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> Why we treat student loan debt debt as being different Where is the collateral? You buy a house, don't pay... you lose the house. You buy an education, don'

> Why we treat student loan debt debt as being different Where is the collateral? You buy a house, don't pay... you lose the house. You buy an education, don't pay... you... lose the education? No bank is going to give money for degrees without a realistic change of getting paid back. They have no fear of getting paid back because you CANT remove the debt via bankruptcy. I think there needs to be a different approach because it IS different... but the "you can never remove this debt" is too much. My personal opinion: Give some sort of limit - 10/20/30 years? - and some sort of max% of income - 10%?. If the loan isn't paid off by the end of the limit at a max % of income, then the loan can then be discharged by bankruptcy. That would remove loans for "crap" courses (finger painting) except for those that pay for it out of pocket. Banks would still give loans for courses that lead to real jobs. Kids could still take shit degrees if they can pay for them (although, those would dry up).

javagram 10y ago
Give some sort of limit - 10/20/30 years? - and some sort of max% of income - 10%?. If the loan isn't paid off by the end of the limit at a max % of income, then the loan can then be discharged by bankruptcy. This already exists in the USA. It's called Income Based Repayment and the outstanding balance of loans and interest is forgiven after 30 years of making payments capped to a certain percentage of income. There is a tax penalty that may or may not still exist in 30 years.
- learc83 10y ago
  Under the new plan (retroactively available to old borrowers), it's only 20 years not 30. And Even if they don't fix the tax penalty, there's an insolvency exception. You're only taxed on the amount forgiven above insolvency. If you manage to go 20 years without paying it's likely you have far more liabilities than assets so you probably won't pay any tax penalty.
hackinthebochs 10y ago
>No bank is going to give money for degrees without a realistic change of getting paid back. Then they shouldn't. A big part of the problem is that the negative externalities of loans are all but eliminated from the issuer and completely placed on the borrower, only that these borrowers almost always unaware or don't fully appreciate the risk. If we allowed student loans to be shed through bankruptcy then companies would stop giving out $100k loans for art degrees and history degrees. This is the sort of risk/reward calculation that most incoming students aren't equipped to make, but actuaries are great at. Why don't we let them?
- candiodari 10y ago
  > If we allowed student loans to be shed through bankruptcy then companies would stop giving out $100k loans for art degrees and history degrees. > Why don't we let them? You've answered your own question, no ? Or at least pointed out one big center of opposition. Additionally, universities themselves will vehemently oppose this of course.
dikdik 10y ago
> Where is the collateral? You buy a house, don't pay... you lose the house. And what happens when the bubble bursts and the house is now worth 200k less than what it was originally purchased for? The bank writes it off. So I propose we give everyone a paperclip with their degree and then if they file for bankruptcy they can give the paperclip, which depreciated 50-100k, back to the bank. It works for boomers so I think it'll work for millennials. ...I'm only half kidding with this comment.
- ccostes 10y ago
  How about giving back the diploma itself?
  - stale2002 10y ago
    Nobody actually cares about the piece of paper. If you are an employer are you going to call up to university just to make sure that the student has paid their students loans? No, whether or not they've paid their loans has zero to do with their qualifications, or your reasons for hiring you.
Sgt_Apone 10y ago
>Give some sort of limit - 10/20/30 years? - and some sort of max% of income - 10%?. If the loan isn't paid off by the end of the limit at a max % of income, then the loan can then be discharged by bankruptcy. This is how it's more or less handled in Canada. You're able to discharge your student loans through bankruptcy 7 years after you graduated. It prevents abuse, while offering some respite to those who fall into deep financial problems. Seems fair to me.

javagram 10y ago

Give some sort of limit - 10/20/30 years? - and some sort of max% of income - 10%?. If the loan isn't paid off by the end of the limit at a max % of income, then the loan can then be discharged by bankruptcy. This already exists in the USA. It's called Income Based Repayment and the outstanding balance of loans and interest is forgiven after 30 years of making payments capped to a certain percentage of income. There is a tax penalty that may or may not still exist in 30 years.

learc83 10y ago
Under the new plan (retroactively available to old borrowers), it's only 20 years not 30. And Even if they don't fix the tax penalty, there's an insolvency exception. You're only taxed on the amount forgiven above insolvency. If you manage to go 20 years without paying it's likely you have far more liabilities than assets so you probably won't pay any tax penalty.

hackinthebochs 10y ago

>No bank is going to give money for degrees without a realistic change of getting paid back. Then they shouldn't. A big part of the problem is that the negative externalities of loans are all but eliminated from the issuer and completely placed on the borrower, only that these borrowers almost always unaware or don't fully appreciate the risk. If we allowed student loans to be shed through bankruptcy then companies would stop giving out $100k loans for art degrees and history degrees. This is the sort of risk/reward calculation that most incoming students aren't equipped to make, but actuaries are great at. Why don't we let them?

candiodari 10y ago
> If we allowed student loans to be shed through bankruptcy then companies would stop giving out $100k loans for art degrees and history degrees. > Why don't we let them? You've answered your own question, no ? Or at least pointed out one big center of opposition. Additionally, universities themselves will vehemently oppose this of course.

dikdik 10y ago

> Where is the collateral? You buy a house, don't pay... you lose the house. And what happens when the bubble bursts and the house is now worth 200k less than what it was originally purchased for? The bank writes it off. So I propose we give everyone a paperclip with their degree and then if they file for bankruptcy they can give the paperclip, which depreciated 50-100k, back to the bank. It works for boomers so I think it'll work for millennials. ...I'm only half kidding with this comment.

ccostes 10y ago
How about giving back the diploma itself?
- stale2002 10y ago
  Nobody actually cares about the piece of paper. If you are an employer are you going to call up to university just to make sure that the student has paid their students loans? No, whether or not they've paid their loans has zero to do with their qualifications, or your reasons for hiring you.

Sgt_Apone 10y ago

>Give some sort of limit - 10/20/30 years? - and some sort of max% of income - 10%?. If the loan isn't paid off by the end of the limit at a max % of income, then the loan can then be discharged by bankruptcy. This is how it's more or less handled in Canada. You're able to discharge your student loans through bankruptcy 7 years after you graduated. It prevents abuse, while offering some respite to those who fall into deep financial problems. Seems fair to me.