Trying To Explain It's Not Binary

A common refrain about the student loan is "they signed a contract, they owe the money."

That is true.

What I want to know is, "did the undersigned know that?"

I am willing to bet they did not.  They almost certainly have no previous experience with contracts.  The student loan agreement (the very language hides that it's a contract!) is likely the first contract they've ever signed.

It's also the most binding contract in American law.

There's no recourse for getting a bad education.  There's no escape if you suffer a financial catastrophe.  You signed, you owe.

Even if you fit into one of the narrow groups for forgiveness, you still owe.  The IRS.  They will send you to jail if you don't pay.

All other forms of debt have an escape clause: Bankruptcy.

Why don't student loans?

Because, in the 1970's a prominent scandal where kids of rich parents took out loans, got their doctorates, declared bankruptcy, started their medical/legal practice debt free.  They did not, personally, own anything so there were no assets to auction off.  Their parents weren't on the contract (remember earlier when I blamed the boomers) so they weren't responsible for the debt.  But the kids lived with (more likely: on) their parents until the bankruptcy was discharged.

This was a huge scandal, at the time.  It led to a far too common situation in American politics, "We must do something!  THIS is something!  We must do THIS!"  So you were no longer able to discharge a student loan in bankruptcy.

That led to banks being unwilling to loan student money when they were none too willing in the first place.

So the idea of student loans being backed by the feds became law.

What a safe loan!  Can't lose!  Even if the debtor defaults, the feds will cover it!

Everyone wins!

Well...  No.

Let's get back to that contract.  It's language is really only binding on the debtor.  The terms can be adjusted, nearly at will, by the lender.  They've been resold, repackaged and bundled in a way that makes the housing market bond crisis seem straight forward and up-front.

It's a massive shit-ball of too big to fail that's failing before our very eyes.

But again, the contract!

I've been quietly polling friends and family about that.  The ones who did best with their loan are the ones whose parents have degrees.  Parents who taught their kids about what were good fields for future employment and the hazards of signing contracts they didn't understand.

The ones who are struggling are the ones with parents with high-school or less education.  Most especially parents who were not employed in the trades.

The school system certainly didn't explain contracts.  They don't even explain why you're out of money when you still have checks.

It's good if you happened to be interested in a field that led to a good job and didn't over-borrow to get it.  It's good if your parents took you aside and taught you to be suspicious of the lenders.  It's good that you got your education at the magic moment where the economy was hiring fresh grads and stayed steady long enough for you to get enough experience to be retained when it receded.

But you have to realize how lucky you are.  Literally exceptional.

Now we're faced with what to do with the shitball.

As I keep repeating: There is no recourse for the debtor if they discover they've been defrauded by the school.  Every graduate of Corinthian Colleges is intensely aware of this.

Places like Corinthians got shut down for defrauding students, yet the students are still on the hook for the loans with degrees with no value because the school is shut down for cause.

There needs to be a way to dismantle the shitball.  "Fuck 'em, they signed!" is not going to work, or happen.

Let them all completely off the hook really isn't either.

The people who cannot pay, aren't going to pay.  Regardless of if they want to or not.  No amount of punishment is going to get blood from that turnip.  They signed, they owe... now what?

There's a lot of people who're really only guilty of trusting people they'd been institutionally informed to trust.  They don't deserve to be fucked by a system that actively prevents them from learning enough to perceive the trap they're about to step into. 

When there is no fair solution, you have to look at and accept the least unfair solution.