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>The solution is simple: make student loans dischargeable in bankruptcy, just like every other kind of loan. I agree the incentives don't align well right now,

>The solution is simple: make student loans dischargeable in bankruptcy, just like every other kind of loan. I agree the incentives don't align well right now, but am curious about what corresponding policies you would implement. Right now we have policies supporting the idea of "you can start from nothing and graduate from any college with any degree". That notion is tough to maintain with a simple switch of policy. Education loans have no collateral. Even if college was only 10k/year, filing for bankruptcy right after graduation would be a rational choice for many people. If loans were dischargeable, would you include provisions such that "expected costs" must always be available as loans (similar to what we have now)? How would you ensure "adequate" access for people to receive an education and climb to the next socioeconomic level? I could see far fewer people going to college right after high school, struggling to save money in relatively low paying jobs since the modest loans they want aren't readily available.

breck 7y ago
> filing for bankruptcy right after graduation would be a rational choice for many people. It would mean 7 years of no credit, harder to get jobs, legal costs and time spent, etc., so there would be strong incentives not to. > I could see far fewer people going to college right after high school, struggling to save money in relatively low paying jobs since the modest loans they want aren't readily available. Or suddenly lots of new educational institutions would spring up, competing on price, since they wouldn't have the government enforcing their loan shark business anymore.
- froindt 7y ago
  Sure it's a mark against you, but for many people in lower earning career paths, erasing 1-2x gross salary after attending a modestly priced college is well worth it. E.g. A journalism student who earns 40k and had 40k of debt would need to pay $5,700/year, before interest, to have the loans paid off in 7 years. At 5% interest, $6,800/year. I think it'd be great to have institutions competing on price and taking steps to knock down the costs of attendance. There are also ideas around for people to pay a percentage of their earnings post-graduation, though the cynic in me says those will become just as predatory as the current lending structure. My university has built 3 dorms in the last 30 years, and all are suite style and ridiculously expensive. Despite earning little money, middle class college students want to maintain the same standard of living they grew up throughout college and first jobs. Yet another of the many challenges in the space.

breck 7y ago

> filing for bankruptcy right after graduation would be a rational choice for many people. It would mean 7 years of no credit, harder to get jobs, legal costs and time spent, etc., so there would be strong incentives not to. > I could see far fewer people going to college right after high school, struggling to save money in relatively low paying jobs since the modest loans they want aren't readily available. Or suddenly lots of new educational institutions would spring up, competing on price, since they wouldn't have the government enforcing their loan shark business anymore.

froindt 7y ago
Sure it's a mark against you, but for many people in lower earning career paths, erasing 1-2x gross salary after attending a modestly priced college is well worth it. E.g. A journalism student who earns 40k and had 40k of debt would need to pay $5,700/year, before interest, to have the loans paid off in 7 years. At 5% interest, $6,800/year. I think it'd be great to have institutions competing on price and taking steps to knock down the costs of attendance. There are also ideas around for people to pay a percentage of their earnings post-graduation, though the cynic in me says those will become just as predatory as the current lending structure. My university has built 3 dorms in the last 30 years, and all are suite style and ridiculously expensive. Despite earning little money, middle class college students want to maintain the same standard of living they grew up throughout college and first jobs. Yet another of the many challenges in the space.