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Largely because of the perverse incentives to declare bankruptcy immediately upon graduation. Think about it: no major purchase on the horizon, such as a mortga
by treyfitty 9y ago
Largely because of the perverse incentives to declare bankruptcy immediately upon graduation. Think about it: no major purchase on the horizon, such as a mortgage- why not just ditch the loan if it's only going to hurt your credit file temporarily?
Call it a slippery slope fallacy, but it's not fallacious when you realize we are rational beings (for the most part) and this loophole is attractive.
- johnmarcus 9y agolol. for the 50 years prior to the law change (~2007) people weren't declaring bankruptcy after college to avoid the debt - but of course the debt was a reasonable amount back then compared to income and other debts. It's not that strange tuition has close to doubled after 2007, while only increasing near inflation before.
- treyfitty 9y agoAlso, (I'm speculating here, since I wasn't alive back then) but bankruptcy was very stigmatized. I won't know the extent, but the way my parents talk about it, bankruptcy just didn't seem like an option. They say it was akin to paying a vet to euthanize your dog rather than suffocating it- it's cheaper one way, but the outcome is the same. It's easy to be "rational" as armchair economists, but social norms and pride are a very important driver. It's what baffles real economists when they gripe "our models would work, if the world were rational!"