[jfrunyon]

> It is definitely important to note that that these loans can be discharged in bankruptcy. But as far as I know, isn't this less stringent than typical student loans, which can't be discharged in bankruptcy? Is the point here that there was a population of Lambda students who weren't aware they could discharge their loan, and this contract prevision was preventing them from doing so? Or was the school deliberately making that process more difficult? The article makes none of that entirely clear.

It makes it quite clear. The loan has always been dischargeable in bankruptcy. However, they had a provision in their contract stating otherwise, which was deceptive.

[musicale]

Although it is harder to discharge student loans in bankruptcy, as I understand it they can be discharged in bankruptcy if the borrower can prove undue hardship (probably hard to do, especially with income-based repayment) or if 7 years have elapsed since the start of repayment.

This does seem to violate the spirit of bankruptcy law as well as basic economics (presumably student loans consist of and are repaid with the same dollars that are used for other loans or unsecured debt) and has almost certainly helped universities raise tuition with impunity for decades while student loan debt has ballooned to more than $1T in the US.

[tptacek]

The reasons you make allusions to education debt in a contract like this is that students have priors about whether student loans are dischargeable, and the company wants to capitalize on those priors. That's the deception.

[kelnos]

You can thank a truly gross lobbying effort that culminated in a bill[0] passed in 2005 intended to curb "bankruptcy abuse" (a thing that was not actually a thing), and, among other things, greatly restricted how educational loans could be discharged in bankruptcy.

[0] https://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_an...

[jfrunyon]

> if the borrower can prove undue hardship (probably hard to do, especially with income-based repayment)

Yeah, it's pretty hard to do. You have to have an "adversarial proceeding" (i.e. a lawyer from the Department of Education or whoever shows up and argues against you).