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BUSINESS Tuesday 3 March 2020
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Liz Weston: Unlock the debtor's prison of student loans

By LIZ WESTON of NerdWal- unable to move on with to private student loans in
let their lives. 2005. Unlike federal student
Earlier this year, a judge Taxpayer money is being loans, private student loans
denounced the myth that wasted, as well. ECMC has are underwritten — which
student loans can't be a long history of aggressive- means the lenders assess
erased in bankruptcy court ly opposing student loan borrowers' ability to repay,
as she excused a Navy vet- discharges, even when charge interest rates that
eran from having to pay there's little hope of recov- reflect the risk of default
$221,000 in education debt. ering any money. Among and often require co-sign-
Bankruptcy judge Cece- other cases, ECMC has ers to guarantee repay-
lia G. Morris' decision gar- notoriously fought bank- ment. Shielding private stu-
nered plenty of headlines, ruptcy relief for a woman dent loans in bankruptcy
along with speculation that diagnosed with pancreatic court may protect lender
the ruling might make such cancer; a formerly home- profits, but it's hard to make
discharges easier. less woman with mental the case that doing so is
The battle isn't over, illness subsisting on Social somehow in the taxpayers'
though. A few days later, Security disability pay- best interest. The commis-
Morris' ruling was appealed ments; and, in the case of sion recommends Con-
by the Education Credit Navy vet Kevin Rosenberg, gress change the law to
Management Corpora- the subject of Morris' ruling, allow private student loans,
tion, a nonprofit company a man whose basic living as well as loans taken out
that guarantees and ser- expenses exceeded his in- by parents and other rela-
vices federal student loans come. tives for their children, to be
for the U.S. Department of Obviously, walking away more easily erased.
Education. from student loan debt THE SEVEN-YEAR STANDARD
The reality is that getting should never be easy. SHOULD BE RESTORED
student loans erased in But getting relief from un- This undated file photo provided by NerdWallet shows Liz Weston, In 1976, Congress decided
bankruptcy, while techni- payable education debt a columnist for personal finance website NerdWallet.com. that overwhelmed borrow-
cally possible, is so hard should never have be- Associated Press ers could get their student
and expensive that few come this hard. loans wiped out in bank-
people try; even fewer suc- That was the consensus of ruptcy suggested changes ALLOW PRIVATE STUDENT ruptcy once five years had
ceed. Without intervention an expert group of bank- judges could make to help LOANS TO BE ERASED passed since the first pay-
by Congress and a change ruptcy judges, lawyers and more borrowers, but real Federal student loans are ment was due. Debtors
of heart at the Education scholars who studied the reform will require new laws backed by taxpayer mon- could get relief earlier if
Department, struggling issue and made their rec- and a more sensible, cost- ey, so it makes sense that repayment represented an
borrowers will continue ommendations public last effective approach by the they're harder to discharge "undue hardship." In 1990,
to be trapped in a virtual year. The American Bank- Education Department. than credit card debt or Congress lengthened the
debtor's prison: unable to ruptcy Institute's Commis- Among the commission's medical bills. But Congress waiting period to seven
pay what they owe and sion on Consumer Bank- recommendations: extended the same status years.q

World economy may shrink because of virus, watchdog says

PARIS (AP) — A global ""Global economic pros- lion euros ($2.2 billion) this
agency says the spread- pects remain subdued and year in tourism revenue
ing new virus could make very uncertain." alone, mainly because
the world economy shrink The last time the world of the drop in number of
this quarter for the first time economy shrank on a quar- Chinese tourists. Things are
since the international fi- ter-on-quarter basis was at expected to get worse for
nancial crisis more than a the end of 2008, when a Europe with the eruption of
decade ago. shock to the financial sec- cases in northern Italy and
In a special report on the tor caused turmoil for busi- the cancellation of events
impact of the virus, the Or- nesses around the world like the Venice Carnival.
ganization for Economic and mass layoffs. On a full- Investors seem to expect
Cooperation and Devel- year basis, it last shrank in central banks to come to
opment said Monday that 2009. the rescue by cutting in-
the world economy is still The OECD said China's re- A woman wearing a protective face mask talks on her phone at terest rates, particularly in
expected to grow overall duced production is hitting the Central Business District in Beijing, Monday, March 2, 2020. the U.S. But experts not that
this year and rebound next Asia particularly hard but Associated Press lower rates cannot fix the
year. also companies around problem.
But the OECD lowered its the world that depend on al economy has become graver scenario: That quar- Lower rates can lead peo-
forecasts for global growth its goods. substantially more intercon- antines and greater cau- ple and businesses to bor-
in 2020 by half a percent- It urged governments to nected, and China plays a tion among consumers row and spend, which can
age point, to 2.4% — and act fast to prevent conta- far greater role in global will lead people to cancel boost economic activity.
said the figure could go as gion and restore consumer output, trade, tourism and travel plans, skip restaurant But they can't make sick
low as 1.5% if the virus lasts confidence. commodity markets." meals, avoid stores or stay people healthy, reopen
long and spreads widely. The Paris-based OECD, China's viral outbreak has home from work. factories whose workers
In addition to the "consid- which advises developed already disrupted global Already the European are kept home because
erable human suffering" economies on policy, said supply chains and cut busi- Union's markets commis- of quarantines or restart
the virus has wrought, with the impact of this virus is ness profits. And as the sioner, Thierry Breton, esti- supply chains in areas of
more than 3,000 deaths much higher than past out- disease spreads, econo- mated Monday that the the world struck by the
worldwide, the OECD said breaks because "the glob- mists now worry about a virus has cost Europe 2 bil- outbreak.q