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Tue Mar 29, 2016, 01:20 AM

 

RULING ON LAW SCHOOL GRAD'S DEBT MAY SIGNAL 'SEISMIC' SHIFT IN LOAN PRACTICES

Source: Abc7

A judge's recent ruling that part of a law school graduate's loans can be canceled breaks new ground for other students who owe a mountain of debt.

Lesley Campbell applied for a loan while she was studying for the bar as a student at Pace University Law School in 2009. She received a "bar loan" of $15,000 from Citibank, a bankruptcy court document states, and she made payments on the loan until June 2012. But in November 2014, after having failed the bar exam, she filed for Chapter 7 bankruptcy protection.

With nearly $300,000 in student loan debt, Campbell, of Brooklyn, New York, found an administrative job with a hotel management company that paid about $50,000, according to a bankruptcy document.

U.S. bankruptcy code states that among the obligations that can't be canceled include funds received as an "educational benefit," scholarship or a stipend. Campbell wanted the loan to be canceled, or "discharged," when seeking bankruptcy relief, arguing that it wasn't an "educational benefit" under the U.S. bankruptcy code. Citibank moved to dismiss that claim, arguing that the loan was an "educational benefit" in the fact that the eligibility for the bar loan was dependent on the plaintiff being a law student.

http://abc7ny.com/news/ruling-on-law-school-grads-debt-may-signal-seismic-shift-in-loan-practices/1266566/

Read more: http://abc7ny.com/news/ruling-on-law-school-grads-debt-may-signal-seismic-shift-in-loan-practices/1266566/

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Reply RULING ON LAW SCHOOL GRAD'S DEBT MAY SIGNAL 'SEISMIC' SHIFT IN LOAN PRACTICES (Original post)
Liberal_in_LA Mar 2016 OP
alcibiades_mystery Mar 2016 #1
Recursion Mar 2016 #8
alcibiades_mystery Mar 2016 #10
JustAnotherGen Mar 2016 #2
hopemountain Mar 2016 #3
a la izquierda Mar 2016 #5
hopemountain Mar 2016 #32
Land of Enchantment Mar 2016 #28
hopemountain Mar 2016 #31
Land of Enchantment Mar 2016 #33
hopemountain Apr 2016 #34
skepticscott Mar 2016 #4
alcibiades_mystery Mar 2016 #11
skepticscott Mar 2016 #29
Trust Buster Mar 2016 #6
groundloop Mar 2016 #7
KansDem Mar 2016 #12
potone Mar 2016 #16
groundloop Mar 2016 #17
potone Mar 2016 #18
LanternWaste Mar 2016 #24
geek tragedy Mar 2016 #9
alcibiades_mystery Mar 2016 #13
Recursion Mar 2016 #14
geek tragedy Mar 2016 #19
turbinetree Mar 2016 #15
DebbieCDC Mar 2016 #20
1monster Mar 2016 #22
JustABozoOnThisBus Mar 2016 #25
1monster Mar 2016 #26
jzodda Mar 2016 #21
Myrina Mar 2016 #23
llmart Mar 2016 #27
Dont call me Shirley Mar 2016 #30

Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 01:26 AM

1. This ruling applies to a very narrow band of loans, unfortunately

 

The only dischargable loan according to the ruling is the "bar loan," not her other $285,000 in student loans. The bar loan masqueraded as a student loan when it was, in the judgment of the court, a simple consumer credit loan, no different from a credit card issued to a student.

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Response to alcibiades_mystery (Reply #1)

Tue Mar 29, 2016, 08:39 AM

8. I can't see where Citi has a leg to stand on here, frankly, but I agree this is a narrow part

of her debt.

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Response to Recursion (Reply #8)

Tue Mar 29, 2016, 09:21 AM

10. Citi has no leg to stand on

 

The bar study loans are fairly obviously NOT student loans. Citi is trying to reduce its risk by treating them that way, but the judge made the correct analysis.

In any case, I think most student loans should themselves be dischargable, but I get the debate on that. Attempting to enlarge the terrain of non-dischargable loans is just the usual shit from the likes of Citi. What's next? Treating credit cards issued to college students as de jure non-dischargable student loans? That's not that far from what Citi is trying to pull with these bar study loans.

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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 03:23 AM

2. I wonder what it looks like on paper

When you sign the paperwork?

I wonder how the ratings agencies rate these loan products?

Who is insuring them if not the Fed Gov (they shouldn't be). Please don't be AIG again.

Why no collateral? Does Citibank even have the original loan paperwork anymore?

I'm convinced (not a financial wizard) that there are a lot of "student loans" that look like this and a lot of people who can't keep their heads above water trying to pay them. I'm convinced - the investment banks are running a scam again. There has got to be some way they make money every time a recent grad defaults.

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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 03:55 AM

3. when considering applying to a graduate program

at a state university, i inquired about financial aide and i was told that bank of america handled the graduate loans and that there were no grants. i called bank of america and the interest was 11% to 14%. i gave up my dream for graduate school.

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Response to hopemountain (Reply #3)

Tue Mar 29, 2016, 05:23 AM

5. On that's so unfortunate.

I borrowed from the government for my 13 years of school (state unis all the way, BA, MA, PhD). I'm now a professor at a big research university, but as a history professor, I make about $57K. It will take awhile to pay my loans back, but they are worth it.

Maybe another school doesn't use private lenders?

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Response to a la izquierda (Reply #5)

Wed Mar 30, 2016, 11:49 PM

32. thank you, a la izquierda -

for the encouragement. at the time (3 years ago) i was so focused on the programs offered and other criteria it was a shock to learn that the bank corporatists had successfully dominated the market on graduate degree funding for public universities. i had to meet the challenge and redream the rest of my life. i'm okay.

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Response to hopemountain (Reply #3)

Tue Mar 29, 2016, 04:52 PM

28. Blessing in disguise? I was all set for law school but was informed that

students were absolutely forbidden to work (even part time) while attending because it would require ALL my time. I just stayed in accounting which I LOATHED and now consider myself a recovering accountant and starving artist. At least I'm not in debt. Then, of course there is Saul Goodman in Albuquerque and yes, there are several 'Sauls' there. Perhaps it's not too late?


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Response to Land of Enchantment (Reply #28)

Wed Mar 30, 2016, 11:44 PM

31. my goal was a masters in conflict resolution,

peace building. the program i was applying to fit my criteria. but, borrowing money from bank of america is against my ethics.

yes - a blessing in disguise: a challenge and the opportunity to rethink the last 25 years or so of my life. i feel good about it and recommitting my skills and background work experience (community and grassroots leadership development) in a more focused manner.

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Response to hopemountain (Reply #31)

Thu Mar 31, 2016, 10:56 AM

33. So you are one of those rare souls who is literally

doing something productive for this society. Very impressive. I had no idea that field even existed and am sure we will all be seeing your work and hearing about it someday in the near future. Well done!


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Response to Land of Enchantment (Reply #33)

Fri Apr 1, 2016, 02:14 AM

34. thank you, land of enchantment

it is humbling to read your acknowledgement.

new mexico is very special to me and my ancestors - one of whom was an early governor of this state -

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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 05:13 AM

4. Sorry, but borrowing 300K

 

for college and grad school is just batshit insane, unless you're getting a degree in how to shit gold nuggets. Though it doesn't say how much of that 300K was specifically for law school, it's a good bet that it was close to half or more. Going that much deeper into debt to attend a lower tier law school is just doubling down on the stupid.

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Response to skepticscott (Reply #4)

Tue Mar 29, 2016, 09:27 AM

11. They sell these law school candidates on the $130,000 start and $40,000 bonuses at

 

Skadden Arps, Davis Polk, Sullivan & Cromwell.

Look at the damn incomings for those jobs: Harvard, Yale, NYU, Stanford, Columbia. You could be coming out of a top 20 law school (UCLA?) and still have trouble landing that. Never mind second, third, and lower tier. It's gonna be Better Call Saul in the back of the nail salon.


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Response to alcibiades_mystery (Reply #11)

Tue Mar 29, 2016, 05:21 PM

29. Exactly

 

These days, unless you're having most or all of your way paid, going to anything but an elite law school ranges from risky to just plain nuts. Not that you can't have a perfectly satisfying legal career with a degree from a lot of places, but your chances of being able to cope with the debt you'll incur aren't great.

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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 06:44 AM

6. It's all about personal responsibility.

 

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Response to Trust Buster (Reply #6)

Tue Mar 29, 2016, 07:44 AM

7. Then corporations should have to exhibit the same personal responsibility


Many corporations, especially those centered around 'investing', routinely buy up companies and take them through bankruptcy as a normal way of doing business. It's really nothing more than legalized stealing since creditors get screwed, employees lose their jobs, and the investors walk away with a pile of cash.

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Response to Trust Buster (Reply #6)

Tue Mar 29, 2016, 09:28 AM

12. I used to believe that.

Then 2008 happened.

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Response to Trust Buster (Reply #6)

Tue Mar 29, 2016, 10:15 AM

16. Nonsense.

It is a scam, as the Court recognized. Also, the law is skewed against students by barring student loans from being included in bankruptcy protection. It is not in society's interest to have young people buried under a mountain of debt as they start their adult working lives. Education benefits our society as a whole, not just the individuals who get the degrees. How can we have an innovative society if we have an uneducated one?

I am tired of this "personal responsibility" meme. It never seems to apply to the people whose actions wiped out the savings and pensions of millions of Americans. It is just the "little people" who get the moralistic, condescending lecture about personal responsibility.

Worker productivity has been going up for decades, yet wages have stagnated and the tax code is skewed to benefit the wealthy and the largest corporations. Young people come into a job market with depressed wages, yet are expected to pay back loans that are necessitated, in large part, by the disinvestment in higher education on the part of both the federal government and state governments.

No wonder young people are flocking to support Bernie. They see their future if things don't change, and they don't like what they see. I, for one, don't blame them.

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Response to potone (Reply #16)

Tue Mar 29, 2016, 10:23 AM

17. Furthermore, once upon a time it was possible to work your way through school

I managed to pay my own way through college (twice), with a minimal amount of student loan debt that wasn't difficult to pay off. Nowadays, because of the significantly higher cost of college coupled with those stagnated wages it's simply not possible to get through college without either a large amount of debt or else huge infusions of cash from your parents.

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Response to groundloop (Reply #17)

Tue Mar 29, 2016, 10:42 AM

18. Yes, and another thing has changed for the worse.

The majority of student aid used to be in the form of grants, not loans. Now it is the opposite. When I was an undergraduate, students were able to make ends meet with a part-time job while they were in school, and to graduate with minimal debt. Now that is simply not possible; many of my students work long hours and have to plan their course schedule around their job schedule, with the result that it takes them longer to get their degrees. I really feel ashamed at how we are letting young people down, and, at the same time, financial security for older Americans is declining as the retirement age for Social Security is increasing.

So other than the fact that young people are not doing well, old people are not doing well, the middle class is shrinking and the number of poor are increasing, everything is just fine!

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Response to Trust Buster (Reply #6)

Tue Mar 29, 2016, 01:45 PM

24. That's adorable.

 

That's adorable.

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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 08:57 AM

9. Bar loans charge a higher interest rate precisely because they are not

 

student loans.

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Response to geek tragedy (Reply #9)

Tue Mar 29, 2016, 09:28 AM

13. Right...they don't get to mitigate their risk BOTH with higher interest AND non-dischargability!

 

These fucking banks want pure, risk-free profit. It's unbelievable.

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Response to alcibiades_mystery (Reply #13)

Tue Mar 29, 2016, 09:47 AM

14. Oh but wouldn't they like to! (nt)

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Response to alcibiades_mystery (Reply #13)

Tue Mar 29, 2016, 10:44 AM

19. it was a bullshit argument, and the courts shot it down nt

 

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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 09:59 AM

15. Bailout.....................................

"Citibank moved to dismiss that claim, arguing that the loan was an "educational benefit"

"educational benefit" in the fact that the eligibility for the bar loan was dependent on the plaintiff being a law student'


I wonder if the bailout they got in 2008 and 2009 was a "educational benefit" , like to not do this again, right, because they are at it again.....................because at one point in there storied life, there bond rating was worthless, but when the public had there credit rating charges go up from 5%, to in some cases up to 27%, this firm along with the other criminal band went to the fed, our fed to bail them out , and then they with outright audacity and asked to get money from the fed window at .01% and turn around and charge the public 3% to 15 % for home mortgage loans and credit cards were 9% to 25%, while at the same time there little band and others was / were foreclosing on homeowners, and going after those that lost there jobs and forcing the bankruptcy laws to be change, was that a "educational benefit"

So in there corporate reasoning that she took the money out and they gave it to her being dependent that she became a "law student", so its a form of blackmail, like they used in 2008 and 2009, they blackmailed the public to pay them and bail them out, nice scam, no accountability.

Why don't we apply this same logic on this firm, that they be dependent to not use funds in derivatives for example and be a bank and not all of the above in the ponzi scheme they operate under like on Wall Street


Honk---------------------for a political revolution Bernie 2016

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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 12:02 PM

20. You can get a car loan for 4% interest, but a school loan costs 14%

Sure, that makes sense

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Response to DebbieCDC (Reply #20)

Tue Mar 29, 2016, 01:06 PM

22. I got a car loan for 0.9%... I'm thinking that maybe when planning

on school loans, one should take out a regular consumer loan, rather than a student loan. The interest would be considerably lower and it would be dischargeable.

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Response to 1monster (Reply #22)

Tue Mar 29, 2016, 04:03 PM

25. Good idea, if you have the collateral.

With a car loan, your car is the collateral, and you have to have good insurance coverage (collision, theft, etc).

If you're studying for a bar exam, maybe your collateral amounts to nearly nothing, if that much.

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Response to JustABozoOnThisBus (Reply #25)

Tue Mar 29, 2016, 04:33 PM

26. I didn't say it would be easy. Student loans are too easy. Not because

I think they should be harder to get, but because the students are being loan sharked. The interest rates are reprehensible and they are being loaded onto young people who are to inexperienced to know they are being wrung dry.

Even semi-experienced people can get rooked by these loan sharks. My DH once took on a second mortgage on our house. He fell for the old, "we'll keep your payments low" ruse. We were making double and triple payments on that second mortgage and the balance after five years of that, the principle had only gone down about $1500. They were taking interest out of mortgage abatement payments too.

When I called them on it, they acted like they were doing me a favor. At which point, I asked them, "Just what interest rate are you charging us anyway?!!" They didn't want to tell me, but I insisted. Fifteen point nine percent. It was a small, second mortgage for about $15,000 and at that rate I would have been still paying until I was planted. We were somewhere around five years from paying off the first mortgage.

I refinanced the first and second mortgages and banned my DH from ever signing any financial papers again without getting my okay first.

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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 12:22 PM

21. It's a load of crap!

I, like many law students, took the bar exam loan. It's such a small percentage of the overall student debt.

Also like most graduates I consolidated the bar exam loan with the other loans. I'm guessing that by consolidating it takes that loan out of a category that I can discharge it.

In any event that loan isn't the one that's killing me. It's the 130k federal loan that I will carry around my neck till I'm old and grey. The one that prevents me from being able to have a nicer apartment or a nicer car.

They told me when I signed up for law school that good jobs await our entire class from top to bottom. What a sucker I was.

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Response to jzodda (Reply #21)

Tue Mar 29, 2016, 01:30 PM

23. Exactly.

My original loan balance when I graduated was $35k (U of WI) back in the 90's. I've been paying - with a few deferments here & there while getting started in my career and raising my daughter on my own. All total by now, I've paid back the original $35k but because of all of the interest that was compounded and re-charged interest on, and the loans bundled and sold a few times over, according to Great Lakes Servicing, I owe $92,000.

How in anyone's understanding of math do you pay off a loan and still owe triple the amount you started with?!?!


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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 04:45 PM

27. Some advice.....

don't go to law school. It's not worth it any more. Law school graduates, even the good ones, are a dime a dozen.

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Response to Liberal_in_LA (Original post)

Tue Mar 29, 2016, 06:28 PM

30. Next financial bubble to burst: student debt credit default swaps.

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