September 28, 2014

Student Loan Debt: The Only Debt You Can’t Discharge in Bankruptcy

Today’s students are being crushed with John Bunyan’s proverbial burden on their backs – student loan debt. Until relatively recently this debt could have been discharged in bankruptcy.

Then all that changed when Sallie Mae, the Student Loan Marketing Association, was privatized in 2004. Albert Lord, the new CEO, and his lobbyists went to work to change the laws so that student loans could not be discharged in bankruptcy. Today the cumulative student loan debt is more than $1 trillion.

While a generation ago a high school diploma was considered sufficient for a decent middle class entry level job, today it’s a college diploma even if the job itself could be easily accomplished by a person with just a high school education.

In Sallie Mae annual reports, CEO Albert Lord has boasted that the company’s extraordinary financial growth could be attributed to fees collected from defaulted loans, as well as loan origination growth. Lord, who personally invested hundreds of thousands of dollars (on the books) in politicians and PACs involved with education legislation is probably the largest individual beneficiary of student loan privatization.

In 2001, US News reported that Mr. Lord’s compensation for the year 2000 had skyrocketed to over $33 million. From 1999-2004, Sallie Mae’s top two executives, Al Lord and Tom Fitzpatrick, received compensation worth $225 million and $245 million, respectively. Both men have regularly topped Fortune Magazine’s list of highest paid CEO’s in the Washington D.C. Area. Albert Lord also put in a bid to purchase a major league baseball team, the Washington Nationals, with the wealth he extracted from defaulted borrowers.

While Albert Lord and others have profited handsomely from student loan privatization, many of the students themselves have been driven to despair after they graduate and payments on the loans become due. Similar to the pilgrim in John Bunyan’s Pilgrim’s Progress, they enter the slough of despond.

And God forbid they miss a payment or even go into default. Severe penalties double and triple and before they know it, they are owing three or four times the amount of their original student loan. Many student loan debtors, as another writer for the San Diego Free Press explains, have taken the only route out of this living hell they could think of: suicide. It seems that law students are particularly vulnerable to the privatized loan scam since their aspirations are so high and their actual results after graduation are so devastating.

This is from Huffington Post:

Suicide is the dark side of the student lending crisis and, despite all the media attention to the issue of student loans, it’s been severely under-reported. I can’t ignore it though, because I’m an advocate for people who are struggling to pay their student loans, and I’ve been receiving suicidal comments for over two years and occasionally hearing reports of actual suicides. More people are being forced into untenable financial circumstances as outstanding student loan debt has surpassed $1 trillion. And people simply aren’t able to pay all the money they owe. In the past few years, the rate of defaults for federal loans has increased at an alarming rate. According to theDepartment of Education, those recent graduates who began repayments in 2009, 8.8 percent had already defaulted on their federal loans. That compares to 7 percent in 2008. Currently, 36 million Americans have outstanding federal loans. I can’t help but wonder how many of those millions are feeling distressed or suicidal, or how many have attempted suicide because of all that debt hanging over their heads.

StudentdebtTaking advantage of low income students who want a better life for themselves than their parents had and the siren call of easy money loans that don’t have to be paid back for many years — after the student supposedly has snagged a lucrative professional job, the private loan industry has suckered unsophisticated high school graduates and led them down the garden path of a future filled with prestige and high wages.

The problem is when (and if) that student has obtained that degree, they find that (a) they can’t get that lucrative job because either that job isn’t available or their degree is worthless or (b) they have to move back in with their parents in order to afford the payments on their student loan.

And don’t even think about getting married and raising a family if you have a substantial amount of student loan debt. Each spouse is responsible for the other’s debts including student loan debts. Sort of a dowry in reverse. This is from

Good luck getting married with your large student loan debt. In the good old days, love conquered all. But today, love is a necessary but not sufficient condition for a lasting relationship. Now that student loan debt exceeds $1.2 trillion and shows no signs of stopping, it is probable that your future spouse will have considerable student loan debt. And you may have to face the possibility that by getting married, you may have to pay your spouse’s student loan debt — possibly for life.

It is common knowledge that large student loan debt is forcing young people to delay getting married and starting families. If both partners have small to moderate student loan debt, they can find a way to deal with it eventually. But those who paid off their student loans will be reluctant to marry someone with large student loan debt unless they have a good job and a realistic plan for paying it off in a short period of time.

Colleges and universities themselves are a major part of the problem. Over the last three decades, the price of a year of college has increased by more than 1,200%. They are selling the American Dream, especially to students from poor financial backgrounds. As we have reported previously, University of Phoenix and Ashford University are particularly culpable.

This is from the article, For-Profit Colleges as American Dream Crushers and Factories of Debt:

As Cornell professor Noliwe Rooks and journalist Kai Wright have reported, black college enrollment has increased at nearly twice the rate of white enrollment in recent years, but a disproportionate number of those African-American students end up at for-profit schools. In 2011, two of those institutions, the University of Phoenix (with physical campuses in 39 states and massive online programs) and the online-only Ashford University, produced more black graduates than any other institutes of higher education in the country. Unfortunately, a recent survey by economist Rajeev Darolia shows that for-profit graduates fare little better on the job market than job seekers with high school degrees; their diplomas, that is, are a net loss, offering essentially the same grim job prospects as if they had never gone to college, plus a lifetime debt sentence.

The above statements do not represent those of Weston Legal or Michael Weston and they have not been reviewed for accuracy. The statements have been published by a third party and are being linked to by our website only because they contain information relating to debt. Nothing in this article should be construed as legal advice given by Weston Legal or Michael Weston. To view the source of the article, please following the link to the website that published the article. Articles written by Michael W. Weston can be viewed here: To report any problem with this article please email



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