WHEN GOOD STUDENT LOANS GO BAD…
One of the burdens that debtor’s have is that student loans, as a general rule, are not dischargeable in a bankruptcy. This promotes the policy of promoting education and preventing new graduates from dishonoring their obligation after getting the benefit of the education, whether it’s a college degree, B.A., M.A. M.S., Ph.D. or professional education in Law School or Medical School. This seems to make sense, because you shouldn’t be given an education and the ability to earn a significant income, and then be allowed to get rid of the debt that provided you with the degree.
But with the changing economy, what happens if the degree you have is now useless in the open market? What if your degree is in Nuclear Engineering? At one point in time nuclear engineering might have held a promising future. But after Three Mile Island, there hasn’t been a nuclear plant built in the United States in over thirty years. What happens if your degree is in construction management, or Real estate Finance, and now, due to circumstances beyond your control, the economy has tanked, and you are now virtually unemployable in your chosen field. Your inability to make money in your chosen field is the reason why you can’t pay back your student loan, not a scheme to skate out on the obligation. So now the debt you incurred believing that you going to be able to earn a decent living is a real hardship that will hang over you the rest of your life. And because you are unable to pay it back, you may be doomed to a life of poverty. Do they go back to school and get another kind of education. Incurring more debt to solve a financial problem is a philosophy that might work for the government, but its probably not good for individual borrowers. Can you even qualify for a new student loan to go back to school? After you obtain an education in a new and different filed, and prepare yourself for a new and different career, are you going to be able to handle the debt service for the cost of two educations, still pay your bills, and raise a family? Where’s the bailout for these borrowers?
But there’s an even more sinister side to the non-dischargeabilitiy issue. And that is, that with the rising cost of education, the lack of private money, the loss of equity in houses that parent’s were counting on to fund their child’s education, if you are now required to obtain a loan that is insured by the Federal Government. And the question is what does that make you? Does that mean that you are now a slave for the federal government and will never have economic freedom until you pay off the loan. With the alltime high cost of education, which is ever increasing, perhaps its time for Congress to take a look at the dischargeability rules for student loans. This might a more productive use of their time than holding hearings on the NCAA football playoff system. All kidding aside, Mr. Obama needs to forget ab out picking the winner in the brackets for March Madness and figure out a way for the next generation of Americans. Obama is correct that our education system is vitally important for the future of this country. Like everything else, there is a cost to getting an education, and if you can’t pay back the debt you are incurring for your intended goals, you have a problem. And while universal health care, an education for everyone are noble goals, that’s the real question. How do you pay for it?