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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. I
by 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 agoTwo 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.
- carlmr 7y agoAllowing for bankruptcy discharge would lead to less predatory lending (since all of a sudden the banks would have an interest in checking credit-worthiness), and that in turn would lead to universities losing many students if they don't lower tuition costs to reasonable levels again. Not allowing defaulting on student loans was a huge driver in why tuitions are so high without any added value from the universities.
- rayiner 7y agoThe only real lender of significance in the market is the federal government, which makes loans without regard to credit worthiness. That policy is not subject to change for policy and political reasons. What credit check is an 18 year old going to pass for a large unsecured loan? Especially 18 year olds from disenfranchised groups?