This is an unintended consequence of the 2005 US bankruptcy "reform" act. That act made it impossible to discharge student loans in bankruptcy.
Because those loans can't be discharged in bankruptcy, it's less risky to make student loans. Therefore, lenders don't have the same incentive as before to underwrite their loans. That is, it isn't quite as important to make sure their borrowers have a decent shot at repaying the money.
So, it's easier to get a student loan. And, it's easier to borrow more money. So, it's easier for educational institutions to increase tuition and fees, and still fill up their classes. This turns into a vicious cycle increasing tuition and student debt.
I don't want to pick on Valpo. I don't know anything about their law school.
If the lenders were taking a close look at the Massachusetts College of Law (MCL, local to me, and struggling a bit) and asking whether their grads were getting decent jobs, they might make it harder to borrow so much money. That would put downward pressure on MCL's tuition and fees. But the lenders are not doing that.
But why should the lenders bother? It's a hassle to underwrite an educational institution. Student borrowers can't declare bankruptcy and get out from under those loans, even if the education bought with that money turns out to be worthless to them. So the lenders risk little.
It's time to repeal that part of the bankruptcy "reform."
Until then people who sign student loan papers should realize they are literally signing away their lives. Student lenders are clever and dangerous predators, and student borrowers are their lawful prey.
> lenders don't have the same incentive as before to underwrite their loans. That is, it isn't quite as important to make sure their borrowers have a decent shot at repaying the money.
But the students' incentive to make sure they can pay back the money is much higher.
If you're looking to underwriters to keep debt levels reasonable, you are looking in the wrong place. In any industry (school, real estate, etc.), their max is far higher than you should actually take.
Because those loans can't be discharged in bankruptcy, it's less risky to make student loans. Therefore, lenders don't have the same incentive as before to underwrite their loans. That is, it isn't quite as important to make sure their borrowers have a decent shot at repaying the money.
So, it's easier to get a student loan. And, it's easier to borrow more money. So, it's easier for educational institutions to increase tuition and fees, and still fill up their classes. This turns into a vicious cycle increasing tuition and student debt.
I don't want to pick on Valpo. I don't know anything about their law school.
If the lenders were taking a close look at the Massachusetts College of Law (MCL, local to me, and struggling a bit) and asking whether their grads were getting decent jobs, they might make it harder to borrow so much money. That would put downward pressure on MCL's tuition and fees. But the lenders are not doing that.
But why should the lenders bother? It's a hassle to underwrite an educational institution. Student borrowers can't declare bankruptcy and get out from under those loans, even if the education bought with that money turns out to be worthless to them. So the lenders risk little.
It's time to repeal that part of the bankruptcy "reform."
Until then people who sign student loan papers should realize they are literally signing away their lives. Student lenders are clever and dangerous predators, and student borrowers are their lawful prey.