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There is also a free and fair option, just let people go bancrupt on their student loans. We've already seen politicians bailing out loans to help their reach f

There is also a free and fair option, just let people go bancrupt on their student loans. We've already seen politicians bailing out loans to help their reach friends, but saying it's all for the people. Don't let history repeat itself

nerfhammer 7y ago
student loans are typically not dischargeable in bankruptcy
- Retric 7y ago
  That’s based on laws that can change at any time. IMO, people should be able to discharge them in bankruptcy around 15 to 20 years after graduation. This is in line with the “total and permanent disability” escape method which has minimal impact on the larger student loan market. https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/disability-discharge https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancell...
  - bradleyjg 7y ago
    There isn't much of a student loan market. The overwhelming majority of student loans are made by the government with no underwriting and the rates set arbitrarily.
    - Retric 7y ago
      The market is on the other end. Loans are constantly resold after being issued, which is why people regularly get new student loan processors.
      - bradleyjg 7y ago
        I don’t believe that’s the case. My understanding is that the government holds on to the loans but hires servicers to interact with borrowers. These servicing contracts are subject to competitive bids and that’s why people regularly get new processors.
        Retric 7y ago
        It’s true loan servicing does not always change when loans are sold they are independent. In 2010 the policy changed, however plenty of older federally backed student loans are still being sold and resold. https://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp https://www.investopedia.com/articles/personal-finance/08121...
      - rayiner 7y ago
        Loans are not resold. They stay in the government’s books. The loan processors are just contracted to provide processing services. https://studentaid.ed.gov/sa/repay-loans/understand/servicers#transfer https://studentaid.ed.gov/sa/repay-loans/understand/servicer... > In some cases, ED needs to transfer loans from one servicer to another servicer on the federal loan servicer team. ED transfers loans as part of its efforts to ensure that all borrowers are provided with customer service and repayment support. If ED needs to transfer your federal student loans from your assigned servicer to another servicer, your loans will still be owned by ED. The “transfer” to another servicer on ED’s federal loan servicer team simply means that a new servicer will provide the support you need to fully repay your loans.
        Retric 7y ago
        https://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp https://www.investopedia.com/articles/personal-finance/08121... There was a change as a rider to the 2010 affordable care act. But, older federally backed student loans are sold and resold.
        rayiner 7y ago
        Pre-Obama loans represent a small fraction of all student loan debt.
        Retric 7y ago
        I think it’s still on the order of 3-400 Billion or so, but I am not sure of the numbers. Either way loans go back 4+ years before graduation and people take 15+ years to pay them back. So I assume quite a few of these loans are out there even if the remaining balance is not that huge.
tptacek 7y ago
The problem with allowing people to BK their student loans is that it creates a perverse incentive. If you BK over a car, it gets repossessed. But nobody can take your education back. A BK at 22-23 years of age is not a strong deterrent; you'll still be able to buy a house in your early 30s, which is when a lot of people plan to do that anyways. You can make loans dischargeable, but doing so will drastically change who loans are made available to in the first place.
- 5822130027 7y ago
  BK still hits your credit score and employers might not hire you knowing you BKed on your obligations. BK's on your undergrad also would make it harder to take out loans for post graduate courses.
- kasey_junk 7y ago
  Why could theoretically repossess the certification though. That is make it illegal to report you have a degree you bk’d on and make the colleges respond negatively when asked about your credentials. I suspect that leads to outcomes that are uncomfortable for universities though.
  - brians 7y ago
    Consider if we required colleges to guarantee student loans.
- dsfyu404ed 7y ago
  For a long time people were allowed to discharge student loans in bankruptcy. Most people didn't because costs were reasonable and it hit your credit score. If you suddenly made that allowed again there's be a bunch of initial bankruptcies because of pent up demand and the market racing toward equilibrium but it would almost certainly revert to somewhere near the level it was originally.
  - tptacek 7y ago
    Two responses to this (we're recapping a previous thread at this point): 1. Tuitions were much lower when loans first started to be non-dischargeable. 2. The provision to exempt them from bankruptcy was based on concerns that people were already ruthlessly defaulting on them. As this article notes: the current disposition of college financing is part of a package of policy changes geared at drastically expanding access to college, and that package is generally viewed as being successful on its own terms.

nerfhammer 7y ago

student loans are typically not dischargeable in bankruptcy

Retric 7y ago
That’s based on laws that can change at any time. IMO, people should be able to discharge them in bankruptcy around 15 to 20 years after graduation. This is in line with the “total and permanent disability” escape method which has minimal impact on the larger student loan market. https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/disability-discharge https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancell...
- bradleyjg 7y ago
  There isn't much of a student loan market. The overwhelming majority of student loans are made by the government with no underwriting and the rates set arbitrarily.
  - Retric 7y ago
    The market is on the other end. Loans are constantly resold after being issued, which is why people regularly get new student loan processors.
    - bradleyjg 7y ago
      I don’t believe that’s the case. My understanding is that the government holds on to the loans but hires servicers to interact with borrowers. These servicing contracts are subject to competitive bids and that’s why people regularly get new processors.
      - Retric 7y ago
        It’s true loan servicing does not always change when loans are sold they are independent. In 2010 the policy changed, however plenty of older federally backed student loans are still being sold and resold. https://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp https://www.investopedia.com/articles/personal-finance/08121...
    - rayiner 7y ago
      Loans are not resold. They stay in the government’s books. The loan processors are just contracted to provide processing services. https://studentaid.ed.gov/sa/repay-loans/understand/servicers#transfer https://studentaid.ed.gov/sa/repay-loans/understand/servicer... > In some cases, ED needs to transfer loans from one servicer to another servicer on the federal loan servicer team. ED transfers loans as part of its efforts to ensure that all borrowers are provided with customer service and repayment support. If ED needs to transfer your federal student loans from your assigned servicer to another servicer, your loans will still be owned by ED. The “transfer” to another servicer on ED’s federal loan servicer team simply means that a new servicer will provide the support you need to fully repay your loans.
      - Retric 7y ago
        https://www.investopedia.com/articles/personal-finance/081216/who-actually-owns-student-loan-debt.asp https://www.investopedia.com/articles/personal-finance/08121... There was a change as a rider to the 2010 affordable care act. But, older federally backed student loans are sold and resold.
        rayiner 7y ago
        Pre-Obama loans represent a small fraction of all student loan debt.
        Retric 7y ago
        I think it’s still on the order of 3-400 Billion or so, but I am not sure of the numbers. Either way loans go back 4+ years before graduation and people take 15+ years to pay them back. So I assume quite a few of these loans are out there even if the remaining balance is not that huge.

tptacek 7y ago

The problem with allowing people to BK their student loans is that it creates a perverse incentive. If you BK over a car, it gets repossessed. But nobody can take your education back. A BK at 22-23 years of age is not a strong deterrent; you'll still be able to buy a house in your early 30s, which is when a lot of people plan to do that anyways. You can make loans dischargeable, but doing so will drastically change who loans are made available to in the first place.

5822130027 7y ago
BK still hits your credit score and employers might not hire you knowing you BKed on your obligations. BK's on your undergrad also would make it harder to take out loans for post graduate courses.
kasey_junk 7y ago
Why could theoretically repossess the certification though. That is make it illegal to report you have a degree you bk’d on and make the colleges respond negatively when asked about your credentials. I suspect that leads to outcomes that are uncomfortable for universities though.
- brians 7y ago
  Consider if we required colleges to guarantee student loans.
dsfyu404ed 7y ago
For a long time people were allowed to discharge student loans in bankruptcy. Most people didn't because costs were reasonable and it hit your credit score. If you suddenly made that allowed again there's be a bunch of initial bankruptcies because of pent up demand and the market racing toward equilibrium but it would almost certainly revert to somewhere near the level it was originally.
- tptacek 7y ago
  Two responses to this (we're recapping a previous thread at this point): 1. Tuitions were much lower when loans first started to be non-dischargeable. 2. The provision to exempt them from bankruptcy was based on concerns that people were already ruthlessly defaulting on them. As this article notes: the current disposition of college financing is part of a package of policy changes geared at drastically expanding access to college, and that package is generally viewed as being successful on its own terms.