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The fundamental problem here is that student loans have been declared a special debt not dischargeable through bankruptcy. At the same time, these loans can be
by CalChris 9y ago
The fundamental problem here is that student loans have been declared a special debt not dischargeable through bankruptcy. At the same time, these loans can be Federally guaranteed through FFEL. This leads to $100K cooking schools promising to turn a recent dischargee from the Army into a pro-chef, sign here, here and here.
If student loans were subject to bankruptcy banks would be more careful. Instead we have a political system making bank from banks for ruining young people's lives.
Any libertarians care to wade in here and tell me this is a small price to pay for freedom?
- sorrymate 9y agoI agree. Why is it that banks are able to charge 6.8% interest for student loans, but the government will provide banks with that same student loan money for 0.03% interest. The middle man adds no value.
- OliverJones 9y agoExactly. The lenders don't have enough skin in the game to make it worth negotiating with the colleges / universities to keep tuition down. The article mentions "loose student loan underwriting standards". That means the underwriters don't call the colleges on the carpet about grossly overpriced degree programs. So tuition spirals.
- CalChris 9y agoI blame the lenders as well but I get there differently. With or without the threat of lendee bankruptcy, it isn’t in the interests of lenders to negotiate lower tuition. This doesn’t happen with houses. It’d never happen with tuition. Instead this is just free money for the banks. Since it guaranteed they risk nothing. Your no skin in the game is their lack of risk. I blame the lenders because they lobbied for this gift.