Student Debt – Historical Background

Moe Tkacik had an excellent post a couple of weeks ago on “The Unconstitutional 40 Years War On College Students” (posted by her earlier on Reuters):  What she explains is how it came to be that student loans college are “non-dischargeable”: that is, you can’t get out from under them through bankruptcy — unless you can prove in court, as described in New York Times article yesterday that describes the brutal case of a recent graduate here in Ohio), that there’s a “certainty of hopelessness” to your situation.  The Times article references a 1987 appellate court decision that defined the standards:

the district court adopted a standard for “undue hardship” requiring a three-part showing: (1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans

The case law on this is accessible on the web — the standard is used in 9 circuits as of 2011; one can apply for discharge, but it’s an “adversarial” proceeding and according to one analysis  the number of debtors who apply for relief is small — though the data (from 2007) seems problematic and the reasons for the small number is unclear.

Why do I keep on about student debt?  Well, it’s interesting (not the right word) to be on the outer edge of a Ponzi bubble (working in an institution increasingly dependent on student debt), and considering how higher education is being reconstructed as a bubble economy; but I’m also interested this new way of making and using futures:

In essence, the logic of the system is that the lenders own your future to the extent that your time and energy must be directed to repaying them:  And the only way to get out of this system is to prove that your future is worthless.

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