“You’d need to spend at least $5,000,” said Henry Sommer, supervising attorney at Consumer Bankruptcy Assistance Project in Philadelphia and a former president of the National Association of Consumer Bankruptcy Attorneys. The catch is that “if you had $5,000, you would not be eligible for a student loan discharge,” Sommer added. Several recent court decisions have challenged the notion that only the worst-off borrowers, typically those who are permanently disabled, can get education debt erased. The borrowers who won these discharges had low costs, either receiving free legal help or representing themselves. In most cases, borrowers in bankruptcy don’t even ask for help because they figure a discharge of debt is so rare.
The Student Loan Scheme Amendment Bill (No 3) is aimed at borrowers who persistently refuse to make repayments. From April 1, Inland Revenue will be able to seek an arrest warrant to deal with serious cases. And those with loan balances of over $45,000 will have their repayment rates increased. The Government wants to claw back millions of dollars in unpaid debt, and says overseas-based borrowers are responsible for 80 per cent of all overdue loan repayments. Tertiary Education Minister Steven Joyce said: “It is important that student loan borrowers meet their obligations to the people who have supported their tertiary study, wherever they are in the world, so we can provide the same support for the next generation of students.” The bill was introduced in August last year.
Portions of Student Loans are Increasingly Going Toward Non-College Expenses
Bankruptcy attorney Sommer said few borrowers are prepared to argue their cases in court against skilled and often aggressive lawyers representing their creditors. “Most people are not capable of doing that,” Sommer said. “This is full-scale litigation.” The bar is certainly high. A borrower has to prove that repaying his or her student loans would be an “undue hardship.” Typically, that means meeting three tests: a current inability to pay the loans, because doing so wouldn’t allow you to maintain a minimal standard of living given your current income and expenses; a future inability to repay the money, because your financial situation is likely to continue; and a good-faith effort to repay what you owe. In two recent decisions, though, courts granted relief to borrowers who hadn’t made voluntary payments on their debt and who refused to enroll in income-based repayment plans. The appeals court judges in both cases said enrolling would have been pointless given the women’s tiny incomes.
Student loan update: ‘I’m from the government, and I’m here to entice you into debt slavery.’
“Obviously, it’s better not to use it that way if you can help it, because you’re just going to owe that much more later,” says Ms. Merritt, a former bookkeeper. The government lets students use a portion of federal loans for living expenses on the grounds that it allows students to devote more time to studying and improves their chances of graduating. Even when schools suspect students are over-borrowing, they are restricted by federal law and Education Department policy from denying funds. College and university trade groups are pushing legislation this year to set lower maximum loan limits for some types of students, such as part-timers.
Student Loans Entice Borrowers More for Cash Than a Degree
Its report said that among online programs at eight universities and colleges, non-education expenses such as rent, transportation and miscellaneous items made up more than half the costs covered by student aid. The report also found the schools disbursed an average of $5,285 in loans each to more than 42,000 students who didnt log any credits at the time. . Even when schools suspect students are over-borrowing, they are restricted by federal law and Education Department policy from denying funds. College and university trade groups are pushing legislation this year to set lower maximum loan limits for some types of students, such as part-timers.
Student Loans Are Ruining Your Life. Now They’re Ruining the Economy, Too
The federal government performs no credit checks for most student loans. An article by the Wall Street Journal examines the rampant use of student loans for non-college expenses. It followed a warning by the U.S. Education Departments inspector general last month about the rising popularity of online education, which has led more students to borrow excessively for personal expenses. Its report said that among online programs at eight universities and colleges, non-education expenses such as rent, transportation and miscellaneous items made up more than half the costs covered by student aid, the WSJ reports. In 2011-2012, about a quarter of student borrowers got loans totaling more than their tuition, after grants, how to apply for student loan forgiveness act of 2012 by about $2,500, according to research by Mark Kantrowitz, a higher-education analyst and publisher of the education site Edvisors.com.
There are a range of views on this. My personal view is that the increasing reliance on student loans for financing college education is going to be a drag on consumption for some time. Knowing the kind of debt hell face once he graduates, Rong says he rarely goes to happy hours, and Handel says shes much less likely to get regular haircuts, schedule doctor prompt doctors appointments, or buy the small things that add upand, in aggregate, eventually prop up the economy and drive GDP growth. Its the little things, she says. Putting off a haircut for a long time, getting more makeup, prescriptions, or doctors appointments, the things that I dont even think cost money but end up adding up a lot. Its also become harder and harder to qualify for a mortgage if you have student loans, says Andrew Haughwout, another economist with the New York Federal Reserve. Banks tightened their underwriting standards after recession and are now much less willing to grant house and auto loans at low-interest rates, particularly for graduates with more debt than ever before. Thats slowing down the housing recovery and the construction markets.