Non dischargeable student loans violate the 13th amendment

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Subprime JD's picture
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Non dischargeable student loans violate the 13th amendment

Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.

Peonage Refers to a person in "debt servitude," or involuntary servitude tied to the payment of a debt. Compulsion to servitude includes the use of force, the threat of force, or the threat of legal coercion to compel a person to work against his or her will.  Peonage Section 1581 of Title 18

 

Involuntary servitude

Refers to a person held by actual force, threats of force, or threats of legal coercion in a condition of slavery – compulsory service or labor against his or her will. This also includes the condition in which people are compelled to work against their will by a "climate of fear" evoked by the use of force, the threat of force, or the threat of legal coercion (i.e., suffer legal consequences unless compliant with demands made upon them) which is sufficient to compel service against a person's will. The first U.S. Supreme Court case to uphold the ban against involuntary servitude was Bailey v. Alabama (1911).

Here is the current legislative language, as amended by Section 220 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), P.L. 109-8, effective October 17, 2005.

   523(a) Exceptions to discharge

       (8) Unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents, for--

             A- an educational benefit overpayment or loan made, insured, or guaranteed by a government unit, or made under any program funded in whole or in part by a government unit or nonprofit institution; or an obligation to repay funds received as an educational benefit, scholarship, or stipend;

 

US Bankruptcy Code 11 USC 523(a)(8) is unconstitutional as it violations section 1 of the 13th amendment. The exception for undue hardship only occurs when the borrower is basically flat out broke, destitute, and emotionally and physically drained. Section 1581 of Title 18 and the language of Bailey v Alabama are in direct conflict with US code 523(a)(8).

A student loan is a contract like many other contracts that are signed on a daily basis worldwide. Definition, "An agreement between two or more parties, especially one that is written and enforceable by law". Contracts, being agreements, are breached all the time for many reasons. Sometimes they are breached because of undue hardship, sometimes it is more economical for a party to breach rather than fulfilling its obligation. Sometimes, impossibility is used as a defense, as it is impossible to satsify the terms or frustration of purpose is used as a defense to breaching a contract. However, student loan contracts are special in that the consequences of breach are severe and for the most part, nondischargeable.

I argue that the penalties, enforcement, and nondischargeable nature of federally backed student loans violate the 13th amendment. As such, it is imperative that a suit be brought against the government. The specific remedy should be: that US Bankruptcy Code 22 USC 523(a)(8) is violative of section 1 of the 13th amendment as accruing interest, lifetime duration nature of student loan payments is tatamount to involuntary servitude as private banks, through the use of collections agents, use legal threats of coercion to defaulted borrowers to repay their loans. In addition, the fact that the contract can effectively never be terminated is also violative of the 13th amendment as borrowers are forced to work to make these payments "against their will" by the use of legal coercion. Contracts are terminated when a party has committed a total breach. When a party has breached the terms of a contract, they go to court, a judgment is rendered and a remedy is provided. In the event that a party cannot pay the remedy, he files bk and the case is over. The party which could not pay CHOSE to file bk, and that is the end of it. With nondischargebale student loans, the borrower is forced against his will to continue to pay a usurious loan against his will. This fits the description of involunary servitude.

 


land2341's picture
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Re: Non dischargeable student loans violate the 13th ...

Sorry,  I am not buying it.  I think it is wrong that debts are dischargable in most cases at all.  As some one who was severely financially damaged by some one who defaulted on their contract by declaring bankruptcy,  I am not going there.  It is against the 13th Amendment for a person to be able to file for bankruptcy and put me in debt.  If you fail to pay back your student loan you are taking my tax dollars because the bank will always get paid,  that is the meaning of backed by the government.  So no.  Too bad.  The education in your head cannot be returned.  I say indentured servitude would be good.  Thousands of hours of community service as a pro bono lawyer for failing to pay those loans.  I wanted to go to law school but I was afraid of that debt.  Why should I have to pay for the fact that you got to go?

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Re: Non dischargeable student loans violate the 13th ...

The government has been subsidising housing and people are defaulting like mad. That bankruptcy provision violates the 13th on its face. If you like slavery then go to africa.

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Re: Non dischargeable student loans violate the 13th ...

Other people are doing something wrong so it makes it OK for me to do it is a crock.  I don't like slavery but at the moment I cannot get out of my tax slavery so why should you be allowed to violate that?

 

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Re: Non dischargeable student loans violate the 13th ...

Student loan slaves pay taxes and loans with interest. If u dont work, u dont pay tax. If you dont work, you still get the bill from the student loan servicers. Its a DEBT, and DEBT is liquidated in all circumstances except for student loans. If u look at the legislative history, the rules were tightened dramatically in 2005. I guess they figured that no one would think to use the 13th amendment to battle that bk code. Until of course, BMT gets his license.

 

People that have 70k in loans and are making 50k a yr, odds are strong that person wont default on a 650 a month payment. Someone who owes 120k and makes 35k a yr SHOULD be allowed to default. Period. By allowing distressed student loan borrowers to defualt would hurt the student loan market. Thus, tutions would fall more in line with realistic incomes. Let the market work damn it!

Ive read so many horror stories of law or mba, phd grads getting out with 200k in student loans and are making 30-40k a year. They default, the principal grows and they will never get out of debt. This is involuntary servitude which benefits primarily the banks and then the gov. 11 USC 523(a)(8) needs to be revised.

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Re: Non dischargeable student loans violate the 13th ...

The world isn't fair and most of the time, economically, you don't get what you want, you get what you deserve.  Man up, pay up, and move on.  Life's too short. 

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Re: Non dischargeable student loans violate the 13th ...

You older folk fail to realize the predicament facing the younger generation. Young adults listened to their parents and society, studied hard, went on to higher education, incurred unprecedented debt, and are now finding themselves in a desperate situation. At least the boomers that went on a home buying frenzy have the option of walking away. Generation Y cannot walk away from student loans. Not only Gen Y, but the most recent graduates that also happen to carry the largest debt loads are the ones having the toughest time getting a job. No generation ever had it this hard, absent the civil war folks. Not even the great depression youth were subject to this. Some attorney told one of my fellow grads that "if i was in your shoes id shoot myself in the head".

By and large the comments that I get every time i speak about the plight of my generation are haughty and cruel. If society will punish their youth and treat them the harshest out of any class of people in this environment, then there really is no hope for the future. We grads deserve to have our wages garnished to fund your social security benefits becuase we elected to pursue a higher education? No, in the end you will get what you deserve when the entire system falls apart.

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Re: Non dischargeable student loans violate the 13th ...
land2341 wrote:

Sorry,  I am not buying it.  I think it is wrong that debts are dischargable in most cases at all.  As some one who was severely financially damaged by some one who defaulted on their contract by declaring bankruptcy,  I am not going there.  It is against the 13th Amendment for a person to be able to file for bankruptcy and put me in debt.  If you fail to pay back your student loan you are taking my tax dollars because the bank will always get paid,  that is the meaning of backed by the government.  So no.  Too bad.  The education in your head cannot be returned.  I say indentured servitude would be good.  Thousands of hours of community service as a pro bono lawyer for failing to pay those loans.  I wanted to go to law school but I was afraid of that debt.  Why should I have to pay for the fact that you got to go?

Wow. So you'd bring back debtor's prison? The damage of a default can wreck someone's life for 7 years. Most people wouldn't do that unless they were desperate. 

Debtor's prison was abolished for moral reasons. And you want to bring it back?

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Re: Non dischargeable student loans violate the 13th ...
bearmarkettrader wrote:

You older folk fail to realize the predicament facing the younger generation. Young adults listened to their parents and society, studied hard, went on to higher education, incurred unprecedented debt, and are now finding themselves in a desperate situation. At least the boomers that went on a home buying frenzy have the option of walking away. Generation Y cannot walk away from student loans. Not only Gen Y, but the most recent graduates that also happen to carry the largest debt loads are the ones having the toughest time getting a job. No generation ever had it this hard, absent the civil war folks. Not even the great depression youth were subject to this. Some attorney told one of my fellow grads that "if i was in your shoes id shoot myself in the head".

By and large the comments that I get every time i speak about the plight of my generation are haughty and cruel. If society will punish their youth and treat them the harshest out of any class of people in this environment, then there really is no hope for the future. We grads deserve to have our wages garnished to fund your social security benefits becuase we elected to pursue a higher education? No, in the end you will get what you deserve when the entire system falls apart.

This older generation person worked his ass off from the age of 12, worked 24 hours a week carrying an 18 plus credit load at an academically demanding East Coast university, pulled the grades to get a full scholarship working on a second degree, lived in a ghetto apartment going to school to save money, didn't have a car or even a phone to save money, ate a lot of rice and beans to save money (and sometimes even fasted), etc., didn't have to get any loans as a consequence, and didn't whine about it to anyone.

What I see in many (but thankfully, not all) of your generation is that if someone disagrees with that, tells them something they don't want to hear, or makes them feel the least uncomfortable about themselves (even if it's for their own good), that person is "mean" or, in your instance, "cruel and haughty".  Maybe, it's time for some self reflection and contemplation to assess why everyone is so "mean" to you.  I mean, it must always be them, right, and not your actions ... couldn't be your actions, could it?

My 20 year old daughter got a job at the university she's at and in the summer, cleaned the bathrooms and hallways in the commercial building I own, babysat, AND also found herself a full time summer job paying $17.82/hour (thank you, President O'Bummer for one benefit of your stimulus package).  My 17 year old also does the same janitorial work, shovels snow, mows lawns, and coaches soccer and will be working a full time job in a greenhouse this summer as well .  Both of them have earned significant university scholarships as well.  Frankly, if they whined as much as you, my wife and I would verbally kick their butts from here to next year and they know it and act accordingly. 

No generation ever had it this hard!?!?!?  Go back and study your history.  You think you have it tougher than the GIs in France in WW I or those in the Pacific or Europe in WW2 or those in Korea or even those in Vietnam.  Your a** is high and dry and lead free sitting back in the nice comfy USA and you're having it worse than they did?  Get real!

And furthermore, I paid in for my Social Security benefits with many years of 50-60 hour work weeks but I'm also prepared not to get it.  And if and when the system falls apart, we will get exactly what we deserve.  We've prepared well and have the physical and mental capabilities to handle anything that comes our way.  Bring it on, I say. 

Frankly, you seem like a nice guy with a promising future ahead of you but you're spending WAY too much time wallowing in self pity.  Get past it and move on and make your future.  

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Re: Non dischargeable student loans violate the 13th ...

My great grandmother was born in Port Chester, New York in 1898.  She went to work in a textile factory at the age of 11.  Her husband died of typhoid fever when my grandfather was one year old.  Over the course of her life she lost three of her fingers working the looms, and she was still so poor that she had to pick up coal that fell from the railroad cars just to heat her house in the winter.  She would have leapt at the chance to wear nice clothing and shuffle papers around a desk, even if she still had to scrounge for coal to heat her house.  But then again, she wasn't the sort of person who asked others to fork over money to cover for her life's mistakes.  When her attention wandered for a moment after 12 hours at work, and she lost another finger in the machinery, she didn't look for a handout.  Her and people like her built this country, and those people deserved a break.  The break that you are turning your nose up at.

Any informed person who takes federally-backed loans knows that in exchange for the low interest rates and extended repayment terms, they give up the right to discharge the debt in bankruptcy.  You knew that.  If you had found this arrangement disagreeable, then why didn't you get your financing elsewhere?  Of course:  where else could you have borrowed $100k+ with no collateral?  No private lender would be crazy enough to lend tens of thousands of dollars in unsecured money to a penniless student, no matter what interest rate you offered to pay.

The federal loan program is a tool that is available to any student should they wish to take advantage of it.  And it has helped a lot of people obtain very satisfactory educations and employment that would have been completely out of reach without federally backed loans.

You made a business decision.  Now when you find that your contractual obligations have become burdensome to you, you want to weasel out of the agreement that you entered into with full knowledge by making silly arguments about the 13th amendment.  I'll tell you what slavery is.  Slavery is never having a choice.  Slavery is living generation after generation doing nothing but manual labor because you do not have the money to roll the dice on a better life.  Slavery is not being able to afford to leave the neighborhood that you were born in.  Slavery is not having a choice

Now I'll tell you what slavery is not.  Slavery is not having the luxury of choice, exercising that choice, attending the mediocre school of your own choosing, and then claiming that "freedom from slavery" means the freedom to weasel out of contractual agreements when you don't happen to like the outcome.  I suspect that if you had landed a job making $95,000 you would not be complaining so much about being given the chance to attend the school of your choice with no questions asked, rather than spending a lifetime flipping hamburgers.

Would you rather that the loan program was not available at all?  Or do you simply want the United States of America to pick up the tab whenever a student borrows heavily to attend a mediocre school (of their choosing) and then is displeased with the wages waiting for them upon graduation?  Wages that your ancestors would give their eye teeth for, and wages which you could have discovered before attending school.

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Re: Non dischargeable student loans violate the 13th ...

jrf29,

Well stated.

BMT,

Take heed.

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Re: Non dischargeable student loans violate the 13th ...

You guys still think the Constitution is relevant in a society that has abandoned the rule of law?

Sorry for the cynicism, but I couldn't resist. In a world where the CIA openly admits that it assasinates both American Citizens and foreign nationals who are suspected of wrongdoing but who have never had any right of habeus corpus or due process of law, I just can't take a philisophical debate about whether student loans violate the Constitution seriously. Not in the face of extrajudicial executions without charges ever being filed or even a public disclosure of who was executed or why.

Sorry, but as Doug Casey has said publicly, America and all it stood for are gone. All that's left is the United States, and it's just another f***ing country. :-(

Erik

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Re: Non dischargeable student loans violate the 13th ...

Bearmarkettrader,

How would you feel about putting debt free money out there so those people could pay off their loans without forcing someone else deeper in debt?

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Re: Non dischargeable student loans violate the 13th ...

I just can't take a philisophical debate about whether student loans violate the Constitution seriously.

Then could you handle a debate about putting money into circulation without any debt attached to it?

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Re: Non dischargeable student loans violate the 13th ...

Hey BMT

Iam of the "older folk"..

IMO you should try and figure out a way NOT to pay.. Usury and all the tricks of deception that go with it are bullshit..  For as long as you can,instead of paying the loan put the money into PMs and physical cash.. Then when, and if, you have a day in court try and win the case.. As you have already presented a fair argument..

Of course the interest will still add up.. However depending on how bad TSHTF having the physical PMs and cash in your posession is a much smarter thing than worrying about numbers in a computer.. Its easy to get complaicent with the current "extend and pretend" it feels like it could go on forever.. But it won't.

We were all born into this system.. None of us asked for it.. We dont really have any power over the system.. Except to opt out as much as possible.. Naturally in practical terms we can't opt out 100%.. But we can stop being used as much as possible..

So dont pay...

The other arguments against BMT on this thread seem to be only relevent looking backwards.. Sure, what seemed moral in the past..

Whats moral now is to break the system.. Revolt.. Say no to the criminals.. (Gov and banksters alike)..

West

 

 

 

 

 

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Re: Non dischargeable student loans violate the 13th ...

First off, I personally have no problem paying my student loans back. I am in the position of repaying them. I have small amounts of loans and strong financial support for my family.

My passion and interest in this issue stems from the plight of the tens of thousands of other graduate school grads across the country, including my graduating class. To date, MOST of them are unemployed and probably half of them have either deferred their loans or are in forbearance. The problem with either of the two is that payment is stopped until the borrower finds employment, but the principal balance grows. Moreover, the MBA and JD are being diluted as year after year more grads enter a smaller market. The costs are astronomical but the payout is low.

Jrf29

No private lender would be crazy enough to lend tens of thousands of dollars in unsecured money to a penniless student, no matter what interest rate you offered to pay.

The gov has no business insuring student loans. But for the govs involvement tuition would have never gotten so high in the first place.

Would you rather that the loan program was not available at all?  Or do you simply want the United States of America to pick up the tab whenever a student borrows heavily to attend a mediocre school (of their choosing) and then is displeased with the wages waiting for them upon graduation?  Wages that your ancestors would give their eye teeth for, and wages which you could have discovered before attending school.

The government involvement with the student loan market is the primary cause for the rising cost of education. Were the gov to stay the hell out of the student loan market, then the prices would be much lower today. Banks would have to take the risk, and thus would not lend as much money. In addition, the fact that the gov guarantees student loans has further exacerbated the grad school and even the college bubble. There are too many students out there with nothing to do when they graduate. The gov allowed american companies to outsource thereby collapsing the manufacturing sector. In response, the gov advocated college for the youth of america. The taxpayers should never pick up the tab for defaulted student loans, the risk should be left with the bank that made the loan.

With regards to your "mediocre" school assertion, in this market any school outside the top 20 is considered mediocre, especially law school. There are people graduating from great schools that cant find work for years. Contrary to what you see on boston public and raising the bar, new attorneys that dont get into BIGLAW get very low pay. "Displeased" with wages isnt the correct description when the student loan mob is banging on the door month after month. Lets see, some student graduates with 130k in debt and gets paid 40k a year. The loan payment is 1000 per month. After taxes he nets 28k. Thats 2300 a month. After the loan he has 1300 for rent, food, car. Assuming rent is 500 (roomate) and he has a car payment of 150 per month (beater) he is left with 650 a month to eat, or 162 a day. Assuming no benefits hes one hospital visit away from bk. Or, what if he gets laid off and cant get work for 6 months. Loans go in deferrement and the principal GROWS.

Or what about the student that graduates with 200k in loans? Thats 1543 a month in just loan payments. What if 99% of his class does well but he falls through the cracks. He gets a job then gets layed off. He cant get work for 2 yrs and now his loans have ballooned to 250k. Now he needs 1900 per month. He didnt do too well at his mediocre school and after  2yrs of looking he throws in the towel. He goes to find a sales job, marketing job, ANY job. In the meantime he has maxed out credit cards at 20k. Hes broke. No help cus his parents are either messed up, broke themselves or dead. He gets a secretarial job paying 15 per hour. He grosses 2400 per month. Its obvious he cannot repay the loan so he makes partial payments. After rent, food (no car, takes the bus) he works just to have a place to stay and barely eat. Its obvious his "degree" didnt work out for him. He is "displeased" with his wages. Yet he has no right to file bk and properly default on the loan because the government made the reckless decision to guarantee it? Why dont the banks and gov further investigate who they want to lend to? Perhaps a closer audit of graduate performance will open their eyes to a world of pain.

I know so many people that ran up the cards, 40-50k. They splurged on dinners and movies in LA. Yet, when the payments got to high they went to bk court, filed ch 7 and are now debt free. Others bought overvalued homes (FHA, FNM, FRE) subsidized and guaranteed now yet they STILL walk away. Yet thousands upon thousands of grads that fell through the cracks that are leveraged up to their eyeballs cant get bk relief? The taxpayers eat the loss constantly in the housing debacle. Yet the best and brightest of this countries youth are falling through the cracks at a much more rapid pace with no relief. Lives destroyed, relationships destroyed. The stress being unbearable. You see, you spoke of slavery in the past. Todays slavery does not involve physical chains, but rather digital chains. And those digital chains are powerful, following you wherever you go. You better believe its slavery friend. To give your hard earned money to a lender and government that bear no risk of loss as the debt can never go away until you pay it off, which for many of these people could be never.

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Re: Non dischargeable student loans violate the 13th ...
ErikTownsend wrote:

You guys still think the Constitution is relevant in a society that has abandoned the rule of law?

Sorry for the cynicism, but I couldn't resist. In a world where the CIA openly admits that it assasinates both American Citizens and foreign nationals who are suspected of wrongdoing but who have never had any right of habeus corpus or due process of law, I just can't take a philisophical debate about whether student loans violate the Constitution seriously. Not in the face of extrajudicial executions without charges ever being filed or even a public disclosure of who was executed or why.

Sorry, but as Doug Casey has said publicly, America and all it stood for are gone. All that's left is the United States, and it's just another f***ing country. :-(

Erik

+1789 Erik. And the worst part of it is that it's citizens CHEER ON it's own demise. 

People deserve to get good and hard the politicians that they choose. 

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Re: Non dischargeable student loans violate the 13th ...

How did I know when I read this subject title it would be posted by BMT?

I look at it like this. When everyone has to play by the rules then I will too. But if bankers can break contracts, make malinvestments and have my tax dollars got to pay them off, charge interest on something that isn't theirs, and so on then I don't feel obliged to follow the rules and carry the ethics flag.

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Re: Non dischargeable student loans violate the 13th ...
Johnny Oxygen wrote:

How did I know when I read this subject title it would be posted by BMT?

I look at it like this. When everyone has to play by the rules then I will too. But if bankers can break contracts, make malinvestments and have my tax dollars got to pay them off, charge interest on something that isn't theirs, and so on then I don't feel obliged to follow the rules and carry the ethics flag.

Good point. Goose/Gander applies here. If not being able to discharge a debt would ruin a business then why are the interests of a corporation greater than that of a citizen? 

Anyone care to answer? 

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Re: Non dischargeable student loans violate the 13th ...

Because students cant sign the contract under a LLC, or LP lol.

Washington D.C., Dec 5, 2009 / 06:03 pm (CNA).- The “crushing burden” of student loans delays marriage and childbirth and encourages cohabitation, family policy expert Allan Carlson said in a lecture on Friday. He urged a pro-family debt relief program to help alleviate the financial stresses student loans can cause.Carlson, who is President of the Howard Center for Family, Religion & Society, spoke at the Family Research Council in Washington, D.C.

“In cultures around the world and throughout recorded history, the common practice has been to use dowries (the property brought by young women into their marriages) and other marital gifts to provide newlyweds with working capital at the beginning of their marriage,” Carlson wrote in a 2005 paper. “This cultural strategy has aimed at encouraging marriage, stable homes, and the birth of children.”

However, the recent practice of burdening young adults with substantial educational debt appears to significantly discourage marriage and childbirth.

At the FRC on Friday, Carlson cited a 2002 survey indicating that 14 percent of indebted students delayed marriage because of their loans, while 21 percent delayed having children. In 1988 these numbers were nine and 12 percent, respectively.

This debt can also cause problems in marriages. One survey which examined 41 marital problems and found that “debt brought into marriage” was the third most problematic issue facing newlyweds. Among respondents who had no children, debt was the second most problematic problem. Among respondents ages 29 and below, debt was named the most problematic issue.

Carlson suggested student loan debt has encouraged a “retreat” from marriage.

The marriage rate for women aged 20-24 declined 41.4 percent between 1984 and 2004. The rate for women aged 25-29 declined 19.4 percent. For men, the marriage rate in those cohorts declined 45.5 percent and 29.6 percent, respectively.

Cohabiting couples have increased from 1.6 million in 1980 to 5.1 million in 2004. This has significant effect on the family, as cohabiting couples are less stable, more prone to domestic violence and more prone to infidelity even after they marry. Children of cohabiting couples show the same level of well-being as children of single mothers, a much poorer well-being than children of married parents.

Carlson added that women who receive a college degree or above tend to remain childless compared to those without a university degree. The higher a woman’s qualifications, the less likely she is to marry or cohabitate.

If these women do marry, they are more likely to marry college-educated men. This means their debt obligation is likely to be twice as high as individual debt.

Student loan debt also has effects on health care costs, Carlson noted in the question and answer session after his lecture. Doctors who exit medical school with massive debt must insist on a large income to repay it. This pressures doctors to prefer specialized fields which pay more than general practice.

http://www.catholicnewsagency.com/news/student_loan_debt_a_crushing_burden_that_harms_young_families_expert_says/

 

 

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Re: Non dischargeable student loans violate the 13th ...

Student loans are crushing new grads Without jobs, paying off $100,000 in debt is tough

By Christine Dugas
USA TODAY 

Thousands of college graduates are facing a student loan crisis.

The job market is shrinking, and the sour economy is preventing employers, parents and relatives from helping those who are behind on payments.

Student loan defaults are at their highest rate since 1998, and likely will go higher. And though federal student loans offer some payment modification options, private loans are far more onerous, because even filing for bankruptcy rarely wipes out the debt.

Congress might tackle bankruptcy law reform again this year, but it decided as recently as last year not to allow student loans to be easily discharged through bankruptcy filings.

Without such an option, many college grads are saddled with debt and unable to buy a home or obtain other credit. That can leave them in some cases unable to pursue the careers they studied for because they must take low-paying jobs just to try to keep up.

But lawmakers should move carefully on any reform, banking industry officials say.

"If private student debt can be discharged in bankruptcy, that creates risk, and the result will increase the cost of tuition," says Scott Talbott, chief lobbyist for the Financial Services Roundtable. (HAHAHAH look whos talking, POS banker)

The cost of going to college or graduate school is rising. On average, the public college experience cost a student $6,585 this school year, up 6.4% from last year. Private tuition costs $25,143 on average, up 5.9%.

FinAid.org, a financial aid information source, says that two-thirds of four-year undergraduates leave college with debt. Graduate and professional students borrow $27,000 to $114,000.

Bankruptcy law allows for discharges of credit card debt, car loans and even gambling debt, but not student loans.

A student loan debtor must try to claim an "undue hardship" to seek bankruptcy protection — a claim that is successful at best about 50% of the time. Unlike a traditional bankruptcy filing, a hardship filing requires debtors to file a lawsuit against creditors. That pits the student against corporate lawyers and defense teams, and often requires an expert witness, which can cost the graduate thousands of dollars to arrange.

"We're talking about people who are in bankruptcy because they don't have money," says Rafael Pardo, associate professor of law at Seattle University and co-author of a recent research report about undue hardship litigation. "Yet we're asking them, 'If you want relief, you have to find a way to pay for a full-blown lawsuit.' "

Renee Marie French wanted to file for an undue hardship claim in 2006 when she stopped working so she could care for her mother, who had cancer, in Albany, N.Y. As an unmarried parent of one child, French was unable to pay for a lawyer. But Thomas Califano, a bankruptcy attorney, agreed to provide pro bono service.

Even though French was able to go through the process, a judge ruled against her.

The whole process is unfair and extremely difficult, Califano says. Since then, French's student loan has risen from $14,000 to $44,000 because of interest and penalties. And her life is more difficult. Her mother died, as has her stepfather. She works as a registered nurse and earns $20 an hour.

"I pay $1,000 in child care, so I don't make enough to pay for my bills," says French. "I pay $25 a month to the collection agency."

Discharging student debt used to be easier.

"When I first started practicing bankruptcy law 22 years ago, you could wipe away student loans that were more than 5 years old," says Nora Raum, a bankruptcy attorney in Virginia.

Gradually, bankruptcy law changed. In 1998, Congress ruled that federal student loans were not allowed to be discharged except under the undue hardship provision. In 2005, private loans, which can carry terms up to 25 years, came under the same regulations.

Student loans more than doubled in the past 10 years, from $41 billion to $85 billion, according to a 2008 report by the College Board, a non-profit organization of colleges, universities and other educational institutions. During the same period, private loans soared from 7% of student loans to 23%.

"Many students are borrowing from both federal and private loans," says Sandy Baum, senior policy analyst at the College Board. "I think we're going to start to hear a lot about how those people are unemployed and can't pay back those loans. And nobody is going to help them with that."

Federal loans offer financially distressed borrowers options, such as forbearance, extended terms and alternate repayment. But there is no escaping the loan altogether: The federal lender can pursue repayment forever because the debt statute of limitation does not apply.

It does for private loans, but they can be costlier and offer fewer relief options. Lenders often fail to offer relief to the neediest borrowers, says a report issued last month by the National Consumer Law Center.

"I feel like it's a real shame that people like me are coming out of college, weighed down by all this debt," says Austin Light, 24, a journalist for The Mecklenburg Times in Charlotte. He and his wife have $100,000 in student loans. "My dream is to be a full-time children's book author and illustrator, and if I wasn't shackled with this debt, I would be pursuing that."

Kim Prewitt of Baltimore is in worse financial distress.

She graduated from law school with about $140,000 in student loan debt and no job offers. To get by, she started working at a bank. But she recently lost that job.

Prewitt is allowed to temporarily stop making payments on her federal loans, although the interest continues to pile up. About one-third of her debt is from private loans, so she must continue making payments.

"I do not know which way to turn," she says. "Even once I have that full-time job so I can make the monthly payments, I am looking at 15 to 30 years to pay this off."

President Obama wants to reform the student loan system, but even if Congress adopts his plan, it won't help the graduates who already are underwater.

Sen. Dick Durbin, D-Ill., says he plans to re-introduce a bill that stayed in the Judiciary Committee last year. It would turn back the 2005 change in bankruptcy law and allow private student loans to be discharged.

"The sky-high interest rates on private loans combined with questionable practices by lenders and the exponential growth of the private student loan market over the past decade have resulted in mountains of debt that can follow students from graduation to the grave," Durbin says.

Rep. Danny Davis, D-Ill., also plans to keep pushing for a change in the bankruptcy law. He introduced a bill that was voted down last year.

"I think the purpose of bankruptcy is to provide some sense of release for people when they've gotten totally overwhelmed," he says. "It's difficult for me to understand why we can't treat student loans the way we treat some other indebtedness."

Since the law stopped allowing private student loans to be discharged, loans are not any cheaper, says Lauren Asher, acting president of the Institute for College Access and Success. So the argument that reform will cause increased college costs doesn't hold, she says.

Not everyone thinks bankruptcy is the best option.

"I don't support it, but I don't have a solution," says Peter Mazareas, vice chairman of the College Savings Foundation, a non-profit advocacy group for college savings plans.

"It is going to be a generational challenge, in terms of the current students who are maxing out on their loan indebtedness now realizing that they will have to pay $1,500 to $2,000 a month for the next 10 to 15 years," Mazareas says.

It is apparently on many people's minds.

In January, Robert Applebaum, a 35-year-old lawyer, launched a Facebook campaign called Cancel Student Loan Debt to Stimulate the Economy. He was furious that billions of dollars were going to bail out the banking industry, but not to help the middle class.

"I just wanted to get my thoughts out, and I posted it in a Facebook group," he says. "I never had the expectation of more than 10 people reading it."

Now 188,000 people are members of the group.

Applebaum, who still owes $96,000 in student loans, has launched a non-profit organization and website. His aim is to expose inequities and unfairness in the student loan industry: "Students are graduating with incredible amounts of debt, so they are starting out with their hands tied behind their back."

http://www.usatoday.com/printedition/money/20090513/studentloans13_cv.art.htm

 

jrf29's picture
jrf29
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Re: Non dischargeable student loans violate the 13th ...

Interesting reading.  I agree that educational debt is a special problem.  I could support a legislative initiative to handle student debts differently.  Perhaps allow student loans to be discharged in bankruptcy after a certain number of years or else offer more flexible repayment terms.  There's already a law which caps student loan repayments at 15% of a person's income. 

But I can't agree that student loans are the same thing as slavery and involuntary servitude just because a person cannot walk away from them.  There is no absolute constitutional right to discharge any debt in bankruptcy court.  Every time a debt is discharged in bankruptcy, somebody loses.  In the case of student loans, it is the taxpaying citizens who lose.  Given the choice of imposing the loss on the student who chose to take the debt, or the student's fellow taxpayers who have not defaulted on their own loans, I think we should be very careful before throwing the burden on the taxpaying neighbors.  There should be substantial protection for both parties.

Your examples of people gorging themselves on credit card debt before wiping it away in bankruptcy do not convince me that student loans should receive equally lenient treatment -- if anything your examples make me wonder if other types of debt aren't too easily discharged.  If you would respond by pointing out how corporations default on debts all the time, I would reply that that, too, is not necessarily good.  If we were to reach back to the old days when owners of a corporation shared at least some legal liability for the debts of their company, this could serve as a very effective brake on the wild and reckless habits of corporations in possession of other people's money.

Again, the plight of some students is sad, particularly those who find no work on graduation.  Legislative changes might be needed.  But it's a step too far to claim that it is slavery of the kind that was banned by the 13th Amendment.

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Subprime JD
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Re: Non dischargeable student loans violate the 13th ...

Im glad that I brought the plight of struggling grads to your attention. This class of persons is woefully unrepresented and their voices dont get heard. Many people struggle in this country as they have low paying jobs that dont keep up with inflation. Healthcare costs, housing, energy, and food have continued to rise over the past 20yrs while incomes have stayed flat or even dropped for the lower end. With regards to the student loan issue, there are some, not many but some that end up getting very low paying jobs while still having a massive student loan burden. These people struggle immensely as their personal lives get hurt. Even though many others have these similar low paying jobs, at least they dont have their wages garnished. When you bring a child or 2 into the mix the situation becomes dismal. In these types of situations i argue that the certain bankruptcy code operates in a involuntary servitude type manner. Imagine, for 25 years, having to pay this nondischargeable debt, when the "investment" of obtaining the degree didnt pay off.

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land2341
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Re: Non dischargeable student loans violate the 13th ...

I am very sympathetic to students who are discovering that the world is not what they thought it would be - but I am still not buying the idea that these debts should be discharged.  If you don't want the debt DON"T GET INTO IT.

I wanted that same degree you have and could not afford it.  I knew it would be too high a pay off.  So I waited and worked more than ten years before I went back to grad school,  when I could afford it;  and then "imagine for 25 years having this non=dischargeable debt"  I don't have to imagine it!  I PAID IT!  And the job market stank when I got out too.  $700 a month for more than ten years!!  Imagine how much nicer my life would have ben if I had defaulted on that.

Some one accused me of wanting to bring back debtors prison - no that is not what I said.  I said there should be a system available that students  can use to discharge parts of their debt through community services.  It would then benefit everyone.

I am sorry things did not work out for you as you planned.  But, now you will use the education you bought to get out of the debt you incurred.  Come up with a solution that is responsible.  Come up with a solution that allows you to aid society not screw it over because you think you got screwed.  Work towards making college more affordable for the next generation.  If you default on your debt they will never get to go at all.

 

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goes211
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Re: Non dischargeable student loans violate the 13th ...

Although BMT has not won a lot of fans with his recent positions on student debt, in this particular case I am a little more sympathetic.  Whenever you have a debt, there must always be the fear of default or else there will be no market mechanisms to keep that debt under control.  By having the government step in and garantee these loans, it removed default risk from the creditor, and made these loans much more lenient than they would have been otherwise.  This in turn causes tuition inflation, because now there is far more money available for schooling than there would have otherwise have been.

To me this looks like a classic case of governmental interference causing unintentional consequences.  The government tries to help students with loans and in the process accidentally makes them debt slaves.  Just par for the course as far as governmental interference with the free market goes.

Johnny Oxygen's picture
Johnny Oxygen
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Re: Non dischargeable student loans violate the 13th ...

Another issue to this is this idea that only the people who can pay for 'higher education' should get it. IMO what mankind has learned collectively, and has been passed down from generation to generation, is not for an individual or institution to profit from since it wasn't theirs to begin with.

This is the premise for my belief that everyone has the right to 'higher education'. The main problem is the lack of alternatives. Large colleges or universities have tremendous overheads with their sprawling campuses and aging buildings being among the few things that jack the price up. I think a good start would be to make local community colleges four year colleges. They are smaller and easier to maintain. They are local and abundant.

Another good start would be that any required course that could be taught online (not neededing an instructor) should be or at least the option should be there. This would significantly cut down on costs. From my own experience most of my university courses consisted of me reading from a designated text and being hearded into classrooms of 300 to 400 students 2 to 3 times a week to listen to a lecture about what we just read.

Another issue is the shear waste of my tax dollars that could easily pay for my education if these changes were made.

The reality is that every single person on this planet has the right to the knowledge that mankind has discovered throughout the ages. It is our inheritance. That should not be turned into a business where some are excluded because they can't pay.

goes211's picture
goes211
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Re: Non dischargeable student loans violate the 13th ...
Johnny Oxygen wrote:

This is the premise for my belief that everyone has the right to 'higher education'.

Sorry but I don't buy it.  It is not possible to have a RIGHT to something that someone else must provide for you.  That goes for food, lodging, education, healthcare,...  Society can choose to collectively provide these for you but it is certainly not a natural right like the first and fourth admendments.

Johnny Oxygen wrote:

The reality is that every single person on this planet has the right to the knowledge that mankind has discovered throughout the ages. It is our inheritance. That should not be turned into a business where some are excluded because they can't pay.

I agree the collective knowledge of the ages should be free ( possibly after a SHORT period if you believe in intelectual property ).  It is only education, which requires the labors of others, on which we disagree.

Johnny Oxygen's picture
Johnny Oxygen
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Re: Non dischargeable student loans violate the 13th ...
goes211 wrote:
Johnny Oxygen wrote:

This is the premise for my belief that everyone has the right to 'higher education'.

Sorry but I don't buy it.  It is not possible to have a RIGHT to something that someone else must provide for you.  That goes for food, lodging, education, healthcare,...  Society can choose to collectively provide these for you but it is certainly not a natural right like the first and fourth admendments.

Johnny Oxygen wrote:

You have a right to the information. Others have a right to charge for their services or goods but those people can't, or shouldn't, claim ownership to the information they are teaching. The argument I'm making is that we have been taught that

The reality is that every single person on this planet has the right to the knowledge that mankind has discovered throughout the ages. It is our inheritance. That should not be turned into a business where some are excluded because they can't pay.

I agree the collective knowledge of the ages should be free ( possibly after a SHORT period if you believe in intelectual property ).  It is only education, which requires the labors of others, on which we disagree.

You have a right to the information. Others have a right to charge for their services or goods but those people can't, or shouldn't, claim ownership to the information they are teaching.

What if you could learn the equivilant of a college education on your own through the public library and/or internships. (which by the way you can). Shouldn't that give you the same qualifications and credentials as a college graduate? Yes it should but it doesn't because these institutions have appropriated this 'inheritance' as their own, solely their own, as in ownership.

If you don't pay them to go through their process then you won't be 'qualified'. IMO this is extortion and worse yet they are using something that rightfully belongs to another to facilitate this extortion.

My premise supersedes governments and markets and eras.

 

Erik T.'s picture
Erik T.
Status: Diamond Member (Offline)
Joined: Aug 5 2008
Posts: 1234
Re: Non dischargeable student loans violate the 13th ...

I've resisted getting involved in this thread because I know better, but now I'm having a weak moment. Here goes...

The deep injustice here is that the GSL program exists in the first place. Just as "predatory" subprime lenders suckered a bunch of lowlifes into buying homes they could not afford with easy-money financing, the government is suckering young kids who don't know better into signing up for absurdly overpriced university degree programs they often don't even want to attend with easy-money financing. In the case of subprime, the souce of capital was investors who should have known better but decided to put blind faith in ratings agencies. In the case of GSLs, the situation is much worse: The American taxpayer is stuck eating the losses when these malinvestments in adolescent playschool masquarading as "higher education" don't pay off. The travesty of justice is not the plight of graduates, but the plight of the taxpayer who paid the bill.

Idealist arguments about how "everyone deserves a chance at a higher education" went out the window with the advent of the web. I wholeheartedly support access to higher education for EVERYONE: We should continue to invest in public libraries with Internet-accessible computers for use by anyone. For those who lack the self-discipline to learn on their own, you can now access almost all of MIT's curriculum including lectures online for free. Problem solved.

But most people prefer to attend University in person... Fine, then come to terms with the reality that this is a luxury that has more to do with a supervised playground to grow up in that it has to do with higher education, and that providing taxpayer-backstopped easy money to help push cost of tuition to idiotic levels is just plain stupid and serves nobody.

Encouraging anyone to borrow when their ability in future to service the debt is in serious question is reckless, irresponsible, and immoral. For that reason, GSL programs should be terminated immediately. Loans should be made on the basis of ability to repay. If a social agenda to make university education available to everyone must exist, then programs to GIVE free tuition to those in need through scholarships should be expanded, and a rational plan for how to pay for those programs should be the prerequisite. But backstopping malinvestment loans because "higher education" feels emotionally like something we ought to be entitled to is just as stupid as socializing medicine, and has the same result of degrading quality while increasing cost.

And what would I say to underprivileged youth who desperately want to attend college but can't afford it? LUCKY YOU! Your circumstances prevent you from making a foolhardy malinvestment in an education you could obtain much more cheaply and efficiently without attending University, and the sooner you come to terms with the fact that the only thing holding you back is your own self-discipline, the better. If you want to understand the true role of university, watch the film Animal House. That's what it's about: Getting your parents to foot the bill for a big beer party while you supposedly learn something. Yes, people aslo experience meaningful education at universities, but doing your learning in that environment is a luxury that is completely unnecceary to achieve the educational goal, and one that should not be publicly subsidized.

I acknowledge that certain careers such as medicine demand a "formal" education where learning on the web is not a realistic option, but IMHO existing scholarship programs already address the need of underprivileged people aspiring to those careers.

But that's just my humble opinion, BMT.

Erik

 

jpitre's picture
jpitre
Status: Gold Member (Offline)
Joined: Mar 3 2009
Posts: 366
Re: Non dischargeable student loans violate the 13th ...

Erik

Humble or not, I agree with your opinion. In addition, higher education has gone crazy with million dollar compensation packages for management, tenure for unworthy profs, and multimillion dollar money to the sports system -- little of which is deserving of taxpayer subsidy/bailout.

My not so humble opinion

Jim

Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1443
Re: Non dischargeable student loans violate the 13th ...

How about a UED (Undergradute Equivalency Diploma.)

Pass the test to get it. Study anyway you wish.

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