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You can't allow bankruptcy because there's no collateral to these loans, only the vague promise that the borrower will use their degree to make a good income so
by blisterpeanuts 10y ago
You can't allow bankruptcy because there's no collateral to these loans, only the vague promise that the borrower will use their degree to make a good income some day.
For example, home mortgages are breakable because the bank gets the house. What does the bank get when you break your Sallie Mae loan? Zero. Only the government would lend money knowing the borrower might never pay it back. They might as well be honest and just subsidize tuition, in that case.
- dragonwriter 10y ago> You can't allow bankruptcy because there's no collateral to these loans Unsecured loans are often dischargeable in bankruptcy (even student loans are, though its harder than most other unsecured loans.) The idea that only secured loans can be discharged in bankruptcy is false. > Only the government would lend money knowing the borrower might never pay it back. Obviously false, as private insitutions do issue unsecured credit that is dischargeable in bankruptcy.
- seiferteric 10y agoSure, but then the interest rates on student loans would by necessity be much higher.