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Let student loans be dischargeable in bankruptcy and watch prices "adjust". What other asset-backed-security is tied to someone's life until they die or become
by chopsueyar 16y ago
Let student loans be dischargeable in bankruptcy and watch prices "adjust".
What other asset-backed-security is tied to someone's life until they die or become physically incapacitated?
- hga 16y agoThe problem here is that these are not asset backed, at least in the collateral sense. A house can be foreclosed on, a car repossessed. You can't take away the education someone's gained, although I suppose you could force schools' registrars to not confirm the granting of a degree, but that could still be proven in a variety of ways. The concern is that too many would immediately declare bankruptcy after finishing their education, wait out the 7? years it takes to for that to fall off their credit report and then get on with their lives. Since few new graduates need serious credit for anything beyond cars....
- chopsueyar 16y agoPlease substantiate the claim "The concern is that too many would immediately declare bankruptcy after finishing their education".
- chopsueyar 16y agoThe loan is the asset, both in cases of student loans and mortgages.
- hga 16y agoAre you talking about derivative securities built on top of loans?
- chopsueyar 16y agoA pool of loans. https://www.salliemae.com/about/investors/debtasset/slmsltrusts/ https://www.salliemae.com/about/investors/debtasset/slmsltru...
- hga 16y agoWell, I've been talking about the loans themselves, which by definition are not "assets": "Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent ownership of value that can be converted into cash..." (http://en.wikipedia.org/wiki/Asset http://en.wikipedia.org/wiki/Asset). Therefore securities built on top of these loans, such as the pools you refer to in your link, are by definition not "asset-backed-securit[ies]". They are instead backed by e.g. the laws and regulations that make them non-dischargeable ... and I contend that's a major reason why they are non-dischargeable.
- chopsueyar 16y agoI don't mean to spam you with Sallie Mae links, but clearly you can see the heading of this page... https://www.salliemae.com/about/investors/debtasset/ https://www.salliemae.com/about/investors/debtasset/
- hga 16y agoFrom one of the links: "... financial characteristics and servicing information related to the underlying student loan assets...." The student loans themselves are assets (the fit the above definition), my point is that they themselves are not asset based like a house or car loan. Sallie Mae's use of the term "asset" here might be slightly misleading, but being essentially part of the government they can get away with it.