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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 fo

by 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.
    - breck 7y ago
      > 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. Four decades ago student loans started becoming undischargeable (1) and the price of college has gone up over 6x, and I have never seen evidence that prior to that there was "widespread ruthless default", as you stated. Not to mention, times have changed and with the Internet and it would be much harder today than back then to hide a previous bankruptcy. 1.https://info.legalzoom.com/did-laws-effect-preventing-bankruptcy-student-loans-26426.html https://info.legalzoom.com/did-laws-effect-preventing-bankru... College should cost 10x less, easily. If I graduated with $5K in debt instead of $50K (or to take the national current average of $2,400 instead of $24,000), there would be no need to even consider bankruptcy.
      - tptacek 7y ago
        That college should cost less isn't the debate we're having. You're unlikely to find anyone here to disagree with about that. For this thread, college costs what it costs, and it costs enough for a deliberate bankruptcy (the technical term for that, by the way, is "ruthless default") to be a practical option. We're referring to the same time period, by the way. Have you looked for evidence of defaults in the late 60s and early 70s? Where did you look? During the housing crisis, a material number of people defaulted ruthlessly on their homes. There was even slang for it --- "jingle mail", for people mailing their keys back to their lenders. That is, defaults were a problem even when lenders actually had a valuable asset to seize. Later A more tenable suggestion would be to restore the status quo ante of the 98 Bankruptcy Reform act, making loans dischargeable in bankruptcy after 7 years. It'd be interesting to go look for the rationale for the '98 act's indefinite non-dischargeability provision. This is an interesting paper, one you'll probably like as it's skeptical of arguments against non-dischargeability, that goes into some detail about what other countries do (they do address what the paper calls "opportunistic" default): https://repository.law.umich.edu/cgi/viewcontent.cgi?article=1709&context=articles https://repository.law.umich.edu/cgi/viewcontent.cgi?article...
- imtringued 7y ago
  There is no rationale to ruthlessly default. It only makes sense if you cannot pay your student loans back, which is the entire purpose of bankruptcy. If the bank lends money to people that can't pay the student loan back then it's the bank's problem. Bankruptcy isn't a free get out of jail card. You're not going to find many people who study a very expensive degree like medicine only to then work at McDonalds for 7 years so they can avoid paying the full sum back.
harryh 7y ago
No, none of that will work. Great students taking majors with high earning potential can still declare bankruptcy the day they graduate and discharge the debt with few consequences.
- breck 7y ago
  Have you declared bankruptcy before? I have not, but from what I read there are very severe consequences. (Okay okay, our present president being the exception. But if you are not born rich there are bad consequences)
  - harryh 7y ago
    You'll have trouble getting a home loan for 7 years. And maybe a bit of trouble getting a car loan or a credit card for a while. But these things aren't a big deal for most 21 year olds. Certainly they are smaller considerations compared to paying back a high 5 or 6 figure debt.
    - juliusmusseau 7y ago
      You also probably can't be a director of a private or public company until the bankruptcy is discharged (2 years?). If student loans became dischargeable through bankruptcy, I imagine that could put pressure on bankruptcy laws in undesirable ways (e.g., the current 7 year period might get extended to 20 years).

by libria 7y ago

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.
  - breck 7y ago
    > 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. Four decades ago student loans started becoming undischargeable (1) and the price of college has gone up over 6x, and I have never seen evidence that prior to that there was "widespread ruthless default", as you stated. Not to mention, times have changed and with the Internet and it would be much harder today than back then to hide a previous bankruptcy. 1.https://info.legalzoom.com/did-laws-effect-preventing-bankruptcy-student-loans-26426.html https://info.legalzoom.com/did-laws-effect-preventing-bankru... College should cost 10x less, easily. If I graduated with $5K in debt instead of $50K (or to take the national current average of $2,400 instead of $24,000), there would be no need to even consider bankruptcy.
    - tptacek 7y ago
      That college should cost less isn't the debate we're having. You're unlikely to find anyone here to disagree with about that. For this thread, college costs what it costs, and it costs enough for a deliberate bankruptcy (the technical term for that, by the way, is "ruthless default") to be a practical option. We're referring to the same time period, by the way. Have you looked for evidence of defaults in the late 60s and early 70s? Where did you look? During the housing crisis, a material number of people defaulted ruthlessly on their homes. There was even slang for it --- "jingle mail", for people mailing their keys back to their lenders. That is, defaults were a problem even when lenders actually had a valuable asset to seize. Later A more tenable suggestion would be to restore the status quo ante of the 98 Bankruptcy Reform act, making loans dischargeable in bankruptcy after 7 years. It'd be interesting to go look for the rationale for the '98 act's indefinite non-dischargeability provision. This is an interesting paper, one you'll probably like as it's skeptical of arguments against non-dischargeability, that goes into some detail about what other countries do (they do address what the paper calls "opportunistic" default): https://repository.law.umich.edu/cgi/viewcontent.cgi?article=1709&context=articles https://repository.law.umich.edu/cgi/viewcontent.cgi?article...
imtringued 7y ago
There is no rationale to ruthlessly default. It only makes sense if you cannot pay your student loans back, which is the entire purpose of bankruptcy. If the bank lends money to people that can't pay the student loan back then it's the bank's problem. Bankruptcy isn't a free get out of jail card. You're not going to find many people who study a very expensive degree like medicine only to then work at McDonalds for 7 years so they can avoid paying the full sum back.

harryh 7y ago

No, none of that will work. Great students taking majors with high earning potential can still declare bankruptcy the day they graduate and discharge the debt with few consequences.

breck 7y ago
Have you declared bankruptcy before? I have not, but from what I read there are very severe consequences. (Okay okay, our present president being the exception. But if you are not born rich there are bad consequences)
- harryh 7y ago
  You'll have trouble getting a home loan for 7 years. And maybe a bit of trouble getting a car loan or a credit card for a while. But these things aren't a big deal for most 21 year olds. Certainly they are smaller considerations compared to paying back a high 5 or 6 figure debt.
  - juliusmusseau 7y ago
    You also probably can't be a director of a private or public company until the bankruptcy is discharged (2 years?). If student loans became dischargeable through bankruptcy, I imagine that could put pressure on bankruptcy laws in undesirable ways (e.g., the current 7 year period might get extended to 20 years).