6 ms·

This is a possible solution, but it's not simple. If you do this, the current system of student loans we have will collapse completely. Now, maybe that would b

by harryh 7y ago

This is a possible solution, but it's not simple. If you do this, the current system of student loans we have will collapse completely. Now, maybe that would be good...but it's not simple.

breck 7y ago
It is simple. Not easy, but simple. This is the solution. It works for all other industries. If I loan you money to buy a house or buy a car, without doing due diligence to that loan, the courts tell me "tough luck" if you file for bankruptcy. But if I lend you $250,000 for an arts degree, the power of the state will force you to pay me. That's insane!!!
- harryh 7y ago
  Yes, and home and car loans still exist because if people don't pay it back there is an asset to repossess. That's not the case with college loans. Which is why they are fundamentally different.
  - breck 7y ago
    > they are fundamentally different. Perhaps it's good there are some things that are different. Some things are property. Some are not. In history there always seems to be a trend for those in power to try and enslave those not in power, by putting property laws on people. This student loan bankruptcy exception is one example. Intellectual slavery laws like copyright and patents are another.
    - tptacek 7y ago
      This is a non-sequitur response to the point 'harryh made. Regardless of the underlying moral dimension of college financing, you can't rationally extend dischargeable loans to students, because they can default and discharge the loan with minimal impact on their life. If dischargeability became the norm, most students would simply not be able to obtain loans at all. That may be a good thing, as 'harryh said. But that's not the point: the point is, at the point where you make student loans dischargeable, you might as well just concede that you're eliminating them altogether.
    - breck 7y ago
      In reply to tptacek: "at the point where you make student loans dischargeable, you might as well just concede that you're eliminating them altogether." Have you ever gone through bankruptcy? Luckily I have not, but from what I've read it's a horrible thing to go through with serious consequences to your finances that takes a minimum of 7 years to overcome. I think the cost of college would drop 10x. I went to Duke, and the gardens and pools were lovely, really, but perhaps some tables and books would have been the more appropriate use of my tuition money. I do agree the IS bit was somehwhat a non sequitor, but there is a common thread here I think when people try to put property and ownership rights on things that nature doesn't make that easy.
      - tptacek 7y ago
        I have administered and underwritten bankruptcies for others and feel like I have some direct personal experience with the process. I do not feel like the consequences of bankruptcy are sufficient to make it irrational to discharge 6 figures of college debt through the process.
        kasey_junk 7y ago
        I would have declared bankruptcy in a heartbeat for my wife’s loans & it would have been rational. I a) make good money b) have good credit and c) don’t have financial hardships.
  - imtringued 7y ago
    The asset is a person who will have to undergo a repayment plan for 7 years.
- vonmoltke 7y ago
  > But if I lend you $250,000 for an arts degree, the power of the state will force you to pay me. Why would the state not use the power of the state to make sure you pay back money it lent you?
  - breck 7y ago
    Because it's a dumb predatory loan that should never have been made in the first place. There is a type of business for making dumb loans and using force to ensure they are paid back: the mafia. The mafias of old are nothing in size when compared to the student loan industry.
    - vonmoltke 7y ago
      So you are calling the Department of Education a mafia? The Department of Education is the "student loan industry".
      - breck 7y ago
        I think mafia is a poor word choice. At least the mafioso didn't pretend to be saints.
    - bumby 7y ago
      Discharging loans and the predatory nature of them are two different arguments. If they loans are predatory, make the loans harder to qualify for. It won't fix the predatory nature if they are easy to get rid of; if anything it will make them more predatory by likely increasing the interest rate to compensate for the increased risk to the lender.
      - breck 7y ago
        This is completely wrong. The answer is simplicity, not more complexity that would come from "make the loans harder to qualify for". > It won't fix the predatory nature if they are easy to get rid of Yes, it will. People will stop hunting for more students to go to their schools with expensive landscaping if there were no government guarantees to ensure they get paid. This is a very simple issue. Any attempts to complexify the issue I suspect are merely attempts to divert attention from the question of human rights and equality. I paid all my student loans and personally have only to lose if they change the laws, but it's the right thing to do.
libria 7y ago
Collapse? Change maybe. It means underwriters will want proof of performance, High school GPA, SAT's, and intended college major. Good grades and signing up for pre-med? Here's a year of cash, you'll get your next payout if you're on the honor roll next year. Planning on majoring in Homeopathic Nutrition Science? Denied. Sounds like it'll make people a lot more focused on ROI and studying and that strikes me as a good thing. If it cuts down on a lot of frivolous choices, it'll also reduce the overall regret from those.
- tptacek 7y ago
  The problem with dischargeable student loans isn't that the students won't profit from them; it's that, having obtained a dischargeable loan whose direct utility ends in their 21st year of life, the rational move for student borrowers would be to ruthlessly default. You can't repossess an education.
  - breck 7y ago
    That's false. My father and mother took out student loans when they were dischargeable and they paid them off. My dad via working as a taxi driver and bouncer, because there was downward pricing pressure back then. There are severe consequences to filing for bankruptcy. That is on your record for 7 years, minimum.
    - tptacek 7y ago
      This is also a non sequitur response. Doubtless many people would pay back their loans, for personal moral reasons. But a BK on your record from ages 21-28 is not a meaningful practical deterrent for ruthless default, because those are ages when personal credit history is not especially important; the BK would come off your record years before most people take out their first mortgage (the median age of first home purchase is 42, but a mortgage in your early 30s would be easily accomplished after a student loan default). There are annoying consequences to having a BK on your record --- it would be harder (though not impossible) to get a credit card, and your first couple apartment lessors might want cosigners (though it is extremely possible to get a lease with terrible credit). The problem is that these consequences are far less onerous than shouldering student debt, which takes most people decades to repay. What's worse is, the incentive would likely be to default as quickly as possible, since that's what starts the recovery countdown. Not defaulting right after graduation would be a significant gamble on your ability to either repay or practically default later in life, when you're more exposed to the credit system. Obviously, an important part of this analysis is that student loan amounts have gotten significantly larger in the last 2 decades. Another easily-made observation is that student loans stopped being dischargeable because of widespread ruthless default, even with tuition rates less than 1/3rd what they are now.

by harryh 7y ago

This is a possible solution, but it's not simple. If you do this, the current system of student loans we have will collapse completely. Now, maybe that would be good...but it's not simple.

breck 7y ago

It is simple. Not easy, but simple. This is the solution. It works for all other industries. If I loan you money to buy a house or buy a car, without doing due diligence to that loan, the courts tell me "tough luck" if you file for bankruptcy. But if I lend you $250,000 for an arts degree, the power of the state will force you to pay me. That's insane!!!

harryh 7y ago
Yes, and home and car loans still exist because if people don't pay it back there is an asset to repossess. That's not the case with college loans. Which is why they are fundamentally different.
- breck 7y ago
  > they are fundamentally different. Perhaps it's good there are some things that are different. Some things are property. Some are not. In history there always seems to be a trend for those in power to try and enslave those not in power, by putting property laws on people. This student loan bankruptcy exception is one example. Intellectual slavery laws like copyright and patents are another.
  - tptacek 7y ago
    This is a non-sequitur response to the point 'harryh made. Regardless of the underlying moral dimension of college financing, you can't rationally extend dischargeable loans to students, because they can default and discharge the loan with minimal impact on their life. If dischargeability became the norm, most students would simply not be able to obtain loans at all. That may be a good thing, as 'harryh said. But that's not the point: the point is, at the point where you make student loans dischargeable, you might as well just concede that you're eliminating them altogether.
  - breck 7y ago
    In reply to tptacek: "at the point where you make student loans dischargeable, you might as well just concede that you're eliminating them altogether." Have you ever gone through bankruptcy? Luckily I have not, but from what I've read it's a horrible thing to go through with serious consequences to your finances that takes a minimum of 7 years to overcome. I think the cost of college would drop 10x. I went to Duke, and the gardens and pools were lovely, really, but perhaps some tables and books would have been the more appropriate use of my tuition money. I do agree the IS bit was somehwhat a non sequitor, but there is a common thread here I think when people try to put property and ownership rights on things that nature doesn't make that easy.
    - tptacek 7y ago
      I have administered and underwritten bankruptcies for others and feel like I have some direct personal experience with the process. I do not feel like the consequences of bankruptcy are sufficient to make it irrational to discharge 6 figures of college debt through the process.
      - kasey_junk 7y ago
        I would have declared bankruptcy in a heartbeat for my wife’s loans & it would have been rational. I a) make good money b) have good credit and c) don’t have financial hardships.
- imtringued 7y ago
  The asset is a person who will have to undergo a repayment plan for 7 years.
vonmoltke 7y ago
> But if I lend you $250,000 for an arts degree, the power of the state will force you to pay me. Why would the state not use the power of the state to make sure you pay back money it lent you?
- breck 7y ago
  Because it's a dumb predatory loan that should never have been made in the first place. There is a type of business for making dumb loans and using force to ensure they are paid back: the mafia. The mafias of old are nothing in size when compared to the student loan industry.
  - vonmoltke 7y ago
    So you are calling the Department of Education a mafia? The Department of Education is the "student loan industry".
    - breck 7y ago
      I think mafia is a poor word choice. At least the mafioso didn't pretend to be saints.
  - bumby 7y ago
    Discharging loans and the predatory nature of them are two different arguments. If they loans are predatory, make the loans harder to qualify for. It won't fix the predatory nature if they are easy to get rid of; if anything it will make them more predatory by likely increasing the interest rate to compensate for the increased risk to the lender.
    - breck 7y ago
      This is completely wrong. The answer is simplicity, not more complexity that would come from "make the loans harder to qualify for". > It won't fix the predatory nature if they are easy to get rid of Yes, it will. People will stop hunting for more students to go to their schools with expensive landscaping if there were no government guarantees to ensure they get paid. This is a very simple issue. Any attempts to complexify the issue I suspect are merely attempts to divert attention from the question of human rights and equality. I paid all my student loans and personally have only to lose if they change the laws, but it's the right thing to do.

libria 7y ago

Collapse? Change maybe. It means underwriters will want proof of performance, High school GPA, SAT's, and intended college major. Good grades and signing up for pre-med? Here's a year of cash, you'll get your next payout if you're on the honor roll next year. Planning on majoring in Homeopathic Nutrition Science? Denied. Sounds like it'll make people a lot more focused on ROI and studying and that strikes me as a good thing. If it cuts down on a lot of frivolous choices, it'll also reduce the overall regret from those.

tptacek 7y ago
The problem with dischargeable student loans isn't that the students won't profit from them; it's that, having obtained a dischargeable loan whose direct utility ends in their 21st year of life, the rational move for student borrowers would be to ruthlessly default. You can't repossess an education.
- breck 7y ago
  That's false. My father and mother took out student loans when they were dischargeable and they paid them off. My dad via working as a taxi driver and bouncer, because there was downward pricing pressure back then. There are severe consequences to filing for bankruptcy. That is on your record for 7 years, minimum.
  - tptacek 7y ago
    This is also a non sequitur response. Doubtless many people would pay back their loans, for personal moral reasons. But a BK on your record from ages 21-28 is not a meaningful practical deterrent for ruthless default, because those are ages when personal credit history is not especially important; the BK would come off your record years before most people take out their first mortgage (the median age of first home purchase is 42, but a mortgage in your early 30s would be easily accomplished after a student loan default). There are annoying consequences to having a BK on your record --- it would be harder (though not impossible) to get a credit card, and your first couple apartment lessors might want cosigners (though it is extremely possible to get a lease with terrible credit). The problem is that these consequences are far less onerous than shouldering student debt, which takes most people decades to repay. What's worse is, the incentive would likely be to default as quickly as possible, since that's what starts the recovery countdown. Not defaulting right after graduation would be a significant gamble on your ability to either repay or practically default later in life, when you're more exposed to the credit system. Obviously, an important part of this analysis is that student loan amounts have gotten significantly larger in the last 2 decades. Another easily-made observation is that student loans stopped being dischargeable because of widespread ruthless default, even with tuition rates less than 1/3rd what they are now.