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> Considering that those loans don't even go away with bankruptcy What? How does that work? Edited to add: this link suggests you can make it go away, but you

> Considering that those loans don't even go away with bankruptcy What? How does that work? Edited to add: this link suggests you can make it go away, but you need to do some extra work: https://studentloanhero.com/featured/student-loan-bankruptcy-discharge/ https://studentloanhero.com/featured/student-loan-bankruptcy...

koolba 9y ago
The rationale is that you can't take away an education the way you can repo a house or car. That and something about doctors borrowing a couple hundred K, then declaring bankruptcy to discharge it after graduation.
- vkou 9y ago
  And yet, nothing prevents me from maxing out my credit cards, and spending it all on whiskey and limousine rides... Or totaling my car (While only having liability insurance). Lenders charge a premium over the prime interest rate because of the risk that they will never get their money back. Student loans are backed by the federal government - there is zero risk for these lenders. They seem to be under the impression that they should be getting paid for risk that they don't have to shoulder. Why on earth should 18 year olds be entering financial transactions over hundreds of thousands of dollars, where they, but not their counterparty, get to shoulder all the risk? One would expect that the lenders should be sophisticated enough to know how to deal with it, and price accordingly.
  - salesguy222 9y ago
    Of course the answer is that 18 year olds shouldn't be strapping themselves up with debt. And it should be dischargable. But of course, we are living in a country that is controled by fabulously wealthy and powerful individuals and their businesses. The education lobby, like any other lobby, successfully petitioned the government to make student loans a contract in blood. It is deeply irrational, unfair, and leads to inflation and rampant misallocation of resources. But the education cartel and its alligned politicians don't give one fuck about that. In fact, this was the intended outcome. They count the money and if it ever breaks, hey, they're rich!
  - lr4444lr 9y ago
    I upvoted you because I think you've put your finger on something, and I think part of the answer is a collective unspoken belief that people who may not be meritorious on past academic achievement and/or very low on the income spectrum should have an avenue to determine their own educational destiny through hard work if they pledge a return on the investment to help them get there. And because of an impression that the rates would be too prohibitive if left to market forces, there's a risk trade-off to keep them artificially low enough for more people to pay them back on schedule at the expense of the taxpayer. I'm not saying this is a good thing, but we the taxpayers take a haircut when these loans go into default and have to be sold off at a discount - I don't think it's right to say the student bears all of the risk. The lender plays both sides.
    - pmiller2 9y ago
      Except the taxpayers don't really lose out on student loans unless the borrower gets the loans discharged. They have immense power to levy bank accounts, garnish wages, seize tax refunds, and even garnish Social Security payments. Practically speaking, unless the borrower dies or becomes totally and permanently disabled, the government will get theirs. Bankruptcy discharges are very rare, and with all those ways of collecting, not paying isn't an option, unless the borrower leaves the US, never to return.
      - lr4444lr 9y ago
        I'm not sure about that. Isn't the whole point of outfits like Navient that the govt. loses money by selling off billions of the obligations to servicers?
        pmiller2 9y ago
        No, not at all. There are three players in the student loan game: lender, servicer, and guarantor. The lender is pretty much what it sounds like. The servicer is the agency that handles the repayment process (and any deferment or forbearance) as long as the loan is not in default. The guarantor is where the loan is transferred if it goes into default. The guarantor will add collection fees of up to 20% of the defaulted balance, and can pursue those collection methods I mentioned earlier. They can also hire an outside agency to do collections. Their main job is to get loans out of default, either by rehabilitating the loan (a process whereby a borrower makes 12 on time, consecutive payments, and the loan is kicked out of default status), or directing the borrower to consolidate. Navient falls under the category of lender or servicer (or both), depending on the specific loan. Their interest is in stringing out the payments as long as possible, and wring out as much money from the borrower as they can, which is why they got into trouble recently for directing borrowers to deferment and forbearance options rather than lower payment plans. If that sounds like a lot of people interested in putting 18 year olds in debt, it is. I worked in this industry for a couple years on the consolidation front, and heard a lot of sad tales.
  - austenallred 9y ago
    > Why on earth should 18 year olds be entering financial transactions over hundreds of thousands of dollars, where they, but not their counterparty, get to shoulder all the risk? It's pretty insane, to be honest
  - aianus 9y ago
    > Or totaling my car (While only having liability insurance). I don't know where you live but in Canada the car dealer won't give you the keys without getting confirmation of comprehensive insurance coverage with lienholder protection. Personally just did it a couple of months ago.
  - thatwebdude 9y ago
    > Why on earth should 18 year olds be entering financial transactions over hundreds of thousands of dollars, where they, but not their counterparty, get to shoulder all the risk? I'm a firm believer in maturing before entering a transaction like that. Maybe even "taking off a year" or working full-time for a bit to understand how "the real world" may work from what you understood it as at home (hint: it's much easier for some than others).

koolba 9y ago

The rationale is that you can't take away an education the way you can repo a house or car. That and something about doctors borrowing a couple hundred K, then declaring bankruptcy to discharge it after graduation.

vkou 9y ago
And yet, nothing prevents me from maxing out my credit cards, and spending it all on whiskey and limousine rides... Or totaling my car (While only having liability insurance). Lenders charge a premium over the prime interest rate because of the risk that they will never get their money back. Student loans are backed by the federal government - there is zero risk for these lenders. They seem to be under the impression that they should be getting paid for risk that they don't have to shoulder. Why on earth should 18 year olds be entering financial transactions over hundreds of thousands of dollars, where they, but not their counterparty, get to shoulder all the risk? One would expect that the lenders should be sophisticated enough to know how to deal with it, and price accordingly.
- salesguy222 9y ago
  Of course the answer is that 18 year olds shouldn't be strapping themselves up with debt. And it should be dischargable. But of course, we are living in a country that is controled by fabulously wealthy and powerful individuals and their businesses. The education lobby, like any other lobby, successfully petitioned the government to make student loans a contract in blood. It is deeply irrational, unfair, and leads to inflation and rampant misallocation of resources. But the education cartel and its alligned politicians don't give one fuck about that. In fact, this was the intended outcome. They count the money and if it ever breaks, hey, they're rich!
- lr4444lr 9y ago
  I upvoted you because I think you've put your finger on something, and I think part of the answer is a collective unspoken belief that people who may not be meritorious on past academic achievement and/or very low on the income spectrum should have an avenue to determine their own educational destiny through hard work if they pledge a return on the investment to help them get there. And because of an impression that the rates would be too prohibitive if left to market forces, there's a risk trade-off to keep them artificially low enough for more people to pay them back on schedule at the expense of the taxpayer. I'm not saying this is a good thing, but we the taxpayers take a haircut when these loans go into default and have to be sold off at a discount - I don't think it's right to say the student bears all of the risk. The lender plays both sides.
  - pmiller2 9y ago
    Except the taxpayers don't really lose out on student loans unless the borrower gets the loans discharged. They have immense power to levy bank accounts, garnish wages, seize tax refunds, and even garnish Social Security payments. Practically speaking, unless the borrower dies or becomes totally and permanently disabled, the government will get theirs. Bankruptcy discharges are very rare, and with all those ways of collecting, not paying isn't an option, unless the borrower leaves the US, never to return.
    - lr4444lr 9y ago
      I'm not sure about that. Isn't the whole point of outfits like Navient that the govt. loses money by selling off billions of the obligations to servicers?
      - pmiller2 9y ago
        No, not at all. There are three players in the student loan game: lender, servicer, and guarantor. The lender is pretty much what it sounds like. The servicer is the agency that handles the repayment process (and any deferment or forbearance) as long as the loan is not in default. The guarantor is where the loan is transferred if it goes into default. The guarantor will add collection fees of up to 20% of the defaulted balance, and can pursue those collection methods I mentioned earlier. They can also hire an outside agency to do collections. Their main job is to get loans out of default, either by rehabilitating the loan (a process whereby a borrower makes 12 on time, consecutive payments, and the loan is kicked out of default status), or directing the borrower to consolidate. Navient falls under the category of lender or servicer (or both), depending on the specific loan. Their interest is in stringing out the payments as long as possible, and wring out as much money from the borrower as they can, which is why they got into trouble recently for directing borrowers to deferment and forbearance options rather than lower payment plans. If that sounds like a lot of people interested in putting 18 year olds in debt, it is. I worked in this industry for a couple years on the consolidation front, and heard a lot of sad tales.
- austenallred 9y ago
  > Why on earth should 18 year olds be entering financial transactions over hundreds of thousands of dollars, where they, but not their counterparty, get to shoulder all the risk? It's pretty insane, to be honest
- aianus 9y ago
  > Or totaling my car (While only having liability insurance). I don't know where you live but in Canada the car dealer won't give you the keys without getting confirmation of comprehensive insurance coverage with lienholder protection. Personally just did it a couple of months ago.
- thatwebdude 9y ago
  > Why on earth should 18 year olds be entering financial transactions over hundreds of thousands of dollars, where they, but not their counterparty, get to shoulder all the risk? I'm a firm believer in maturing before entering a transaction like that. Maybe even "taking off a year" or working full-time for a bit to understand how "the real world" may work from what you understood it as at home (hint: it's much easier for some than others).