Debt's too high - won't pay

[vaskidmark]

http://www.washingtonpost.com/news/get-there/wp/2015/03/30/a-revolt-is-growing-as-more-people-refuse-to-pay-back-student-loans/

TL/DR version -

Students picked for-profit private school that lied about job placement, attendance, fudged grades.  Graduates told by employers that their diploma is not worth the paper it is printed on.  They admit they took out the loans but say they should not have to pay them back.

They may have a chance.

An attorney working with the Collective is helping the strikers file what’s known as a defense to repayment claim, an appeal to the Education Department to discharge the federal loans on the grounds that the for-profit school broke the law. Organizers posted the claim form on their Web site last week and had received 300 applications from Corinthian students as of Monday morning, according to Luke Herrine, a Debt Collective organizer.

The department has broad authority to cancel federal student loans when colleges violate students’ rights and state law. There is even a clause in federal student loan agreements that says: “In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.”

Meanwhile, because they did not use due diligance John/Jane Q. Taxpayer is going to get stuck with the bill.  And they did not get taken out to dinner and plied with drinks first.

stay safe.

[MillCreek]

^^^I have read of similar issues involving recent law school graduates suing their law schools over fudged placement numbers.

[Hawkmoon]

It’s a tough call for the government. State attorneys general and the CFPB lawsuits against Corinthian present strong evidence of years of misconduct that could strengthen the students’ cases. But granting the discharges could mean the loss of billions of dollars in taxpayer money and set a precedent for future requests for loan forgiveness.

Well, golly gee. Hint to .gov: If you didn’t want students to ask for loan discharges when they get defrauded, perhaps you shouldn’t have opened the door to such requests in your loan agreements.

The department has broad authority to cancel federal student loans when colleges violate students’ rights and state law. There is even a clause in federal student loan agreements that says: “In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.”

[Tuco]

Provider failed to deliver, and or misrepresented product.
Customer refuses payment.

Sounds like they learned something about contract law.

[Mannlicher]

the morons that run up thousands of dollars in student debt are the ones that are going to break the bank.  As usual, liberals and their hair brained schemes are the ones that cause these mega financial disruptions.

[Headless Thompson Gunner]

All schools paint a rosy picture of their graduates' futures.  You wouldn't expect them to do otherwise.  It's up to the prospective students to figure out what the schooling is really worth to them. 

It’s a dicey move because students who default can lose their paychecks, tax refunds or even a portion of their Social Security. Not paying back debt can also ruin someone’s credit, making it difficult to buy a house or car, or to get a job.

But organizers say most of the strikers are already in default. Anyone willing to join the movement must attend a financial literacy workshop on the consequences of not repaying their debt, according to the organizers.

Uh huh.  It's not a protest, it's an excuse.

I'm tired of whiny people blaming others for their own bad decisions.  Paying tens of thousands of dollars for schooling anything without fully investigating its value is a bad decision. 

[HankB]

If it turns out that a court determines the "school" did defraud students, then the loan underwriter (the Feds?) ought to be able to obtain reimbursement from the "school" in the full amount of the loans - plus interest.

And isn't fraud generally a crime? IANAL, but it seems that if a crime was knowingly committed by employees of the institution, those employees ought to have some personal exposure to criminal charges. I know - from working for a LARGE company - that if I committed some crime on behalf of the company (e.g., money laundering, bribery of foreign officials, etc.) I could be looking at some time in the slammer myself; why not "school" officials?

[Headless Thompson Gunner]

I don't know specifically about Corinthian College, but in most of these cases it isn't outright fraud.  It's more that the school takes the rosiest possible interpretation of murky data. 

Even if the school did wrong the students in some way, the solution is for the students to seek recompense from the school.  The loan providers didn't defraud anyone, and shafting them isn't fair or just.  Granted, the way the loans are written opens a door to this kind of foolishness, but that still doesn't make it right.

[Firethorn]

All schools paint a rosy picture of their graduates' futures.  You wouldn't expect them to do otherwise.  It's up to the prospective students to figure out what the schooling is really worth to them. 
Uh huh.  It's not a protest, it's an excuse.

I'm tired of whiny people blaming others for their own bad decisions.  Paying tens of thousands of dollars for schooling anything without fully investigating its value is a bad decision. 

I'd like to point out that it's probably not the ones who managed to get jobs despite their expensive degree that are protesting, it's the ones that took the loans in anticipation of being able to pay for them with their nice new high paying job they got with the degree.  Instead they're stuck with the loans, often with family, working a near-minimum wage job, if that.

To put it another way - while yes, we can probably find something that each protesting student did 'wrong', at least for the vast majority of them, but the fact of the matter is that the school is a scam artist and committing fraud.

Forgive the student's loans.  Take the money out of the school.  When they protest they're bankrupt, seize everything, including the assets of the CEO and such.  Decertify the school, IE it doesn't get any federal money anymore -grants, loans, etc...

[lupinus]

I'm all for paying your student loans and if it just a case of *expletive deleted*it happens, you were dumb enough to get a degree in underwater basket weaving, you are an unemployable moron, etc. refer back to the first reason.

But there's plenty of schools lying to folks to varying degrees, some of which IMO crosses the line into outright fraud. In which case they dang well should have their loans discharged and the school should be held liable for the balance.

[brimic]

What about fraud on the students' part? A lot of these so-called 'students' took out huge loans to live high off the hog for years without any intention of getting a degree. FSA types have been getting a wink and a nod from their patron president for several years now that forgiveness of student loans is going to be in the works. Whether the schools were legitimate or scams matters less than the fed.gov handing out free money to anyone who asks.

[Monkeyleg]

All schools paint a rosy picture of their graduates' futures.  You wouldn't expect them to do otherwise.  It's up to the prospective students to figure out what the schooling is really worth to them. 

You mean someone actually believed advertising? And here I didn't think that just using Axe bodywash would get me hot chicks.

[Headless Thompson Gunner]

You mean someone actually believed advertising? And here I didn't think that just using Axe bodywash would get me hot chicks.

Axe will totally get you hot chicks.  I saw it on a commercial, so I know it must be true.

And if it doesn't, well, just go ahead and skip a credit card payment or two.   

[Firethorn]

What about fraud on the students' part? A lot of these so-called 'students' took out huge loans to live high off the hog for years without any intention of getting a degree. FSA types have been getting a wink and a nod from their patron president for several years now that forgiveness of student loans is going to be in the works. Whether the schools were legitimate or scams matters less than the fed.gov handing out free money to anyone who asks.

Citation?  Per the attached article it implies that they have degrees - degrees the employers told them are worse than worthless.  Most of these schools charge the *maximum* most students can get via loans for tuition alone.  They might be in 'nice' classrooms, but a massive amount of their money is being taken as profit and advertising expenses(to get the next generation of suckers).

As long as the federal government is going to be subsidizing education, it needs to step up and set standards, which it has, but it looks like they need to be tightened.  To wit, allow students to 'petition' for loan forgiveness if they figure out that their degree isn't worth what the university said.  However, any university that gets too many successful petitions against it loses eligibility for federal programs.  Especially if it's charging the maximum allowed amount per student.  So the money pool dries up.   The 'for profit' university becomes, while still not 'cheap', at least extremely dedicated to keeping it's eligibility and thus not allowing students to take degrees in 'underwater basket weaving'.  We might even see intense cooperation with other businesses to produce graduates targeted at their requirements for maximum employability.

[brimic]

Citation?

http://www.zerohedge.com/news/2014-03-04/what-student-loans-are-really-used-depressing-case-studies
http://www.usnews.com/education/best-colleges/paying-for-college/articles/2013/07/24/undergrads-blow-it-with-student-loan-refunds
http://www.wsj.com/articles/SB10001424052702304585004579415022664472930

As long as the federal government is going to be subsidizing education, it needs to step up and set standards, which it has, but it looks like they need to be tightened.  To wit, allow students to 'petition' for loan forgiveness if they figure out that their degree isn't worth what the university said.  However, any university that gets too many successful petitions against it loses eligibility for federal programs.  Especially if it's charging the maximum allowed amount per student.  So the money pool dries up.   The 'for profit' university becomes, while still not 'cheap', at least extremely dedicated to keeping it's eligibility and thus not allowing students to take degrees in 'underwater basket weaving'.  We might even see intense cooperation with other businesses to produce graduates targeted at their requirements for maximum employability.

That goes double for State universities. People like to single out 'for profit' because 'profit' is an evil, loaded word- as if making a 'profit' is morally wrong....State universities have turned into degree mills that churn out diplomas for various flavors of useless marxist studies.

[KD5NRH]

And here I didn't think that just using Axe bodywash would get me hot chicks.

It didn't?  You must be using it wrong.

[Firethorn]

http://www.zerohedge.com/news/2014-03-04/what-student-loans-are-really-used-depressing-case-studies
http://www.usnews.com/education/best-colleges/paying-for-college/articles/2013/07/24/undergrads-blow-it-with-student-loan-refunds
http://www.wsj.com/articles/SB10001424052702304585004579415022664472930

That goes double for State universities. People like to single out 'for profit' because 'profit' is an evil, loaded word- as if making a 'profit' is morally wrong....State universities have turned into degree mills that churn out diplomas for various flavors of useless marxist studies.

The thing about State Universities is not entirely true.  Of course, I'm attending the University of Alaska - Fairbanks right now for a STEM degree, so I'm probably biased.

But yeah, it'd be universal.

Reviewing your links -
First:  Outright fraud, 'paying rent to mother, pay cellphone bill, and catch occasional movie' fails to raise my ire all that much.  Let's face it, cellphones are practically a requirement anymore, an adult should be paying 'rent', and we don't know mom's financial situation otherwise.  'Occasional movie', well, some entertainment is to be expected.  Other than that, I see examples, anecdotes, not data on abuse.  A man using the loans to 'stock the freezer' so his family doesn't have to worry about food for a bit longer?  The loans are supposed to help cover living expenses.  Said anecdotes show that tightening the rules for 'part time' students would be good.  They should pro-rate the loans on the basis of how close to 'full time' you are.

"About 25% took loans that exceeded tuition, after grants, by $2,500" - No mention of living expenses.  Here at UAF, if you live in student housing, you have to buy a 'Meal Plan', the cheapest of which is around $1.5k per semester.  Would that be included in 'Tuition'?  It's not on the documents they give you...

Second:  Some abuse stories, not much different than teens with their first credit card often get into.  I'm sorry but debt consolidation and lower interest rates only makes sense.  I actually applaud the family that started a business and are actually making money.

Third:  WGJ link wants me to subscribe.  Sorry, nope.

[brimic]

The thing about State Universities is not entirely true.  Of course, I'm attending the University of Alaska - Fairbanks right now for a STEM degree, so I'm probably biased

I'm not going to knock the STEM programs...have degrees in chemistry and biology myself, never a waste of money. Otoh, as a taxpayer, I don't want to pick up the tab for the loacal barista who has a degree in afrocentric gay womyn victimhood literature.

[Firethorn]

I'm not going to knock the STEM programs...have degrees in chemistry and biology myself, never a waste of money. Otoh, as a taxpayer, I don't want to pick up the tab for the loacal barista who has a degree in afrocentric gay womyn victimhood literature.

Before you'd have to 'pick up the tab', remember that:
1.  She's still on the hook for the payments.  Unless she can express how the university misled her about the employment prospects for a degree in 'afrocentric gay womyn victimhood literature', she's stuck paying even when working as a barista. 
2.  There's still a fair amount of call for degrees in the 'liberal arts'.
3.  If you start making it so that a college is dinged whenever a student defaults/has his debt written off, primarily due to inability to find a job that pays well enough to pay them off, I think that you'd see colleges going even further to place students, and might just tighten the degree requirements, or jettison those with the lowest employment prospects.

[Fitz]

It didn't?  You must be using it wrong.

Well, welcome to the "goofy looking bastard with a hot wife" club.

I'm also a member

[Fitz]

IF they defrauded her, then it seems to me that's between her and the school. The loans were given, and why should the lender "eat" the cost?

[Firethorn]

IF they defrauded her, then it seems to me that's between her and the school. The loans were given, and why should the lender "eat" the cost?

Think of it like secured debt.  The used car a guy bought, and you gave a loan for, turns out to be a fraudulently worthless piece of junk and the dealer's gone(bankrupt).  The guy who bought the car, in good faith, just doesn't have the resources to support debt payments on TWO cars, and he really needs a car, so he stops paying YOUR note.  It's probably cheaper for you to simply eat the cost than to try to sue him, he'll just let you have the car.

Consider it somewhere between the cost of doing business and the need for you, the lender, to be careful not only who you lend to, but for what.

[Fitz]

Think of it like secured debt.  The used car a guy bought, and you gave a loan for, turns out to be a fraudulently worthless piece of junk and the dealer's gone(bankrupt).  The guy who bought the car, in good faith, just doesn't have the resources to support debt payments on TWO cars, and he really needs a car, so he stops paying YOUR note.  It's probably cheaper for you to simply eat the cost than to try to sue him, he'll just let you have the car.

Consider it somewhere between the cost of doing business and the need for you, the lender, to be careful not only who you lend to, but for what.

Except the dealer HASNT gone bankrupt, he's still actively taking money for others.

Sorry, the "cost" of doing business as a moneylender isn't negotiating between the buyer and seller of the goods. This isn't secured debt. There is no collateral.

[Firethorn]

Except the dealer HASNT gone bankrupt, he's still actively taking money for others.

See how long that lasts when you start demanding money back for 'failed' educations.

And I was making an analogy.

[Fitz]

See how long that lasts when you start demanding money back for 'failed' educations.

And I was making an analogy.

Analogies are useless when there are crucial differences.

I borrow 20 bucks from you for a bunch of Axe. It doesn't get me hot women.

I'm mad because Axe said it did.

Your fault? Do i suddenly not owe you the 20 bucks anymore?