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Because students generally are poor and so don't have much to lose by declaring bankruptcy. They shrug off massive debts are left with an (ostensibly) valuable
by yasp 7y ago
Because students generally are poor and so don't have much to lose by declaring bankruptcy. They shrug off massive debts are left with an (ostensibly) valuable degree. Lenders are unable to secure the loan against the borrower's assets, as would generally be the case for a home, auto, or business loan. It's possible that if student loans were dischargeable in bankruptcy that, absent a government guarantee, the lender would need to charge a high enough interest rate where the student loan market simply wouldn't function. And a government guarantee combined with student loan dischargeability in bankruptcy would leave US taxpayers holding the bag.
- freewilly1040 7y agoPreventing the student loan market from functioning as it is now is a feature, not a bug.
- nicoburns 7y agoIn the UK, student loans are not dischargeable via bankruptcy. But repayment is income based (9% of income), and is only due at all for people who are earning above a certain income (currently ~£21k). This seems like a decent way of dealing with this issue.
- rayiner 7y agoSame is true in the US.
- otaviokz 7y agoSo, after the 6 months of "grace period", does only students with and a minimum wage get to pay it? I thought you just had to start paying after 6 months.
- bko 7y agoIf you enroll in income based repayment, you pay 10% of discretionary income for 20 years. I'm not sure how "discretionary income" is calculated but its probably similar to the UK threshold [0] https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven https://studentaid.ed.gov/sa/repay-loans/understand/plans/in...
- dotnetdemon 7y agoDon’t forget that any remaining balance that is forgiven at the end gets counted as income on your taxes.
- deleted 7y ago[deleted]