> Banks only lend for education because it's not dischargeable - there's no penalty for the bank making a 'bad decision' because they'll get their money one way

> Banks only lend for education because it's not dischargeable - there's no penalty for the bank making a 'bad decision' because they'll get their money one way or another. I was under the impression that only federal student loans were protected from bankruptcy. However, it looks like that changed in 2005 when Congress largely extended this protection to private student loans as well. I still don't quite fully agree with your statement since financial institutions often have a hard time collecting on debt regardless of their legal rights, but you are certainly correct that this encourages financial institutions to take on more risk. Private student loans are performing much better than federal student loans though (11%+ vs 4%+ delinquency rates) so the data implies that they are still practicing somewhat strong underwriting practices. Further, nearly 95% of all private student loans have a cosigner. Regardless, the private student loan market is very small in comparison to the federally subsidized student loan market. I know it is easy to blame the 'banks,' but in reality this situation has developed largely from societal pressures (college=success), federal and state policies ('cheap' and 'accessible' loans), and unchecked spending at colleges. Link of an interesting paper on the subject for those curious: http://law.emory.edu/ebdj/content/volume-32/issue-1/comments/non-dischargeability-private-student-loans-looming-crisis.html http://law.emory.edu/ebdj/content/volume-32/issue-1/comments...