03 April 2015

Be Careful What You Wish For: A New Private Student Loan Lender Joins the Market And ...

... The Feds Slowly Reveal Deadbeat Colleges

The federal government makes the overwhelming majority of student loans and, as if that's not enough, with its Parent Plus program, the feds also make loans to parents of students. If you're a parent who wants to borrow on slightly better terms go here to read in the Washington Post about a private lender, Citizens Bank, that will lend at a lower interest rate and without the fees the feds charge.

A lower rate of interest is certainly good news but these loans, like direct student loans, are not dischargeable in bankruptcy. Even worse, loans to parents are not eligible for the income-based repayment or pay-as-you-earn loan reduction programs that are available to students. Student loans to parents explain the creepy phenomenon that more and more folks are dying with unpaid student debt. At least death, even when the decedent's estate is insolvent, does discharge the remaining balance. At least I think so.

On another half-way bright note, the federal Department of Education has at last published the list of some of the schools of "higher" education that are on its Watch List for financial insolvency. Go here to read the list and here to read a good editorial in the New York Times arguing for complete disclosure of all of the schools that might be in financial distress.

Why is complete disclosure important? Imagine this worst-of-all-worlds scenario: both students and their parents borrow to the max only to have the school that receives the students loans go out of business. No education and nondischargeable debts all around. Not likely, you say? Read my earlier post about the Corinthian College students here.

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