5 ms·
Student loans should be dischargeable in bankruptcy after 10 years post-graduation (and not fully guaranteed past a certain amount, say $10K or $20K) -- hear me
by dokein 8y ago
Student loans should be dischargeable in bankruptcy after 10 years post-graduation (and not fully guaranteed past a certain amount, say $10K or $20K) -- hear me out.
The common reason student loans are NOT allowed to be dischargeable is because, in the minute after graduating and without collateral, the student can declare bankruptcy with no effect (the vast majority are not buying a house within the time it would take for their credit to repair).
This has the side effect of blunting market forces. It is the same amount of interest and same approval process to get 200K for medical school as it does for an art degree, despite market forces suggesting that the former are vastly more needed (ok, granted, there's the AMA, but that's another discussion). It doesn't matter to the bank -- after all you can just repay a little bit until you're 70 years old.
Allowing things to be dischargeable 10 years after graduation would reintroduce market forces. You want 200K for medical school (maybe we change the post-graduation length a bit to account for residency / fellowship)? Great! Almost guaranteed well-paying job out the other end.
But 150K for an expensive art school + MFA? You better be prepared to have your credit looked at under a microscope. Application rejected.
What would this mean? This would mean that schools would actually have either a) provide more value to the individual, b) charge less or c) accept much smaller classes. It would mean they would probably have to focus most of their energy on education + job placement rather than funding more school athletics and building a fancier dorm.
- bradleyjg 8y agoThere isn't much of a market for market forces to act upon. The overwhelming majority of student loans are made directly by the government with terms and underwriting (or lack thereof) set by Congress, not competition.
- gwright 8y agoIt isn't specifically said, but I assumed that the parent was implicitly suggesting a switch back to private loans with market mechanisms instead of the current government loan mechanism.
- bradleyjg 8y agoIf so, the post buried the lede. That’d be a bigger change than allowing them to be discharged in bankruptcy.
- justherefortart 8y agoMaybe since college is the new High School we should fund colleges completely. I'm pretty sure my local high schools cost of administration haven't gone up 237% like colleges the last 20 or so years. https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities https://www.usnews.com/education/best-colleges/paying-for-co...
- darkerside 8y agoDevil's advocate, but maybe that's why college has become the new high school?
- mijamo 8y agoNot really, that phenomenon is hlobal, as observed everywhere in the developed world. It has mote yo do with competition to get jobs for young people.
- darkerside 8y agoIn a complex system there are multiple reasons for every event. I'd say these are both factors. Globalization and driving force of capitalism is the context, and proportional investment in primary education is an obvious step that we're not taking.
- ac29 8y agoWhat you, the author, and some other posters don't seem to realize is that student loans can be forgiven after 20 or 25 years, with payments up to that point capped at 10% of discretionary income: https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven https://studentaid.ed.gov/sa/repay-loans/understand/plans/in... No one should be paying "until they are 70 years old".