Bankruptcy Fight on Private Student Loans re Sally Mae

Bankruptcy Fight on Private Student Loans

by blmiller [Subscribe]

Thu Feb 07, 2008 at 05:59:59 AM PST

The U.S. House of Representatives has a chance today to provide much-needed relief to low-income and minority students who have fallen victim to predatory private student loan practices by Sallie Mae and other lenders.

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The U.S. House of Representatives has a chance today to provide much-needed relief to low-income and minority students who have fallen victim to predatory private student loan practices by Sallie Mae and other lenders.

House Members will vote on an amendment, sponsored by Rep. Danny Davis (D-IL), that would reverse a 2005 law making it virtually impossible for borrowers who are in financial distress to discharge private student loans in bankruptcy.

Higher Ed Watch has argued in the past for the need for this change. But as we learn more about how Sallie Mae "partnered" with giant publicly-traded, for-profit higher education companies to push high cost private loans, with interest rates and fees exceeding 20 percent, on high-risk borrowers with poor credit, we are even more convinced that Congress has a moral obligation to act.

For most unsecured debt, a borrower who runs into difficulty can file for Chapter 7 liquidation or Chapter 13 reorganization, so a judge can sort out the appropriate treatment of various loans. But there is a short list of debts that the law subjects to a different status, allowing discharge in only the most extreme circumstances. The government, for example, makes it especially difficult for people to escape child support responsibilities, overdue taxes, and criminal fines.

Federal student loans also can't be discharged. There's at least some justification for providing federal student loans that status since they are backed by taxpayer dollars and come with borrower protections in cases of economic hardship, unemployment, death and disability. But there is no good reason for private student loans to be accorded the harshest bankruptcy status given to criminal fines, child support, and back taxes.

To be clear, we're not advocating allowing borrowers to claim bankruptcy willy nilly in order to avoid student loan repayment. Our view is that private student loans should not be treated any differently than other forms of consumer debt when it comes to bankruptcy. Right now they are, and that's wrong. People who borrow private student loans are trying to better their lives. They should not be treated more harshly than those who rack up credit card debt at the mall.

Shielding private loans from bankruptcy in almost all circumstances means that repayment demands extend essentially forever, leaving even the most destitute borrowers with no way out. And bankruptcy exemption makes private student loan providers less cautious about peddling high cost loans to low-income students who might never to repay them. In other words, it promotes the kind of subprime lending that Sallie Mae was engaged in at some of the most scandal-ridden chains of for-profit colleges. Treating private student loans like other forms of unsecured debt would at least cause lenders to think twice before providing high-interest loans to people who they know will have trouble paying them back.

The Davis amendment takes a responsible approach to helping financially-distressed borrowers. Under the measure, private loans would not become dischargeable until five years after they come due. The five year wait protects lenders from a loan being discharged before a borrower has had an opportunity to reap financial benefits from his or her education.

In addition, after the five years, borrowers wishing to have their private loans erased would still have to meet a strict means test that Congress set up as part of the 2005 law to prevent consumers from abusing bankruptcy laws by trying to escape debt they can afford to repay.

To read more, about lender opposition and the response, please visit www.HigherEdWatch.org

Tags: Bankruptcy, Subprime, Education, Students, Colleges and Universities, Congress (all tags) :: Previous Tag Versions

PUBLIC SCHOOL ASSIGNMENT HAS STUDENTS RENOUNCE US CITIZENSHIP

By Jim Kouri
NewsWithViews.com

America's government schools are fast becoming the vanguard for the Neo-Marxist/Internationalist power elite to assume control of children in the United States, according to conservative activists and pundits.

Under the guise of educating youngsters, leftists are usurping parental authority from the American people. While the schools work in secret, every once in a while a story is leaked out with most of the news media ignoring the news or soft-soaping it.

For instance, an eighth-grade teacher in Chico, California assigned his 13-and 14-year old students to compose a letter, which encouraged them and their parents to renounce their United States citizenship. The letters -- dictated by the teacher Mike Brooks -- stated in part: "After careful consideration of the facts of our current situation, I have decided to announce to everyone that I am no longer a citizen of the United States, but a free and independent member of the global community."

"The Bidwell Junior High School administrators in the usual cowardly way when leftists are caught in treasonous activity claimed that the letter was a good idea for a history lesson, [but] with bad execution," said J. Martin, a grade school teacher and administrator in New Jersey.

"Schools are always shocked when parents discover such activity because they count on parents not being involved in their children's education," said the veteran teacher.

The letter prompted phone calls to the school from several irate parents. But in typical fashion, the Bidwell Principal Joanne Parsley "did a political soft-shoe" and told parents the teacher Brooks never intended the parents sign and mail their citizenship renouncement to the White House.

"It was a well-intended lesson that didn't shake out too well," she said, adding that Brooks would not be subject to disciplinary action.

In other words: "Ooooops -- we got caught!"

"The point was, I wanted to ask parents if they would sign such a letter if conditions that existed prior to the Revolution were happening now," Brooks claimed. "I just wanted to start a discussion."

Parsley said Brooks sent the letter out with no explanation or disclaimer, and was relying on students to tell their parents

Chico resident Michael Hill told a Chico newspaper reporter that he was told by his daughter, Kaytlen Hill, 13, that the assignment was to have parents sign the letter and return it to class Wednesday.

"The lesson being taught in class was that the US kidnaps innocent people and takes them to Cuba, where they are kept indefinitely and tortured," Hill told the Chico Enterprise Record's news writer, Greg Welter, that he learned through his daughter.

When Hill asked her if Brooks mentioned Guantanamo Bay, Cuba, where the US imprisons terrorist suspects, he said his daughter replied "yes."

He said his daughter broke into tears when she talked about Brooks mentioning illegal wiretaps and other surveillance directed against innocent people.

"I think I was more irritated by the classroom discussion than the letter," the angry parent told reporter Welter.

In another incident -- also in California -- on November 3, 2006, Allie Martin and Jody Brown of Agape Press wrote the following, concerning a Nov. 2 decision by the Ninth Circuit Court of Appeals that limited parental rights:

"The case involves the Palmdale School District in California, which notified parents of its intentions to conduct an assessment of children ages seven to ten in order to 'establish a community baseline measure of children's exposure to early trauma (for example, violence).' What the letter to parents did not convey was that ten of the 79 questions on the survey would ask the children about the frequency of 'touching my private parts,' 'thinking about having sex,' 'having sex feelings in my body,' and 'can't stop thinking about sex'" (emphasis added).

In that decision, Judge Stephen Reinhardt -- considered one of the nations most liberal judges -- writing for the court, stated: "We hold there is no free standing fundamental right of parents 'to control the upbringing of their children by introducing them to matters of and relating to sex in accordance with their personal and religious values and beliefs."

Continuing, Judge Reinhardt said: "We conclude only that the parents possessed no constitutional right to prevent the public schools from providing information on [sex education] to their students in any forum or manner they select."

"In other words, the liberal-left administrators and teachers controlling our nation's government schools are free to indoctrinate our children and parents have no right to stop these One-World Government advocates from brainwashing American kids," says conservative political strategist Mike Baker.

"Whether it's about morality or politics, American children are at the mercy of some of the most left-wing and ignorant people in the US -- our so-called educators," accuses Baker.

Contact teacher Mike Brooks - mbrooks@chicousd.org

Contact Bidwell Junior High School - 2376 North Ave · Chico, CA 95926 · (530) 891-3080 www.chicousd.org

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