Sunday, 1 November 2015

Student loan | How To Offset Student Loan Debt « CBS Chicago

Student loan | How To Offset <b>Student Loan</b> Debt « CBS Chicago

How To Offset <b>Student Loan</b> Debt « CBS Chicago

Posted: 29 Oct 2015 03:56 PM PDT

Elizabeth Warren on How Clinton Backed <b>Student Loan</b> and <b>...</b>

Posted: 27 Oct 2015 03:53 AM PDT

A sorry chapter of Hillary Clinton's legislative record was her vote in support of the 2005 bankruptcy "reform" bill. Thw the credit card industry had long been keen to get this measure passed. It had come up repeatedly in Congress and had managed to be beaten back….until 2005, when it became law. One of its biggest proponents was the credit card issuer MBNA, which is now part of Bank of America. MBNA had estimated that getting the bill passed would enable them to get an additional $10 a month from consumers who were eligible for bankruptcy, which would mean an additional $85 million a year to them in profits.

The legislation restricted access to Chapter 7 bankruptcies, which enable borrowers to wipe out their debts, and forced more into Chapter 13 bankruptcies, which require borrowers to negotiate a 60 month repayment plan with budgets that require them to live at an extremely meager level (one indicator: the amounts allotted for food are stunningly low, and one wonders how people who are juggling multiple jobs can possibly find the time to shop for food bargains and cook so as to stay within these restrictions). Many people cannot complete their Chapter 13 plans due to 'shit happens" (an unexpected expense, like a medical emergency or car problem, can lead to a borrower missing his repayment schedule). And that's before you get to bad faith conduct by the lender intended to make the borrower fail or appear to fail, which we documented regularly during the mortgage crisis (the objective was to enable the mortgage servicer to proceed with a foreclosure).

As most readers know well, the provisions of the 2005 bankruptcy "reform" bill relating to student debt were even more draconian. The overwhelming majority of student loan borrowers are effectively barred from discharging these debts in bankruptcy. Moreover, Social Security payments can be garnished to repay student loans. putting parent/grandparent co-signers and middle aged students presumably seeking to qualify themselves for new careers at risk.*

As you can see in a Bill Moyers segment below, Elizabeth Warren recounts how Hillary Clinton sought out Warren's advice on the bankruptcy bill in 1999, and persuaded her husband to veto it, one of the last acts he took as an outgoing President. Warren points out that this bill at the time was a not-very-high priority pro-business measure and by implication was not unduly costly for a departing Chief Executive to oppose.

Hillary Clinton was so proud of her role in stopping this bankruptcy legislation that she touted it in her autobiography. Yet in her first act as a newly-elected Senator from New York, she made a 180 degree change and voted in favor of the bill. And Warren makes clear that from her earlier discussions with Clinton that she knew full well what was at stake in terms of the consequences to families.

How does Warren explain that change? She attributes it to the power of lobbying dollars in Washington, particularly from the consumer financial services industry, which has long been a top spender. Warren also highlights that financial firms were now Clinton's constituents and she therefore was obligated to represent them.

But who precisely were these banking constituents? It was the top executives of the big players headquartered in New York City, such as JP Morgan and Citigroup. Keep in mind that Clinton was not protecting jobs in New York state. Credit card operations, such as back offices and call centers, are located in much lower cost regions (for instance, Citigroup's big credit card processing operation has long been in South Dakota; American Express' is in Phoenix). So Clinton was not protecting jobs; she was at best protecting bank profits and senior level bonuses. And it does not appear that she gave much thought to the costs to the manyborrowers in her jurisdiction.

The lesson seems to be that Hillary Clinton is capable of acting on good impulses, as long as she has nothing at stake.

Elizabeth Warren on Hillary Clinton from BillMoyers.com on Vimeo.

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* The Administration has attempted to offer some relief by allowing as of October 1 that private student loan borrowers be allowed access to bankruptcy courts if the loan does not offer "income driven repayment.". A widely publicized story shows how little this can mean in practice. From Forbes:

Take the case of Robert E. Murphy, a 65-year-old former manufacturing executive who took out a slew of Parent PLUS student loans to put his three kids through college. Murphy, who's been out of work for 13 years, burned through his retirement savings, and had his home foreclosed on, has seen hit his debt balloon to more than $246,000. Even if he were to land a new job and start chipping away at his debt, he estimates he'll owe $500,000 by the time he's 77.

Then there's Mark Warren Tetzlaff, a 57-year-old who financed an MBA and law degree with student debt that now exceeds $250,000. Educational Credit Management Corp., a student loan guaranty agency, expects Tetzlaff to pay that money back — even though he's declared bankruptcy, is unemployed, and has moved back in with his mom.

In the first example, Robert Murphy, consider the Administration's stance. From Bloomberg:

On Tuesday, the Department of Education intervened in the case of Robert Murphy…

Murphy doesn't deserve a break just because he is 65 years old, department lawyers wrote. Repaying his debt loan may require "that he remain employed at or past normal retirement age," they said, even though "his income may top out or decrease" and "further employment opportunities may be limited."…

No student debtor should get a break on student loans unless they can show a "certainty of hopelessness," said the government's lawyers. "[A] debtor must specifically prove a total incapacity in the future to repay the debt for reasons not within his control," they added. The lawyers said that the point of keeping such a stringent standard is to ensure "that bankruptcy does not become a convenient and expedient means of extinguishing student loan debt."

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