3 ms·

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? Stu

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.

3 ms·

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? Stu

by jackvalentine 9y ago

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.