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The other shoe

Free enterprise

War — at least it's a job.

United States President Ronald Reagan cut funding for higher education and increased military spending.

By cutting educational funding, he pressured more students to either borrow money for school or join the military.

One appealing option, at a reasonable interest rate, was the Guaranteed Student Loan. This kind of debt, supplied by a normal bank, was guaranteed by the U.S. government — guaranteed, that is, for the lender. The bank was sure to get paid. This allowed a young person, who likely had no credit history, to go to school — and to go into debt.

These Guaranteed Student Loan obligations are disallowed bankruptcy protection for the borrower. The former student cannot absolve these debts by filing in court for bankruptcy.

The institution of bankruptcy is important, encouraging endeavor, defending human rights, and protecting the individual from the harshest consequences of financial risk, including life-long debt.

There are several categories of debt that one cannot absolve in court. Depending upon current and regional statutes, one may be unable to clear debts incurred in recent luxury purchases, fraudulent acts, transactions agreed while intoxicated — and money borrowed from the government for one's education.

Reagan and his people decreased availability of money for prospective students, encouraging debt — or military enlistment.

Without saying so, they also eliminated the chance for guaranteed-loan borrowers to have an audience in bankruptcy court.

  • Ronald Wilson Reagan died, age 93, at his home in Bel-Air, California on 5 June 2004.