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Thursday, May 26, 2011 11:52 am

Student Loan Sharks

Almost anyone who took out student loans during college will be glad to hear this news: There's a bill before Congress to allow private student loans to be discharged through bankruptcy. That's a major step forward, and here's why: student loans are the only type of private loan with a federal "no-escape" clause. If you file for bankruptcy and get forgiveness of a house loan, car loan, medical bills, etc, you'll still have to pay your student loans. If you die, your private student loans still have to be paid, and it's usually your parents or your kids who wind up footing the bill, even if they didn't co-sign for the loans. (Some banks will forgive loans upon death, but not all do, and they're under no obligation to do so.)

The bill, S3219 was introduced by our senior U.S. Sen. Dick Durbin and has lots of support from lots of good-government groups.

I'm ashamed to admit that I owe lots of money in student loans. I worked a nearly full-time job during all of college and most of grad school, but I still couldn't afford to pay my tuition without taking loans. I'm not planning to file for bankruptcy just to discharge them, but it's comforting to know that if I lost my job and couldn't make my payments, I would have that option.

 The real problem here, however, is the cost of secondary education. It's pretty important to go to college these days if you want to make something of yourself, exceptions like Bill Gates aside. But it seems somehow wrong that you should have to start your adult life in debt. Is that how we help people "pull themselves up by their bootstraps" in this country? We tell kids they have to go to college and get an education, but unless their parents or someone else pays for their education, we don't tell them that they'll come out the other side with an average of $22,049 for a four-year degree in Illinois. (I'm not even going to tell you how much I had to borrow for my Master's degree...it sickens me.) College simply costs more than it should, for reasons I don't fully understand. That's the real problem that needs to be addressed, but this is a good start in the right direction. 

To learn a little bit more about the history of student loans, check out this article from the Consumerist: Student Loans, Gateway Drug to Debt Slavery.

Here's the release on the bill from Durbin: PDF

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