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There really needs to be some “free market” ideology injected into the way loans are dispersed. First of all students need a way to declare bankruptcy. Second,
by dev_dull 8y ago
There really needs to be some “free market” ideology injected into the way loans are dispersed. First of all students need a way to declare bankruptcy. Second, we must take into consideration future earnings potential when deciding how much and at what rate.
- pmarreck 8y agoPermitting bankruptcy would instantly add more risk to the lender and thus instantly boost the interest rate on the loan, potentially pricing it out of the range of the student.
- wycs 8y agoAnd permiting indenture is better? College is a signalling racket status good. Cut the loans and watch as tuition magically decreases to maintain equilibrium.
- pmarreck 8y agoI actually fully agree. I wasn't arguing my personal point, just stating a fact
- belorn 8y agoIf we accept that the risk of student loan is covered by the state in any rate and not by the bank then we can just cut out the middle man and have the state give out the loan in the first place under what ever condition that satisfy the public who is paying for it. Sweden has that system. Can't say it is that terrible.
- pmarreck 8y agoSounds good!
- pwned1 8y agoPrecisely. Then we'd get true price discovery.
- mmirate 8y agoIf any given thing is "too expensive", then an important fact is being conveyed: that thing takes too many resources to produce, relative to the value it is providing. Trying to hide or subsidize the price only prevents people from acting on that fact. (and thereby acquiring that value in a more efficient manner, etc.)
- jldugger 8y ago> First of all students need a way to declare bankruptcy. While I'm not for or against such a policy, I find it intriguing you think bankruptcy is free market ideology adjacent.
- imtringued 8y agoThat's basic economics of lending. If X% of people default then you have to increase interest rates to cover the people that default. The increased interest rate will dissuade students from taking on degrees with lesser economic prospects. It's like adding back pressure or load shedding to a distributed system. It is better to drop or delay requests than let the entire system collapse under it's own weight.
- FLUX-YOU 8y agoHigher tuition (skyrocketing tuition, actually) should have already done that
- sethammons 8y agoNaw, you just get a bigger loan :)
- jldugger 8y ago> If X% of people default then you have to increase interest rates to cover the people that default. Your borrowers can always default, even without bankruptcy protections. It's a good policy, I assume, but I'm not sure it's strictly speaking, part of the free market dogma.
- akvadrako 8y agoThey can't default because of government interference. I don't think anyone was talking about protections.
- user5994461 8y agoIt's the opposite. If people can default, then the bank has to avoid defaulters, staying away from financing expensive studies in dead end careers. Otherwise the bank needs to get more defaulter, because they are more profitable than people who pay back.
- thatjsguy 8y agoWhat if we just like... paid for school with taxes like literally every other country? (Trust me, it shouldn’t cost as much as it does to get a degree. I promise it can be and, in fact, used to be affordable.)
- deleted 8y ago[deleted]
- dev_dull 8y agoIn many ways taxes do pay for it. For example around 50% of state school tuition is paid for by taxes. Yet sky-high, emphatically unpayable debt persists and is getting worse.
- onlyrealcuzzo 8y agoThat's because if you can pay more, colleges charge more.
- wtvanhest 8y agoWe need a mechanism to control costs. The loans are just one side of the story. The majority of public universities are rapidly increasing their cost structures. That doesn't work longterm.