Jump to content

New Supreme Court Ruling on Student Loan Collections


Radio_Guy
 Share

Recommended Posts

This is a sad day when the destitute elderly can have their SS checks garnished by the govt for ancient student loans.

However there is some good news. This case may have provided a

clue that private student loans are subject to an applicable SOL.

This is a direct quote from the Lockhart case:

In 1991, however, the Higher Education Technical Amendments, 105 Stat. 123, sweepingly eliminated time limitations as to certain loans: "Notwithstanding any other provision of statute . . . no limitation shall terminate the period within which suit may be filed, a judgment may be enforced, or an offset, garnishment, or other action initiated or taken," 20 U. S. C. §1091a(a)(2), for the repayment of various student loans, including the loans at issue here, §1091a(a)(2)(D).

Notice it mentions "certain" and "various" student loans, not all student loans. If private student loans were included in this law, the Court should have said so. It didnt so the law doesnt apply to them. This case should be good for private student loan debtors but bad for poor elderly student loan borrowers. A mixed bag and I feel the SS recipients are getting the shaft but the fight is only beginning.

Link to comment
Share on other sites

Yeah it does seema little weird..

I know the courts are a pendulum. They swing as a result of societal behavior to bring about equilibrium.

I know intellectually that they are trying to stem the tide in Student loan deliquencies, but why the heck is our government in the student loan business at all. They write these stupid laws and then go overboard when it creates unforseen problems.

I have read that the new student loan deliquencies is significantly down because of the new SOL and collections policies, so they are now beating the heck out of the people who really shouldn't be beaten... Hello -Feudal Europe of the middle ages...

All for 4 billion dollars total. This probably won't even collect 500 million over the next 10 years and cause untold amounts of grief.

Congress will fix this I'm sure...

Link to comment
Share on other sites

Unlike the news story, there is nothing in the opinion that says the offset is from an elderly disabled man. It construes a narrow piece of statute.

If Mr. Lockhart is disbaled as the the HEA defines the term, he could have his loan forgiven in whole or part. Apparently he did not seek this relief.

The morale here is that guaranteed student loans, or direct loans from teh Feds, will never ever go away. They will collect one way or the other.

Link to comment
Share on other sites

If Mr. Lockhart is disbaled as the the HEA defines the term, he could have his loan forgiven in whole or part. Apparently he did not seek this relief.

You're right - but how many disabled people properly manage their finances or lives. Somebody should have steeped up to the plate and helped this guy who may have been too busy trying to stay alive.

But - We don't know all the facts ...

The morale here is that guaranteed student loans, or direct loans from the Feds, will never ever go away. They will collect one way or the other.

Very true...

Link to comment
Share on other sites

From what I was able to research, this guy borrowed the money in the late 80's, never made a payment on the loans and defaulted almost immediately. He then went to work at the Post Office until he went out on disability. They caught up with him in 2002. If he is truly disabled, he should have filed for permanent disability.

Link to comment
Share on other sites

IMO, it's a fabulous piece of legislation! The government is mostly after the many baby boomer professionals who defaulted on their obligations for one reason or another. A few disabled folks will be caught in the net, but the principle is sound, you've got to admit. Why should taxpayers be stuck with this stuff?

Link to comment
Share on other sites

From what I was able to research, this guy borrowed the money in the late 80's, never made a payment on the loans and defaulted almost immediately. He then went to work at the Post Office until he went out on disability. They caught up with him in 2002. If he is truly disabled, he should have filed for permanent disability.

Ah -Now the truth comes out. He does sound like one of the baby boomers professionals that ghacorp mentioned.

I remember a couple of people telling me I was a fool to pay off my student loans after I completed college - Smart people default and keep the money !

I'm glad I was never that smart !

Link to comment
Share on other sites

Back in the day, I worked for the NYS guaranty agency. We had an administrative wage garnishment ( a draconian device wherein the feds can rip money from your paycheck virtually without suing you just because of a default) with a guy in LA. He had two degrees from UPenn, including an MBA from Wharton and made 150K a year, but said he couldn't pay his student loan ( the balance was quite big) because he couldn't afford ot live in LA. Lifestyle is not a hardship excuse under the law.

Link to comment
Share on other sites

Back in the day, I worked for the NYS guaranty agency. We had an administrative wage garnishment ( a draconian device wherein the feds can rip money from your paycheck virtually without suing you just because of a default) with a guy in LA. He had two degrees from UPenn, including an MBA from Wharton and made 150K a year, but said he couldn't pay his student loan ( the balance was quite big) because he couldn't afford ot live in LA. Lifestyle is not a hardship excuse under the law.

Having been a collector for EdFund and CSAC, I heard this quite a bit! On higher balances with professional degrees, they could be quite ruthless at times, particularly when credit reports where showing $300k homes and $50k cars. One guy called us really pissed off, as we were preventing him from buying a Mazda Miata. We had just pulled his credit report and the Mazda loan officer was familiar with our agency, and figured it was a student loan. (The student loan had already dropped off.)He offered us $50 bucks and yet was looking at a new car payment of over $500/month! He wouldnt budge so we started AWG. His financials showed the max going into his 401k, and bonuses that he had failed to disclose! His home payment was pushing $2k plus golf dues, another luxury car he was paying for his stay at home wife. (No kids) If I am not mistaken, I believe CSAC sued on this one since his balance was so high.

Link to comment
Share on other sites

I think it is important to point out that the court was not asked its opinion as to "whether it is good policy or not collect this money". It was a clear rule choice case, where one statute seemed to contradict a prior statute (that had not been repealed). Scalia's concurring opinion speaks more to the legal issue the Court was faced with- implicit repeal by contradicting statutes.

Whether you like the result or not, its important to remember what was argued here- it had little to do with public policy or whether it is "right" or not to collect on this loan. It was a question of congressional intent and what rule properly controls when a subsequent Congress seems to have contradicted a previous one.

Link to comment
Share on other sites

This is a good discussion here. I have enjoyed reading all the responses.

I like jq26's reply that this was just a case of legislative power. Technically, he is right but what about the three branches of govt?

If the courts just rubberstamp what the executive and legislative branches do then we are in trouble, especially if the later two branches are controlled by one party. The Supreme Court had an opportunity here to at least question some of the current student loan laws. Instead it just

rubberstamped the issue. Many of our best reforms have come from the courts when they question what the other two branches are doing. Remember the civil rights cases in the 60s and 70s. The Court could have made at least a comment or two about when student loans can be avoided. These type of comments can lead to further litigation which can ultimately lead to legislative reform.

I have heard all the tales of baby boomers who blew off their student loans. This is supposedly why the student loan laws were tightened so much. I believe anyone who has the ability to repay at least some of their student loans should do so but the current laws which assume all defaulters are screwing the govt are overbearing and wrong. There has to be a middle ground here. If the govt is to have garnishment and tax refund seizure powers, it should first be required to prove the debtor has the ability to pay. Dont put the burden on the poor to prove they cant pay.

Most cannot afford to do that so the govt always wins. The end result is pure injustice.

Link to comment
Share on other sites

I can see valid points on both sides of the issue.

What we fail to address is the reason our governement is acting like a bank.

Anytime you have government going into business, they cannot compete with the efficiency of the free market. Then, when their attempt at commerce fails because of social issues outweighting good common sense, the 800 pund gorilla has the unlimited power in its actions, whether just or not. This is the abusive power of governement applied in a specific business they have no reason to be in. MAYBE 40 years ago there was a need for a federal program to make access to education more equal but that is no longer true.

Baby boomers blowing off student loans would not have been possible if the loans were standard student loans issued by the free market. The lenders would have had used the legal the remedies of the time and this wouldn't be an issue AND the SOL would be long gone all of these problems would not exist. Governement wasn't efficient enought nor did they have the political will to collect on these loans when they were gong bad in the first place.

My Alma Mater no longer allows Federal Students Loans but they have a similar private program that works just fine. And heaven forbid if something happens and the borrower can't repay once the SOL is up they debts are discharged and they are free.

Yeah as a rule the lenders in this country are nasty, BUT you do have a way out after a period of time. This inability to get out of a bad situation is just like feudal europe where your debts were never discharged.

Don't forget these Federal Student Loans are frequently used to finanace-less-than stellar educational institutions and programs that offer certificates instead of degrees. Some of these certificates are worthless in the market and of course the graduates can't pay because they will never get a job in the field they studied. ("Did you want Fries with that Coke?")

Private Lending weeds out these institutions and programs so people won't be sucked into these worthless programs. There are plenty of lending institutions that will lend money to ANYONE in a bonfide course of study that will enrich themselves and society as a whole.

Its time this program should be retired.

Link to comment
Share on other sites

Don't forget these Federal Student Loans are frequently used to finanace-less-than stellar educational institutions and programs that offer certificates instead of degrees. Some of these certificates are worthless in the market and of course the graduates can't pay because they will never get a job in the field they studied. ("Did you want Fries with that Coke?")

Yes there are some dubious trade schools out there. However what about students who attend prestigious universities and study philosphy, english or history? They come out of 4 year programs with big debts and are qualified to do nothing. I myself have a cousin in Canada who owes way over $100k and he is working on a PhD in Old English. He doesnt want to teach so he manages an academic book store at about $12/hour. Most degrees are not worth the paper they are written on nowadays.

I dont know what the solution is. As a parent of two young, bright girls I am scared for what they face. We have education accounts set up for both girls and put in money every month, even if it is only $20. We push them academically and we have made it clear that we expect them to start taking PSO college credits while in high school. We know that they will have to take loans out, but I will be involved with their decisions.

Link to comment
Share on other sites

I myself have a cousin in Canada who owes way over $100k and he is working on a PhD in Old English. He doesnt want to teach so he manages an academic book store at about $12/hour. Most degrees are not worth the paper they are written on nowadays.

Why do people do that? Just to call yourself "doctor" and have an expensive paper to hang from the girders on the bridge you're living under? Sounds like my ex-wife. 7 years of college and only came away with a general studies degree. I have an idea for a solution but I know the liberals that run these out of touch "higher education" institutions would have a fit and get their collective panties in a wad.

If you pay cash or have a scholarship where the school itself or something like alumni donors are paying - then study what you like. But getting student loans to pay for a "useless" major is just obscene. I'm not usually in favor of government choosing what one desires to achieve because what I'm proposing smacks of a totalitarian government, but there needs to be some stipulations attached to student loans. Getting loans to get a major in general studies or in your example "Olde English" should not happen. There should be some goal that leads to something which makes the student a productive member of society, whether it be thru a technical major such as engineering or science, or a degree that will help someone become a salesperson. Chicken or egg though - employers don't have resources to devote to collaborate with education to produce the future employees of companies. After all isn't the goal of education is to create people to become employees and entrepreneurs who drive this nation forward? I listened on CNBC and they mentioned about companies here in the USA, not only are they offshoring due to labor costs, but also due to a lack of educated talent coming out of high schools and some colleges. It's broken from end to end and fixing it would piss off too many liberals so it remains broken.

Another thing is that most kids coming out of high school have no stinking clue what they want to do with their lives. I didn't. If I had to do it again I'd gotten a job until I decided what I wanted to do, then quit work, go to school, and then get a real job. But I worked and school at the same time and I half assed both.

</soapbox>

Link to comment
Share on other sites

Yes there are some dubious trade schools out there. However what about students who attend prestigious universities and study philosphy, english or history? They come out of 4 year programs with big debts and are qualified to do nothing. I myself have a cousin in Canada who owes way over $100k and he is working on a PhD in Old English. He doesnt want to teach so he manages an academic book store at about $12/hour. Most degrees are not worth the paper they are written on nowadays.

I dont know what the solution is. As a parent of two young, bright girls I am scared for what they face. We have education accounts set up for both girls and put in money every month, even if it is only $20. We push them academically and we have made it clear that we expect them to start taking PSO college credits while in high school. We know that they will have to take loans out, but I will be involved with their decisions.

Lynn I'm right there with you.. I have two good guys three years away from college. Of course we save money for them but that will never pay for all of college. There will be student loans of course. But being the totalitarian dictor that I am -I have been and will continue to repeate to them that they must pursue a course of study that will allow them to get and keep a job, or source of income.

And Grim's right we shouldn't have the government dictate what programs a student should study. That is why the government shouldn't be involved. The free market lenders will offer loans to anyone and if they cannot pay the lenders will take a hit, and the debtors will go free after the SOL.

No I don't advocate blowing off student loans but I don't advocate a government with unlimited power pursuing Debtors beyond the SOL. The SOL is law to protect people from Debtors Prison. As I recall years ago the government either didn't have the proper provisions for collections from these Baby Boomer Student Loan deadbeats or they didn't have the political will to collect. Then once the government felt the heat of the outraged american public the went overboard.

All College degrees are worth something. Even liberal arts degrees open doors for people who want to pursue further study or begin careers in various non-related fields.

Freedom to succeed also means people have the freedom to fail. So the guy who doesn't want to teach but still gets a PhD in Basket Weaving must be allowed to pursue this dream AND allowed to fail if he cannot afford to pay the student loans. Personally I think a Phd IN Underwater Basket weaving is STUPID but who cares what I think, the freedom to evaluate the circumstances and make a choice is for the Dummy who chooses to pursue that degree, not me to dictate to him what he should be allowed to study.

The problem comes in when people are prevented from being allowed to wash away their failures and start again. That's the problem with Federal Student Loans with No SOL.

The free market lenders won't have a problem dealing with these Defaulted debtors. They will try to collect, and either get the money or they will write them off. The debtors will be in a whole world of crap because they made lousy choices about a worthless certificate or degree. But those Stupid people will have the same protections that every other loan holder has- Not a Government with unlimited power pursuing them to the grave.

I do support most of the tougher provisions for collecting these deadbeat student loans, but let this be the end of this insanity. Let the Free Market take over. There is lots more to this issue but I've already said too much...

Best wishes,

Link to comment
Share on other sites

Hey Grim...

Chicken or egg though - employers don't have resources to devote to collaborate with education to produce the future employees of companies.

After all isn't the goal of education is to create people to become employees and entrepreneurs who drive this nation forward?

I listened on CNBC and they mentioned about companies here in the USA, not only are they offshoring due to labor costs, but also due to a lack of educated talent coming out of high schools and some colleges.

It's broken from end to end and fixing it would piss off too many liberals so it remains broken..

</soapbox>

I noticed you quoted CNBC..."lack of educated talent coming out of high schools and some colleges. "

A lot of this is Horse malarky. The employers are looking for talent AT THE WAGES THEY ARE WILLING TO PAY. This BS mantra has been the harbindinger of the businesspeople pushing for more immigration visas for tech workers who will work for MUCH lower wages that I do even here in the US.

The tide on quality education turned about 4 or 5 years ago - colleges AND High schools are increasing the quality of their graduates every year.

Another reason I don't believe this is because in my new Masters program, (yes another masters degree ) we just studying the principle of Labor Arbitrage. Business will do and say ANYTHING to lower labor costs and according to the textbooks, they are SUPPOSED to do anything and everything possible to lower costs. Labor cost are the largest single expense item to a business, (in most industries...)

The goal of Education is to impart information and discover new information.

They never said it was to get jobs -that is a recent (and wise,) idea.

Like you said - If you can afford it, sure go for the PhD in World Peace Studies. If not do something else to earn the money while you go for it...

Best wishes,

BTW: I am paying cash for my latest Masters because I have a job and earn the money first !!!

Link to comment
Share on other sites

Absolutely right! The govt needs to get out of the student loan business.

Maybe the govt could continue to lend to very low income and minorities who cant get a private loan but they need to accept that not all these loans will be repaid, just like any other lender must accept such risk.

Private lenders will not take unnecessary risks. If student loans are not paying off they will stop making them. So the Basket weaver major may no longer be able to get student loans as well as those attending a fly by night trade school or unrespectable academic institution. The end result will be an increase in the quality of higher education even if less people get to go to college.

Why are tuition rates skyrocketing in higher education? One reason is that state schools are getting less money from their state's coffers. The states do this because they know students can take out federal loans and the schools are guaranteed the money by the govt. So the school gets paid, the lender gets paid and the govt is left with the bill which it tries with immense effort to extract from the student regardless of their circumstances. In reality, this makes the student the insurer of their own education and gives the schools no incentive to improve their quality.

This is not a good situation for the student although it is a great scenario for banks and colleges.

I dont know what the ultimate answer is here. But clearly, the current status quo is not working. However, I dont think that students should be the potential victims of guaranteed profits for schools and banks

Link to comment
Share on other sites

If the gov't got out of the student loan business, student loans would be at much higher private bank rates and it would depend on your credit (ie mom and dad's credit). Many couldn't get a loan at all. So the tradeoff for a loan w/out regard to credit or family circumstance with the gov't is the absolute guarantee that it will be paid back.

Its not a perfect system really, but it is the best one of the available choices.

Link to comment
Share on other sites

If the gov't got out of the student loan business, student loans would be at much higher private bank rates and it would depend on your credit (ie mom and dad's credit). Many couldn't get a loan at all. So the tradeoff for a loan w/out regard to credit or family circumstance with the gov't is the absolute guarantee that it will be paid back.

Its not a perfect system really, but it is the best one of the available choices.

You are probably right...

I wish there were a way we could try suspending this program for a short while or in a limited location to see how the free market does on its own.

(The governement could save some money in administration if it worked.)

Best wishes and Merry Christmas...

Link to comment
Share on other sites

You are right jq26, the govt's total exit from the student loan market would result in higher interest rates and the denial of less fortunate students to attend. However, I did mention previously that the govt could still make some loans to promising low income and minority students.

My solution would involve every student having to apply for private loans first. Only if you are rejected by say three private lenders can you then apply for federal loans. Rather than make these loans nondischargeable forever, give those students a choice. They can either agree to forever

be liable for them or get a forgiveness if they agree to do 2 to 4 years of public service. Military service, Peace Corps, community volunteer, whatever; no pay, just room and board. That way at least society benefits in some way regardless of whether the student succeeds financially. This solution allows the free market to dictate quality higher education while still allowing the underpriviledged the opportunity to also benefit.

Link to comment
Share on other sites

Mikeman - though that sounds good on the surface, you can imagine the Liberals crying out "Making poor students work for the Peace Corps while them awful rich students pay their way thru college that is Just Plain Wrong!"

What I want to know is how in the hell did "taxpayer supported higher education institutions" get to cost so damn much to attend?

Link to comment
Share on other sites

The guaranteed student loan industry ( FELP loans) came into being because banks would not lend to 18 and 19 year olds in school full t ime without a source of income. So, the gov't said they would guarantee the loans banks made.

Then, Slick Willie and his fascist wife came along and decided the federal government should loan college money directly as they could do it cheaper ( if not more humanely). Well, that has proven to be wrong.

Education promotes a lifetime of learning. If it take you that long to pay off the student loan, well, that is no one's fault in particular.

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
 Share

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.. For more information, please see our Privacy Policy and Terms of Use.