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Like toomuchtodo mentions, we could treat it like other unsecured debt (like credit card debt). Just because it's unsecured doesn't mean we shouldn't be able t

Like toomuchtodo mentions, we could treat it like other unsecured debt (like credit card debt). Just because it's unsecured doesn't mean we shouldn't be able to discharge it with bankruptcy. Get the government out of the loan business and the market will correct itself. You won't be able to get a loan for a useless degree and if you end up being unable to pay off your loan you can go through normal bankruptcy proceedings and their consequences.

ChemicalWarfare 10y ago
Upvoted. But. The argument against this could be that due to the unsecured nature of the six-figure (potentially) debt the free market rates will be insane effectively reducing access to higher ed for those who can't afford it without the loans. Then again, if less ppl could afford a degree in Queer Musicology (does exist - https://www.musicology.ucla.edu/mission-and-history-1 https://www.musicology.ucla.edu/mission-and-history-1) or let's say Environmental Studies etc maybe the supply and demand would even out so that'll be a good thing.
- dragonwriter 10y ago
  > The argument against this could be that due to the unsecured nature of the six-figure (potentially) debt the free market rates will be insane effectively reducing access to higher ed for those who can't afford it without the loans. Given that federal loans have always had rates set by government policy (not market rates) and the fact that private participation in the program was ended in favor of exclusively direct loans in 2010, I'm not sure what the concern for "market rates" is -- there is no market involved.
  - ChemicalWarfare 10y ago
    see the comment I was replying to >>> "Get the government out of the loan business and the market will correct itself."
- zanny 10y ago
  There is already plenty of movement, and in general close to ready availability, of free college in everyones home state at their state university or several other public universities funded by the state government. If you got rid of the insanity that is federal loans it would just increase demand for state schools and community college.
- paulcole 10y ago
  >Environmental Studies God forbid.
  - ChemicalWarfare 10y ago
    in the "free market" student loan situation this would be an unsafe bet on the creditor's behalf.
    - mywittyname 10y ago
      There's no such thing as "free market" lending because so much of it is tied to legal institutions. For example, is bankruptcy allowed in a free market? Indentured servitude? Seizure of assets? Absent a government, lending is a lose-lose situation. The lender has little recourse to compel the lendee to pay, and the lendee has no protection from the lender.
feklar 10y ago
Would tuition also follow by being more affordable? The government guarantees loans for everybody so institutions jack up their fees accordingly it seems.
- kbutler 10y ago
  Yes, government-backed loans reduce the apparent cost of higher education, increasing the amount people are willing to pay, driving up the costs, and reducing access to people who are unwilling to take the loans. http://www.economist.com/node/21559618 http://www.economist.com/node/21559618 quoting a research paper: "With all factors present, net tuition increases from $6,100 to $12,559. As column 4 demonstrates, the demand shocks — which consist mostly of changes in financial aid — account for the lion’s share of the higher tuition." And then: "so much of the subsidy is translated into higher tuition that enrollment doesn’t increase! What does happen is that students take on more debt, which many of them can’t pay."
rayiner 10y ago
Poor minorities also won't be able to get student loans. That makes your proposal a total non-starter in a society that emphasizes education as the path to economic advancement for minorities.
- morgante 10y ago
  That's an unproven assumption. If existing lenders aren't willing to loan to minorities, then there would be a fantastic opening to make a profit in loaning money to poor minorities with high test scores to study STEM.
  - rayiner 10y ago
    20% of African Americans have credit scores below 620 compared to 5% of non-Hispanic whites. On average, disadvantaged minorities don't do as well on standardized tests, and have worse graduation rates even when they attend the same colleges: http://mobile.nytimes.com/2014/05/18/magazine/who-gets-to-graduate.html http://mobile.nytimes.com/2014/05/18/magazine/who-gets-to-gr.... The US is very deeply invested in the idea that the way to overcome the disadvantages faced by members of certain minorities is education. But those same disadvantages make those students worse credit risks. A credit-based system looking to optimize return wouldn't give these students access to the same educational opportunities.
    - morgante 10y ago
      A credit-based system looking to optimize return would reflect the likelihood of such students actually graduating and getting good jobs. If the problem is that minority students have difficulty achieving at the level of white students, let's focus on that. I don't think it's very helpful that we saddle these students up with loans but then they don't even end up graduating. Instead of forcing lenders to lend to bad credit risks, let's come up with ways to support minority students so they aren't credit risks. I personally would be happy to invest in minority students studying CS, for example. And yes, it will be somewhat painful in the short term. We'll have to confront the reality that lending to students with low SAT scores to study esoteric subjects is maybe not a good idea. Perhaps it would even encourage such students to not waste their time and money on bad degrees.

ChemicalWarfare 10y ago

Upvoted. But. The argument against this could be that due to the unsecured nature of the six-figure (potentially) debt the free market rates will be insane effectively reducing access to higher ed for those who can't afford it without the loans. Then again, if less ppl could afford a degree in Queer Musicology (does exist - https://www.musicology.ucla.edu/mission-and-history-1 https://www.musicology.ucla.edu/mission-and-history-1) or let's say Environmental Studies etc maybe the supply and demand would even out so that'll be a good thing.

dragonwriter 10y ago
> The argument against this could be that due to the unsecured nature of the six-figure (potentially) debt the free market rates will be insane effectively reducing access to higher ed for those who can't afford it without the loans. Given that federal loans have always had rates set by government policy (not market rates) and the fact that private participation in the program was ended in favor of exclusively direct loans in 2010, I'm not sure what the concern for "market rates" is -- there is no market involved.
- ChemicalWarfare 10y ago
  see the comment I was replying to >>> "Get the government out of the loan business and the market will correct itself."
zanny 10y ago
There is already plenty of movement, and in general close to ready availability, of free college in everyones home state at their state university or several other public universities funded by the state government. If you got rid of the insanity that is federal loans it would just increase demand for state schools and community college.
paulcole 10y ago
>Environmental Studies God forbid.
- ChemicalWarfare 10y ago
  in the "free market" student loan situation this would be an unsafe bet on the creditor's behalf.
  - mywittyname 10y ago
    There's no such thing as "free market" lending because so much of it is tied to legal institutions. For example, is bankruptcy allowed in a free market? Indentured servitude? Seizure of assets? Absent a government, lending is a lose-lose situation. The lender has little recourse to compel the lendee to pay, and the lendee has no protection from the lender.

feklar 10y ago

Would tuition also follow by being more affordable? The government guarantees loans for everybody so institutions jack up their fees accordingly it seems.

kbutler 10y ago
Yes, government-backed loans reduce the apparent cost of higher education, increasing the amount people are willing to pay, driving up the costs, and reducing access to people who are unwilling to take the loans. http://www.economist.com/node/21559618 http://www.economist.com/node/21559618 quoting a research paper: "With all factors present, net tuition increases from $6,100 to $12,559. As column 4 demonstrates, the demand shocks — which consist mostly of changes in financial aid — account for the lion’s share of the higher tuition." And then: "so much of the subsidy is translated into higher tuition that enrollment doesn’t increase! What does happen is that students take on more debt, which many of them can’t pay."

rayiner 10y ago

Poor minorities also won't be able to get student loans. That makes your proposal a total non-starter in a society that emphasizes education as the path to economic advancement for minorities.

morgante 10y ago
That's an unproven assumption. If existing lenders aren't willing to loan to minorities, then there would be a fantastic opening to make a profit in loaning money to poor minorities with high test scores to study STEM.
- rayiner 10y ago
  20% of African Americans have credit scores below 620 compared to 5% of non-Hispanic whites. On average, disadvantaged minorities don't do as well on standardized tests, and have worse graduation rates even when they attend the same colleges: http://mobile.nytimes.com/2014/05/18/magazine/who-gets-to-graduate.html http://mobile.nytimes.com/2014/05/18/magazine/who-gets-to-gr.... The US is very deeply invested in the idea that the way to overcome the disadvantages faced by members of certain minorities is education. But those same disadvantages make those students worse credit risks. A credit-based system looking to optimize return wouldn't give these students access to the same educational opportunities.
  - morgante 10y ago
    A credit-based system looking to optimize return would reflect the likelihood of such students actually graduating and getting good jobs. If the problem is that minority students have difficulty achieving at the level of white students, let's focus on that. I don't think it's very helpful that we saddle these students up with loans but then they don't even end up graduating. Instead of forcing lenders to lend to bad credit risks, let's come up with ways to support minority students so they aren't credit risks. I personally would be happy to invest in minority students studying CS, for example. And yes, it will be somewhat painful in the short term. We'll have to confront the reality that lending to students with low SAT scores to study esoteric subjects is maybe not a good idea. Perhaps it would even encourage such students to not waste their time and money on bad degrees.