Monday, October 14, 2013

Yes, The Student Loan Scandal is Worse Than Was Known – Student Loan Balances Will INCREASE During Bankruptcy

Is Indentured Servitude Next?

Anyone who is exposed to the way America finances higher education comes away with the dirty infection of knowing the system is crooked, exploitive and corrupt.  Basically what has happened is that taxpayers have turned their backs on state higher education and cause the tuition and fees to rise tremendously.  To enable students to even go to college means burdening them with huge student loans.

Some students are just unable to pay the vig.  So what happens when they have to declare bankruptcy?

Under the federal bankruptcy code, consumers almost never can get rid of student loans—unlike credit-card, medical and many other types of debt. The rule is meant to prevent people from filing for bankruptcy soon after they leave college in an attempt to renege on their school loans.

Wow, so students are left with the same debts that they had when they entered bankruptcy?  No, they have more.

On top of that, the process under Chapter 13 of the code generally restricts these borrowers from making full payments on student loans during the three-to-five-year bankruptcy period. That allows lenders to add interest, late fees and other penalties to the student-loan balances during that time.

The upshot: Aside from rare cases, student loans are the only consumer debt that ends up larger after bankruptcy.


What kind of people do that to their kids?  Oh, Americans in the 21st century, that’s who.

1 comment:

  1. The system is great for people with money. You can take your disposable income and put it in a 529 plan, get a state tax deduction, watch your investments grow tax free, reallocate your investments over time on advice from your financial planner, and then spend the proceeds on your kids' education with only a tiny fraction of them counting for financial aid purposes.

    Of course, everyone who lacks the means to fund a 529 and hire someone to guide their investments (and isn't otherwise wealthy) is at the mercy of the awful student loan system.