Celebrating 10 years! 2007-2017

11 Years After Default, I Am Now Free Of Private Educational Debt

https://abovethelaw.com/2018/01/11- years-after-default-i-am- ternarydaemon01/24/18
ATL was the comments. That was the whole point. Yeah it was downwardslope01/24/18
ATL isn't worth the read without comments. isthisit01/24/18
I wonder if that hurt their page views. Guessing not or they loblawyer01/24/18
same. even the trolls were somewhat amusing. blackholelaw01/24/18
I liked Elie's message but agree with you that ATL is no fun cranky01/24/18
Took me until the Harvard law part to figure it out it was E jorgedeclaro01/24/18
I read ATL religiously and then dropped it like a hot potato williamdrayton01/24/18
I agree completely. I didn't even read the comments religiou thirdtierlaw01/24/18
Most likely, their sponsors were not really interested in pa ternarydaemon01/24/18
Ellie is a strange character. Like others, I haven't really 6figuremistake01/24/18
It's no coincidence that it was 7 years after he first defau onehell01/24/18
He may be free of private student loan debt, but the balance caj11101/25/18
Its arguable that using his student loan repayment money for uknownvalue01/25/18
Mr. Mystal's wife, from what I understand, is still in BigLa caj11101/25/18
You don’t have to file a joint return. And even if you do onehell01/26/18
The IRS always has at least 10 years to collect - that is be uknownvalue01/26/18
Great write up! triplesix01/26/18
Yup, well said. caj111 is basically confusing the insolvency onehell01/26/18
ternarydaemon (Jan 24, 2018 - 3:09 am)

https://abovethelaw.com/2018/01/11-years-after-default-i-am-now-free-of-private-educational-debt/

"at the time, young and still functionally financially illiterate"

"I was basically being treated like a washed-out drug addict who refused rehab. I had been a “credit to my race” and “one of the good ones.” Now, I was a “lazy,” “shiftless” Negro..."

"I turn 40 this year and, unless something very impressive happens, I’ll be making less money at 40 than I did at 27. Which is an inversion of the traditional wealth accumulation trajectory from which I’ll likely never recover."

I wish ATL still made good blog posts, instead of paid posts. The comments were the best part of the site.

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downwardslope (Jan 24, 2018 - 2:16 pm)

ATL was the comments. That was the whole point. Yeah it was like 92% trolls, but you knew what you were getting.

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isthisit (Jan 24, 2018 - 4:04 am)

ATL isn't worth the read without comments.

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loblawyer (Jan 24, 2018 - 10:15 am)

I wonder if that hurt their page views. Guessing not or they would have reversed course, but I stopped going there once the comments were closed.

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blackholelaw (Jan 24, 2018 - 10:22 am)

same. even the trolls were somewhat amusing.

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cranky (Jan 24, 2018 - 8:02 pm)

I liked Elie's message but agree with you that ATL is no fun to read anymore without the opportunity to comment or read other people's comments. It seems too one-sided. I used to read ATL off and on over 10 years ago even though I never made it to Biglaw. In fact, someone's message in the comments section led me to JDU in the first place. The last time I read anything on ATL was when they had something about the Dan Markel case. At least Elie is recovering from his debts and his wife is still supporting him. Otherwise he'd probably be doing doc review.

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jorgedeclaro (Jan 24, 2018 - 10:21 am)

Took me until the Harvard law part to figure it out it was Ellie. Never been a fan. Oh well, good for him. Also didn't know he had a wife and kids. For some reason I thought he was gay, not that there is anything wrong with that.

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williamdrayton (Jan 24, 2018 - 2:43 pm)

I read ATL religiously and then dropped it like a hot potato when they removed the comments section.

I would be absolutely floored if the current site traffic is even a fraction of what it was when they had comments. and there's no way, they would ever reverse course: that would involve David Lat admitting that he was wrong.

my guess is that they only stay afloat because of scammy recruiting advertisers like Lateral Link and Harrison Barnes. and come to think of it, how much money do they really need? Lat has his "partner" and his parents; Elie Mystal has his wife to support him. at this point it's probably a labor of love.

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thirdtierlaw (Jan 24, 2018 - 2:51 pm)

I agree completely. I didn't even read the comments religiously, but for whatever reason, once they got rid of them, I stopped visiting the site. It might also be that I'm in garbage law and I have no use for the rumors of biglaw.

You're also probably correct that they don't make much money off the site or even need to make much. Half the articles their contributors post seem to be written just so that they can put on their website that they are a contributor to a major legal website.

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ternarydaemon (Jan 24, 2018 - 7:04 pm)

Most likely, their sponsors were not really interested in paid articles where 90% of clicks would go straight to the troll comments rather than the article. If they closed the comments, they should have taken into account that a minuscule fraction of engaged and interested readers is better for their advertisers in the long term.

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6figuremistake (Jan 24, 2018 - 4:06 pm)

Ellie is a strange character. Like others, I haven't really read ATL much recently aside from their updates on the Dan Markel case.

I don't always appreciate Ellie's perspective, but he has been a consistent critic of the law school scam. He probably played some role in getting the issue mainstream attention beyond the scam blogs.

Nonetheless, I don't know if he has the most sympathetic story. The premise of the anti-scam movement is that the schools charge egregious tuition while concealing the (usually) lousy results that await their graduates. Ellie essentially got what he was promised out of law school - a BigLaw job, which paid six figures. It's hard to blame Harvard because he didn't like the job and decided to quit.

To his credit, he admits he wasn't very financially responsible, but it's kind of amazing that someone could work in BigLaw for a number of years and not get his debt under control. If I'm not mistaken, his wife is also in BigLaw. Tuition wasn't even as much when went to school.

Sure, I feel sorry for anyone who gets mired in debt like that and this does serve as a cautionary tale that debt is debt even if your degree is from Harvard: I still wouldn't borrow $200k even if I could get into HYS. Nonetheless, his story is different from most scammed law grads, who never even got a shot at the big time.

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onehell (Jan 24, 2018 - 4:18 pm)

It's no coincidence that it was 7 years after he first defaulted that he was able to buy a house - that's when stuff generally drops off your credit report. Judgments and "re-aging" from entering into and then dropping out of payment plans can extend this, so in many cases trying to "pay what you can" is actually the worst thing you can do.

He wasted time and money trying a payment plan with the collector, but otherwise handled this largely right. Eventually, these debts end up in the hands of debt buyers who paid pennies on the dollar for the notes and will therefore still make money if they settle 'em for a fraction of what's owed. Obviously don't pay anything if they blew an SOL or violated the FDCPA or whatever, but here they had a judgment against him, so he probably took the right course in the end, albeit by accident.

Contrary to what he says, his experience is very replicable. Just keep hanging up the phone when the collectors call. As time goes on, the default has less and less impact on your credit and is worth less and less on the debt-buyer market so eventually you start getting more and more attractive offers. Happens all the time. Of course, if they sue you, you had better get acquainted with what your state allows for garnishment of wages and attachment of bank accounts, but most lenders would rather sell big clumps of defaulted notes for some quick cash than chase you for decades. Their actuaries priced a certain percentage of defaults into the APR so they will still make plenty of money on the portfolio as a whole.

As the old adage goes, debts that can't be repaid, won't be. With IBR, there's no reason to default on federal loans. But with private loans, it's often the only leverage you have and you should use it, unless of course they demanded a cosigner and this will cause them to go after your parents or whatever. I think that may be the only time you're really up a creek.

Otherwise, you have to be prepared to live with bad credit for a few years, but that is survivable. People commit suicide over nonsense like this, so I wish more people like this would tell their stories. By and large, the consequence of default on a private debt is that you will have a hard time getting other credit for a few years, then a few more years where you can get credit but it will be on subprime terms. That's pretty much it, unless you stupidly prolong your misery by trying to play ball with these bottom-feeding debt buyers. Just lay low until the heat dies down, that's pretty much all there is to it.

We should do more to teach folks that there is no debtors prison. These huge corporate lenders knew the risk they were taking on and they priced it into the interest rates they charged. Repaying them is a business decision, not a moral imperative.

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caj111 (Jan 25, 2018 - 10:48 am)

He may be free of private student loan debt, but the balance he didn't pay is now taxable income. For the sake of discussion, let's say $ 100,000 of private loan interest was forgiven and let's say his effective federal tax rate is about 20%. So now he has $ 100,000 of taxable income and he will owe the IRS $ 20,000 on top of tax on income from his regular job. If you think that Sallie Mae and the various collection agencies are inflexible, abusive and ruthless when it comes to collecting on student loans, they pale in comparison to the IRS's tactics. The IRS has no income-based repayment plans either. They'll force you to sell the clothes off your back to make a payment when they can. Now, you can theoretically discharge tax debt in bankruptcy, but the tax debt needs to be at least two years old before that can happen.

Here's another question - was Mr. Mystal laid off from BigLaw or did he choose to quit the job? Because if he chose to quit when he still had a sizeable loan balance, that wasn't a responsible thing to do, and now he has received a Harvard education partially free. He got married, had a kid and now owns a house - doesn't seem fair when I had to defer doing those things to pay off my student loans, in full. I know that student lenders are corrupt and have very unfair and abusive practices sometimes, but he wasn't forced to borrow a dollar of that money.

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uknownvalue (Jan 25, 2018 - 3:52 pm)

Its arguable that using his student loan repayment money for consumer purchases was a better service to society than repaying the loans. Also, he may be partially or wholly insolvent for IRS purposes and therefore may not have to pay taxes on the canceled debt.

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caj111 (Jan 25, 2018 - 6:45 pm)

Mr. Mystal's wife, from what I understand, is still in BigLaw and the IRS can go after her money as long as the two of them are married. Furthermore, even if you are insolvent, the IRS has ten years to collect the taxes owed before they are formally discharged.

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onehell (Jan 26, 2018 - 12:38 am)

You don’t have to file a joint return. And even if you do file jointly, the injured spouse relief form should take care of that issue.

Also the insolvency exclusion is not a deferral or something. It means you don’t owe the tax at all, to the extent of the insolvency as it existed at the time. It’s either taxable income in the year it which it was imputed, or it isn’t. Insolvent to the full extent of the forgiven debt the year it was settled? Great, your tax return shows the insolvency and no tax is assessed on the Imputed income. You don’t go back and retest for insolvency in future years.It has nothing to do with the collections statute of limitations.

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uknownvalue (Jan 26, 2018 - 12:57 am)

The IRS always has at least 10 years to collect - that is beside the point. My point is that Ellie might not have any liability at all depending on his financial circumstances. If he has no liability at all, then the fact that the IRS could collect for 10 years is irrelevant.

I think the disagreement is that when I refer to a tax payer being "insolvent", I mean that he is insolvent according the IRS standard set forth in the IRS cancelled debt publication; insolvency is an exclusion to the taxing of the canceled debt. There is a difference between a tax payer reducing their tax liability by calculating their insolvency (IRS Pub 4681) and being in a "non collectible status" with the IRS for collection purposes. You are correct that even those in non collectible status may have to pay their tax liability if their financial condition changes within 10 years of the either the assessment or tax year (can't remember which).

As far as his wife being liable on his potential debts, they are in NY, which is not a community state - therefore, if Ellie has liability, he can file a separate return and the tax debt will be his alone. The only assets that are subject to collections would be joint assets and his individual assets.

Personally, I pay my debts (SL included) because I decided it is easier to pay them than to default. However, I pay them ONLY because (1) I am lucky that with a few minor sacrifices I can make the payments and (2) the consequences of default would be worse than the sacrifices necessary to avoid default. Debt has a history of being tied up with morality (David Graber wrote an entire book on it "Debt: the first 5,000 years") - but just remember that while it is basically true that one should pay their debts, it is also equally true that money lenders tend to wield unfair leverage over their debtors.

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triplesix (Jan 26, 2018 - 11:57 am)

Great write up!

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onehell (Jan 26, 2018 - 12:44 pm)

Yup, well said. caj111 is basically confusing the insolvency exclusion with CNC status, and missing the fact that married couples don't have to file jointly (and even if they do file jointly, the non-owing spouse can still protect their income from being subject to their spouse's tax liabilities via the injured spouse relief forms)

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