6 ms·

Here's the thing, if you do as many seem to be suggesting and give up on collections for this small percentage of loans, then your default rate will go up as pe

Here's the thing, if you do as many seem to be suggesting and give up on collections for this small percentage of loans, then your default rate will go up as people realize there are no consequences. It's not as if we are spending $38 for every $1 in student loans - the vast majority of them have no money spent on collections. $38 seems crazy high to me, and given the fact that it's the federal government in charge I'm sure it's horrifically inefficient, but we can't just walk away from the money or it all goes to hell.

jackvalentine 9y ago
> then your default rate will go up as people realize there are no consequences. I don't see a problem with that. How about this - in a similar manner to the 'starve the beast' ideological mantra we can starve the student loans beast to force change. (Just like starve the beast I expect that it wouldn't work and we'd just end up totally messing up some systems that rely on that money, but desperate times right?)
- ericd 9y ago
  It's a very bad idea to train everyone that their debts are optional, and that they have no obligation to pay them back. Loans for people who won't abuse the system will become much more expensive to make up for those who don't pay them back.
  - jackvalentine 9y ago
    Debts are optional to repay, and there are legal frameworks to resolve debt disputes if you choose not to. Businesses do it every day why shouldn't people? Student loans are completely outside of this framework because they're risk-free for the lender and can't be discharged at bankruptcy by the lendee. Because of this the loan costs for those that present a good and bad debt proposition are basically the same - I'd call this more of an abuse.
    - ericd 9y ago
      I completely agree that they shouldn't be risk free - that was probably a harebrained idea to make college cheaper and more accessible to everyone, but it completely messes up the incentives. And I know they're technically optional. What I was saying is that we shouldn't be trying to build the idea that it's OK to default if you're better off financially not paying people back into our culture. Trust is important to the functioning of society.
      - jackvalentine 9y ago
        > What I was saying is that we shouldn't be trying to build the idea that it's OK to default if you're better off financially not paying people back into our culture. Trust is important to the functioning of society. I disagree with this. We saw people during the GFC screwing themselves by continuing to pay mortgages that they were underwater on out of some misguided sense of honour. In that case, they should have walked away and left the bank saddled with the stranded asset. Loans are a commercial proposition with a risk and a reward. Introducing washy hard to define concepts like 'trust' to pressure one side only screws the good guys - the unscrupulous ones will do what they want. Better to have a clear playing field where both lenders and lendees understand there will be situations in which the loan isn't going to get repaid and have the risk of that priced in.
  - goldbeck 9y ago
    But we already do this with businesses... We live in this bad idea system you are describing, except that the little guy is getting screwed while fictional business entities ride high amongst the waves.
    - ericd 9y ago
      You seem to be saying the equivalent of "Businesses are acting shitty, so individuals have to be shitty to compete". That's how you end up in a society that no one wants to live in. We should find ways to bring the standards of business up, not bring the standards of individuals down.
  - dikdik 9y ago
    Would you be ok with instituting a law that mortgage and medical debts can no longer be discharged through bankruptcy? I bet people get really irresponsible when they realize they don't have to pay these debts, they just have to take a massive hit to their credit score....or maybe, most people don't become irresponsible, the people that really need the help get it, and a couple take advantage of the system.
    - ericd 9y ago
      No, that's not what I'm advocating for at all, nor would I bring back debtor's prison, or any of the other relics of The Bad Old Days. Just advocating against trying to tell people that it's totally OK to declare bankruptcy in the event that it makes more financial sense for them. It should be reserved for completely untenable situations, and unless you had a reasonable expectation that it would work out, there should be a at least some personal shame involved for having made such poor decisions, such that they don't make the same mistakes again. We shouldn't try to normalize it. You're spending other people's money. Treat it with respect.
      - jackvalentine 9y ago
        > there should be a at least some personal shame involved for having made such poor decisions What about the shame of the lender for making poor lending decisions? > We shouldn't try to normalize it. Why not? The only reasons you've given is "because it makes for a nicer society" but I don't actually see how it does. All you're doing is taking one of the few tools the individual has to mitigate financial problems away from them because you want to moralise their failure. It's not like declaring bankruptcy is a walk in the park. It's a total pain and really negatively impacts your ability to do a lot of stuff. It is already a last resort for individuals and they shouldn't be stigmatised for taking it. > You're spending other people's money. Treat it with respect. No you're spending your own money, gained through a business transaction in which the lender has accounted for the risk of non-repayment. I actually think it makes for a potentially nicer society if lenders are incentivised to have a stake in the successful outcome of their clients. If the client is culturally conditioned to try and pay their loan even after the point it makes no sense to, then the lenders will put more and more onerous terms and rates on loans because they know the person will never give up. Lenders will have to make sure it's a good deal for their clients, not just themselves.
electricEmu 9y ago
I don't think anyone is suggesting walking away from the debt. The article explicitly mentioned that many of these should be forgiven, but the paperwork isn't offered or filled out. Instead, the collection agency keeps getting money for keeping a debt open, even if it has no chance or purpose for repayment.
- Arizhel 9y ago
  >I don't think anyone is suggesting walking away from the debt. Why not? This is exactly what should happen. Students should be able to discharge their student loans in bankruptcy. The problem is that lenders have little to no risk in making these loans, so they do. And colleges have high tuitions because loan money is easy to get, so colleges find all kinds of stuff to spend it on (usually building fancy new buildings). That needs to change: make loan money harder to acquire by making it risky for lenders to give it out, and the money will dry up, and tuitions will fall.
  - developer2 9y ago
    >> Students should be able to discharge their student loans in bankruptcy. No. Bankruptcy is touted as being an absolute last resort that destroys lives. That's not the case, particularly if you are young. It's better to file for bankruptcy if you believe you will not be able to pay off your debts within a few short years. If student loans could be dumped with bankruptcy, every student would be advised to file for bankruptcy before their first payment became due. Bankruptcy would become the norm for many 21-24 year olds.
    - Arizhel 9y ago
      Yeah, so what's the problem with that? If lenders don't like it, they shouldn't be lending out easy money for degrees that aren't going to result in the student paying the loan back within 5 years. Also (you might like this proposal better), it would make sense for bankruptcy law to have a provision for student loans that you can't declare bankruptcy to dodge the loans within 5 years of graduation. Then only students with little hope of repaying the loans, and who have likely already defaulted, will actually declare bankruptcy. The end effect I'm looking for is for lenders to think twice before lending money for student loans.
Stanish 9y ago
We can stop treating education and medical care like they are commodities, as many other, saner, societies around our gdp per capita level have done. The current order of things is keeping a generation in poverty. That's not really what I'd call a sane investment. The truth is we can't afford not to forgive this debt and give millenials (and in many cases their parents, and increasingly, their children) a chance to have a life that isn't characterized by harassment and fear.
BallinBige 9y ago
open up collections to the free market. it will lower cost to collect

jackvalentine 9y ago

> then your default rate will go up as people realize there are no consequences. I don't see a problem with that. How about this - in a similar manner to the 'starve the beast' ideological mantra we can starve the student loans beast to force change. (Just like starve the beast I expect that it wouldn't work and we'd just end up totally messing up some systems that rely on that money, but desperate times right?)

ericd 9y ago
It's a very bad idea to train everyone that their debts are optional, and that they have no obligation to pay them back. Loans for people who won't abuse the system will become much more expensive to make up for those who don't pay them back.
- jackvalentine 9y ago
  Debts are optional to repay, and there are legal frameworks to resolve debt disputes if you choose not to. Businesses do it every day why shouldn't people? Student loans are completely outside of this framework because they're risk-free for the lender and can't be discharged at bankruptcy by the lendee. Because of this the loan costs for those that present a good and bad debt proposition are basically the same - I'd call this more of an abuse.
  - ericd 9y ago
    I completely agree that they shouldn't be risk free - that was probably a harebrained idea to make college cheaper and more accessible to everyone, but it completely messes up the incentives. And I know they're technically optional. What I was saying is that we shouldn't be trying to build the idea that it's OK to default if you're better off financially not paying people back into our culture. Trust is important to the functioning of society.
    - jackvalentine 9y ago
      > What I was saying is that we shouldn't be trying to build the idea that it's OK to default if you're better off financially not paying people back into our culture. Trust is important to the functioning of society. I disagree with this. We saw people during the GFC screwing themselves by continuing to pay mortgages that they were underwater on out of some misguided sense of honour. In that case, they should have walked away and left the bank saddled with the stranded asset. Loans are a commercial proposition with a risk and a reward. Introducing washy hard to define concepts like 'trust' to pressure one side only screws the good guys - the unscrupulous ones will do what they want. Better to have a clear playing field where both lenders and lendees understand there will be situations in which the loan isn't going to get repaid and have the risk of that priced in.
- goldbeck 9y ago
  But we already do this with businesses... We live in this bad idea system you are describing, except that the little guy is getting screwed while fictional business entities ride high amongst the waves.
  - ericd 9y ago
    You seem to be saying the equivalent of "Businesses are acting shitty, so individuals have to be shitty to compete". That's how you end up in a society that no one wants to live in. We should find ways to bring the standards of business up, not bring the standards of individuals down.
- dikdik 9y ago
  Would you be ok with instituting a law that mortgage and medical debts can no longer be discharged through bankruptcy? I bet people get really irresponsible when they realize they don't have to pay these debts, they just have to take a massive hit to their credit score....or maybe, most people don't become irresponsible, the people that really need the help get it, and a couple take advantage of the system.
  - ericd 9y ago
    No, that's not what I'm advocating for at all, nor would I bring back debtor's prison, or any of the other relics of The Bad Old Days. Just advocating against trying to tell people that it's totally OK to declare bankruptcy in the event that it makes more financial sense for them. It should be reserved for completely untenable situations, and unless you had a reasonable expectation that it would work out, there should be a at least some personal shame involved for having made such poor decisions, such that they don't make the same mistakes again. We shouldn't try to normalize it. You're spending other people's money. Treat it with respect.
    - jackvalentine 9y ago
      > there should be a at least some personal shame involved for having made such poor decisions What about the shame of the lender for making poor lending decisions? > We shouldn't try to normalize it. Why not? The only reasons you've given is "because it makes for a nicer society" but I don't actually see how it does. All you're doing is taking one of the few tools the individual has to mitigate financial problems away from them because you want to moralise their failure. It's not like declaring bankruptcy is a walk in the park. It's a total pain and really negatively impacts your ability to do a lot of stuff. It is already a last resort for individuals and they shouldn't be stigmatised for taking it. > You're spending other people's money. Treat it with respect. No you're spending your own money, gained through a business transaction in which the lender has accounted for the risk of non-repayment. I actually think it makes for a potentially nicer society if lenders are incentivised to have a stake in the successful outcome of their clients. If the client is culturally conditioned to try and pay their loan even after the point it makes no sense to, then the lenders will put more and more onerous terms and rates on loans because they know the person will never give up. Lenders will have to make sure it's a good deal for their clients, not just themselves.

electricEmu 9y ago

I don't think anyone is suggesting walking away from the debt. The article explicitly mentioned that many of these should be forgiven, but the paperwork isn't offered or filled out. Instead, the collection agency keeps getting money for keeping a debt open, even if it has no chance or purpose for repayment.

Arizhel 9y ago
>I don't think anyone is suggesting walking away from the debt. Why not? This is exactly what should happen. Students should be able to discharge their student loans in bankruptcy. The problem is that lenders have little to no risk in making these loans, so they do. And colleges have high tuitions because loan money is easy to get, so colleges find all kinds of stuff to spend it on (usually building fancy new buildings). That needs to change: make loan money harder to acquire by making it risky for lenders to give it out, and the money will dry up, and tuitions will fall.
- developer2 9y ago
  >> Students should be able to discharge their student loans in bankruptcy. No. Bankruptcy is touted as being an absolute last resort that destroys lives. That's not the case, particularly if you are young. It's better to file for bankruptcy if you believe you will not be able to pay off your debts within a few short years. If student loans could be dumped with bankruptcy, every student would be advised to file for bankruptcy before their first payment became due. Bankruptcy would become the norm for many 21-24 year olds.
  - Arizhel 9y ago
    Yeah, so what's the problem with that? If lenders don't like it, they shouldn't be lending out easy money for degrees that aren't going to result in the student paying the loan back within 5 years. Also (you might like this proposal better), it would make sense for bankruptcy law to have a provision for student loans that you can't declare bankruptcy to dodge the loans within 5 years of graduation. Then only students with little hope of repaying the loans, and who have likely already defaulted, will actually declare bankruptcy. The end effect I'm looking for is for lenders to think twice before lending money for student loans.

Stanish 9y ago

We can stop treating education and medical care like they are commodities, as many other, saner, societies around our gdp per capita level have done. The current order of things is keeping a generation in poverty. That's not really what I'd call a sane investment. The truth is we can't afford not to forgive this debt and give millenials (and in many cases their parents, and increasingly, their children) a chance to have a life that isn't characterized by harassment and fear.

BallinBige 9y ago

open up collections to the free market. it will lower cost to collect