Saturday, August 25, 2012

Should Congress make law student loan debt dischargeable in bankruptcy?

Steven Harper, a former BigLaw partner who blogs at Belly of the Beast, explains what he believes are the benefits of amending the bankruptcy code to permit the discharge of student loan debt. Prospective law students would have to convincingly articulate to lenders their reasons for attending law school which might give pause to those who go simply because they don't know what else to do. Related to that, lenders would have to be more careful in making law school loans because only those applicants who stand a good chance of actually practicing law would justify the risk.  At present, students fresh out of college are often too cavalier in taking on so much educational debt while lenders have no reason to differentiate between loan applicants because every one of them is on the hook no matter their financial condition.

In the interview below, Mr. Harper makes good points as well as explaining the interesting history of how student loan debt came to be exempted from bankruptcy protection.  But as a practical matter, how would lenders assess the ability of law school applicants to pay their loans?  I guess the elite schools would be unaffected by Mr. Harper's proposal because their graduates are almost sure to find jobs that will enable them to pay back their loans while other schools would be under pressure to contain costs by lowering tuition or face the prospect of closing if lenders believe the return on investment for their graduates isn't justified.

(jbl).

http://lawprofessors.typepad.com/legal_skills/2012/08/should-congress-make-student-loan-debt-dischargeable-in-bankruptcy.html

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Comments

Its a really very interesting post and I think its that ay present, students fresh out of college are often too cavalier in taking on so much educational debt while lenders have no reason to differentiate between loan applicants because every one of them is on the hook no matter their financial condition.

Posted by: Carlos Hank Rhon | Sep 28, 2012 11:37:37 AM

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