Student loans ‘Voxplained’

by Grace

Vox Cards explain student loans.  Here’s the first card.

What is a student loan?

A student loan is money that banks or the federal government lend to students or parents to pay for higher education. Student loans can be used to pay tuition, fees and room and board, and they can also be used for living expenses and books. Student debt refers to the total amount of outstanding student loans from students, graduates, and dropouts.

The majority of students — more than 70 percent of all bachelor’s degree recipients — now borrow money to pay for college, a higher proportion than ever. Those students owe $29,400 on average at graduation. Student debt drew public attention and concern as the recession hit and graduates fell behind on their loans. There’s now agrowing consensus among economists that student debt is a drag on the economy, too, because indebted graduates and dropouts have less money to spend on other things.

The federal government has by far the largest share of the student loan market. Until 2010, the federal government lent money to students by guaranteeing and subsidizing loans from banks like Sallie Mae. In 2010, the Education Department cut out the middleman and became the sole student lender.

Here is their explanation on how student loans are treated in bankruptcy.

Why can’t student loans be discharged in bankruptcy?

Student loans are almost never dischargeable in bankruptcy, unlike credit card debt, mortgages, car loans, and most other forms of consumer debt. As lending to students has grown, so has the difficulty of discharging federal loans through bankruptcy. Getting rid of student loans now entails suing the lender (often, the federal government) and proving to a judge that circumstances are so dire there’s no way the loans will ever be repaid. Fewer than 1,000 people, out of more than 32 million student loan borrowers, try this each year.

There are a couple of reasons for this: some people are concerned that college graduates could decide it’s better to declare bankruptcy while they’re young and take the hit to their credit for several years, rather than repay tens of thousands of dollars of student debt. Federal student loans also offer consumer protections and repayment flexibilitythat credit card bills and auto loans generally do not.

Until 1998, federal student loans could be discharged or restructured in bankruptcy after a waiting period of several years. Private student loans were dischargeable in bankruptcy until 2005. Some people think these restrictions should be relaxed: Senate Democrats have proposed legislation that would make private loans dischargeable in bankruptcy again, and the Center for American Progress has called for a two-tier student loan system that would make some loans dischargeable.

In case you’re not yet familiar with Vox Media’s recently introduced Vox Cards, Margaret Hartmann at New York Magazine offers an explanation.

“Vox Cards,” which explain complex topics in a format that’s a mix between Q & A and a slideshow. The editors say:

They’re inspired by the highlighters and index cards that some of us used in school to remember important information. You’ll find them attached to articles, where they add crucial context; behind highlighted words, where they allow us to offer deeper explanations of key concepts; and in their stacks, where they combine into detailed — and continuously updated — guides to ongoing news stories. We’re incredibly excited about them.

Basically, it’s like a more attractive Wikipedia page written by one well-informed nerd on the internet rather than many nerds on the internet.

Too much spoon-fed information?

I’m not completely sold on the Vox Cards format, but they do seem to offer some utility.  Will this spoon-feeding of information in the media become more widespread?  It seems to have become more common in our schools, where prefabricated study notes are frequently distributed to students in advance of exams.

The entire student debt card stack can be accessed on the Vox Media site:  Everything you need to know about student debt,  By Libby Nelson, April 21 2014

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