eligibility) so by my count, the company collected about 10 years worth of premuims, never had to pay out a cent. And they’re harrasing me that I’ve let the policy lapse? A care policy on a dead person???</p>

<p>So I think we can all agree that collections folks can be rude and obnoxious and say ridiculous things. But I had a two year fight with the State revenue department over “unpaid income taxes” (again- the deceased stopped working, had no income, which sort of explains why he stopped filing a return and paying estimated taxes, no? Isn’t that a little obvious) plus a ton of red tape over other bill collectors and obnoxious types.</p>

<p>So I find it hard to single out educational lenders. Your claim that the system is rigged to “virtually ensure most decent people cannot pay what they borrow” is ludicrous in the extreme. I paid back every nickel of my ed loans; as did my spouse, all of his siblings, all of my siblings, and the nieces/nephews/cousins are all in the process of paying back their loans, one month at a time. The pharmacist at my drugstore pays back his loans; his wife is a physical therapist and she pays back her loans. </p>

<p>How is the system rigged? Are we not decent people? Quick answer- don’t take on debt you can’t afford. That goes for big screen tv’s, SUV’s, fancy countertops in your kitchen (boy would I love that!!!), motorboats and RV’s, ATV’s or motorcycles, and yes, educational loans.</p>

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<p>“How is the system rigged? Are we not decent people? Quick answer- don’t take on debt you can’t afford. That goes for big screen tv’s, SUV’s, fancy countertops in your kitchen (boy would I love that!!!), motorboats and RV’s, ATV’s or motorcycles, and yes, educational loans” </p>

<p>Quicker answer, all of the aforementioned forms of debt except educational loans have established forms of consumer protections. In regards to educational loans, many of these protections were lobbied out of existence. </p>

<p>And yes, when we have a situation where educational lenders can unilaterally bundle, resell, and increase loan amounts 20+% without legal recourse by borrowers it is definitely unethical. </p>

<p>It’s a common practice for these companies to sell loans to their own subsidiaires repeatedly, raising the fees and loan amounts. In some cases students and families are shifted around so much by these tricks that finding out what’s owned to whom is difficult. </p>

<p>There may be people such as yourself, or myself who can pay these loans. But when these companies openly admit to 220% fee revenue increases it will be very difficult for others to do so.</p>

<p>And having some experience dealing with medical bill people and student loan people, the student loan contingent have legal potential for abuse because of the sweetheart regulations propagated by their cronies in congress. And as an academic (and as many profs could attest) the trouble these companies press on students is epidemic. But I will not give names as that is a violation of professorial confidence. </p>

<p>However I suggest you read Dr. Warren’s essays about the matter, and the constant exposes of lender abuses done by the Chronicle and Inside Higher Ed.</p>

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<p>Atana, there are companies which pay terminally ill people cash in exchange for their life insurance; companies which purchase the homes of elderly people and then lease them back to allow them to stay in them, and companies which sell enhanced health insurance to folks too ill to qualify for a group policy, but where the waiting period virutally ensures that they’re dead by the time they can qualify. The abuses in these industries are horrific; the fact that there is consumer protection on the books is irrelevant since in most cases, the individuals being exploited are dead before they can figure out what recourse they have.</p>

<p>I’m not defending the student loan industry- I am pointing out that by demonizing the entire system, you would deny access to a mechanism which allows millions of people to afford an education that would otherwise be blocked to them. So your comments that the system is rigged so that no decent person can pay back their loans… that’s hogwash. Millions of decent people have paid back their educational loans. I bet some of them are even grateful (I know I am.)</p>

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<p>Atana - you are missing the point. Yes, there are abuses in the student loan industry but this guy appears to be a deadbeat, not ever having made a payment. </p>

<p>And the issue is fitness to enter the New York bar. And the threshold is always at its highest when first admitted to the bar - as it should be. This is the kind of guy you want handling client funds, and avoiding at all costs commingling and honesty in accounting? </p>

<p>Reasonable minds may disagree, but denying him a place in the bar is hardly irrational. Consumer protection - a subject to which you care about - is almost nil in the legal profession - passing the bar exam is almost meaningless (and it is not that difficult either) - so you are ready to criticize when the bar actually exercises some discretion at keeps a questionable applicant out of the system? </p>

<p>I don’t get where you are coming from. Conflating the sharp practices of student loan financiers with justification of this fellow to enter the bar doesn’t appear to be appropriate.</p>

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<p>Actually I never completely contended that Bowman wasn’t bringing much of these troubles down upon himself. But that does not excuse the ethical lapses of the lenders. And if someone is going to have the power to make the decision whether someone is going to be in the bar, that should be the ABA and state bar. Not the loan office of SMC. Nor should they have the de-facto ability to deny drivers license renewal, which as noted was tried in Montana. </p>

<p>As far as using examples of other industries moral failings as counterexamples, yes other sectors of the financial sector do also need reform. Madoff made that very abundantly evident, </p>

<p>However there have been numerous and very credible reports stating very clearly that the student loan industry has long been overdue for reform. So its not a matter, or need to demonize that industry. By not cleaning up their act internally, or having the arrogance to assume they were above censure, they’ve provided more than enough fodder for these reports. A good reference is the 2006 report “No Way Out: Student Loans, Financial Distress, and the Need for Policy Reform” by the National Consumer Law Center in Boston. Since this was written there has been no meaningful impetus to cleaning up the abuses, nor have like exposes had much effect. </p>

<p>And the compounding problem is that systemic abuses within the corporate student loan industry are close to spreading negative effects, on a massive scale, to the rest of an already shaken economy. When Moody’s downgraded SMC’s status back in May, it was very indicative of deep systemic problems well past the mere fact that there are some reforms looming in regards to student lending. SMC holds about 40% of the some 580 billion of student debt in the US, and exists in a financial bliss state where the federal government is propping them up, but somehow they still managed to over leverage to the extent that their ratings were substantially downgraded. So the next people to take a soaking by these companies are going to be the investors. </p>

<p>And its very possible that the Obama/Duncan contingents attempt to reestablish direct lending as the model for student borrowing was not the cause of SMC’s downgrading but an attempt to compensate for already developing and potentially dangerous financial trends. The major lenders in this industry had already received billions in federal money for ‘emergency liquidity’ along with the usual massive subsidies, over billings and etc. But even with all that this system has conducted itself in such a manner as to be systemically unsustainable. So whether the government does it by fiat, or the market does it by collapse, it can’t last…</p>

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<p>I don’t like the state of student loans. I believe that every student and parent who take out loans should be counseled about the ramifications of them. I think that it is terrible when I see 21-22 year old kids who took out $50-80k in student loans, much of them at high interest rates when their famiily had low EFCs, and the chances of those kids earning enough to get out of that debt is very small.</p>

<p>A friend’s D visited me recently. She just graduated with a BA in philosphy that took her 5 years to get. She has about $70K in loans; some with high interest rates. Her family has 5 other kids, parents’ business went under, they are in tough times financially. She is talking about going to an architechtural school. Borrowing every bit of the way, of course. Her attitude is that she’s just not going to think about it since she’s in so much debt already. I was appalled with her way of thinking. I know others who think that way as do some parents.</p>

<p>I’ve had the “heck with it” attitude at times too. You spent so much that who cares if you go deeper. You’re in trouble as it is, might as well enjoy yourself. I think many of us have been through that. To do this with school loans is a travesty for kids since the fallout can last a lifetime. I know that it took us years to pay back our student loans, and they were no where near what kids are taking these days. </p>

<p>Sometimes it’s worth it to take these financial risks, but you need to understand the situation and the alternatives instead of just throwing all cautions to the wind.</p>

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<p>“I don’t like the state of student loans. I believe that every student and parent who take out loans should be counseled about the ramifications of them. I think that it is terrible when I see 21-22 year old kids who took out $50-80k in student loans, much of them at high interest rates when their famiily had low EFCs, and the chances of those kids earning enough to get out of that debt is very small.” </p>

<p>The problem is that there are so many genuine conflicts of interest that unbiased advice is at times improbable. For example in my state (and alas institution) what is happening is that posters are being put up which implicitly link the schools and lenders. To the extent that loan payments are to be made through the institutions web page. Its the same trick which brought down censure by the NYS AG, and circuit court, all that’s happened is they’ve moved it out of that jurisdiction. And with this type of institutional co-opting its very unlikely students will be advised about the risks of loans, or even the merits or problems of loans with that particular lender. And faculty under such conditions do take some serious risk when commenting to students to be careful. </p>

<p>The other problem is that there has been quite a successful lobby campaign to ensure that non -loan programs have been politically minimized. Much was made of the Obama decision to increase Pell amounts, but as useful as that was, it was little more than a slight increase which in no way made up for lost ground. </p>

<p>And the unparalleled escalations of tuition costs have a very close correlation to the rise in dominance of the loan (especially subsidized) model. Simply because the government cut non loan aid to schools, and academe looking for support essentially transferred the burden of costs down onto students and families. Essentially the debt they incurred as a result of rampant tuition hikes, and loose spending on glitter, became an out of sight out of mind condition for college administrations. And of course the lenders have had a field day because the American dream still has enough of a hold on the middle class, that a college education is almost a ritual rite of passage no matter how much it costs. The cruelty to it all is that the underclasses are even more vulnerable to the smoke and mirrors. </p>

<p>The deeper problem resultant from this condition is that the perception of the middle class American dream won’t survive too much longer if reforms in student debt, and academic spending are not made. That perception has already been substantially weakened by the mortgage debacle and predatory credit card practices.
Already student loans, debt, and higher education simply no longer correlate cost to benefit. To the extent that higher education is rapidly becoming a detriment to the middle class. It no longer serves as a mode of entry, or preserving middle class status, because the debts are often unsustainable. And as our depression worsens that condition will also get more drastic.</p>

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<p>Atana, you would be more credible if you weren’t so sensationalist. Teachers, Occupational Therapists, Speech Therapists, Pharmacists… all of these professions require Master’s level education, and I know dozens of people in these professions paying off their loans. Some graduated years ago, some graduated a year ago, the payments get made like clockwork.</p>

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<p>In some states, you can’t get a license to practice the regulated professions (dentistry, medicine, law, etc) if you have defaulted on student loans. In Illinois, on the renewal form, it asks about it.</p>

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<p>Atana, if we strip away the interest and the penalties and look only at the principal amounts he borrowed and has not made a dime’s worth of payment on, his balance still represents irresponsibility, along with some shenanigans in order to go 26-27 years without paying a dime. Sounds like he is finally facing some consequences that he may not be able to wiggle his way out of.</p>

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<p>Never disputed Bowman’s irresponsibility. But systemically there has been the problem of companies like SMC grossly inflating the fees and using various tricks to increase the principle amount far beyond ethical boundaries. </p>

<p>What they’ve done, is by various sweet heart regulations provided by congress and pets in the USDOE, is propagated a massive bubble. One which is detrimental and dangerous to what’s left of our middle class. </p>

<p>Bowman is a red herring, insofar as he is an isolated extreme. But those who do try to pay these loans, are increasingly caught into a trap not of their own making. Simply because the government sanctioned profiteering of these companies has broken the ability of their clientele to pay the excesses. </p>

<p>“Atana, you would be more credible if you weren’t so sensationalist. Teachers, Occupational Therapists, Speech Therapists, Pharmacists… all of these professions require Master’s level education, and I know dozens of people in these professions paying off their loans” </p>

<p>Perhaps but those professionals also find that an increasingly unsustainable amount of their income is being directed to the payment of educational costs. Blossom to enhance your knowledge of this matter it might be advisable if you’d do some serious reading into the matter, the NEA, Dr. Warren of Harvard Law & Business, The National Consumer Law Center, Chronicle, Inside Higher Ed, et al have all published quite clear publications about this problem. And there have been repeated radio and TV exposes about the abuses within the student loan industry by CBS, ABC, NBC, NPR, On Point, and etc. And there is an upcoming book about the matter, soon being published. It’s not a matter of sensationalism, because systemically there is a problem. As such whether or not there are attacks on my character on some anonymous discussion board does not change the fact that there are very credible sources which are expressing deep concerns about the problems within this industry. </p>

<p>So whether or not you, me, know people who have paid these loans, that does not preclude the issue that systemically there is a clear and serious problems within the current structure of educational lending. For gods sake, Harvard Business & Law School the nee plus ultra of the establishment has had one of their preeminent professors propagating nationally distributed essays and interviews noting that there are some substantive problems within the student loan system.</p>