Who says student loans can’t be discharged in bankruptcy? It’s not easy, but it happens. From Matt Taibbi at taibbi.substack.com:
Universities built palaces and financiers made fortunes in part through a lie: that student loans can’t be discharged in bankruptcy. But a series of court cases is helping unravel the scam
Stefanie Gray explains why, as a teenager, she was so anxious to leave her home state of Florida to go to college.
“I went to garbage schools and I’m from a garbage low-income suburb where everyone sucks Oxycontin all day,” she says. “I needed to get out.”
She got into Hunter College in New York, but both her parents had died and she had nowhere near enough to pay tuition, so she borrowed. “I just had nothing and was poor as hell, so I took out loans,” she says.
This being 2006, just a year after the infamous Bankruptcy Bill of 2005 was passed, she believed news stories about student loans being non-dischargeable in bankruptcy. She believed they would be with her for life, or until they were paid off.
“My understanding was, it’s better to purchase 55 big-screen TVs on a credit card, and discharge that in a court of law, then be a student who’s getting an education,” she says.
Still, she asked for financial aid: “I was like, ‘My parents are dead, I’m a literal fucking orphan, I have no siblings. I’m just taking out this money to put my ass through school.”
Instead of a denial, she got plenty of credit, including a slice of what were called “direct-to-consumer” loans, that came with a whopping 14% interest rate. One of her loans also came from a company called MyRichUncle that, before going bankrupt in 2009, would briefly become famous for running an ad disclosing a kickback system that existed between student lenders and college financial aid offices.