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The non-dischargeability of student loan debt is the linchpin of the higher education bubble. Let's play out a causal chain: 1. If it becomes possible to get

The non-dischargeability of student loan debt is the linchpin of the higher education bubble. Let's play out a causal chain: 1. If it becomes possible to get out of student debt through bankruptcy, then there must be additional collateral posted by the debtors. 2. This will cause fewer loans to be made, which will reduce the available pool of money sloshing into higher ed. 3. Enrollment and revenues will fall, forcing universities to: a. Fight for some other form of government-ensured revenue stream (beyond the funds that state schools already receive). Get the popcorn out for this political rhetoric. b. Reduce scope and conserve the more limited funds coming in the door. This probably starts with eliminating the endless program offices and initiatives that serve to swell the ranks of non-teaching staff. c. Compete on price and return on investment by improving quality and employment rates of graduates.

allovernow 7y ago
D. Fire bloated administration and maybe get rid of tenured professors who aren't pulling their weight.
- rosybox 7y ago
  How do you determine which tenured professors aren't pulling their weight? How do you pull your weight as a professor of some non-employable field of learning? Higher learning isn't vocational training, it's about creating an educated workforce.
  - beatgammit 7y ago
    Well, I think that's pretty easy: - student reviews - consistency with publishing - faculty peer review If a professor isn't liked by the students and is lagging in publishing, there's a good chance they're mostly dead weight. Likewise, if their peers consider the professor's research worthless and teaching ineffective, they could actually be harmful for the University. In essence, does the professor still fit the reasons they were granted tenure? That being said, I don't think that's the right place to focus. I heard that there's a ton of overhead that could be trimmed, such as administration overhead (probably dealing with financials). It would be interesting to compare private and public schools to see what their costs look like and see if maybe we can simplify things to cut costs.
    - StillBored 7y ago
      Pubic vs Private? I'm not sure what your trying to say here, there is such a broad range on both sides with a lot of elite private schools having the most expensive tuitions. https://www.businessinsider.com/most-expensive-colleges-in-the-us-2017-2 https://www.businessinsider.com/most-expensive-colleges-in-t... I think if you really want to look at how to lower costs you look at how the community colleges do it. Rick Perry (for all that is wrong with that guy) was spot on, when he basically said that it shouldn't really cost much more per year for a 4 year college as it does at a community college. Thats really the key to free college. When people look at Sanders plans, the conveniently forget that we manage to educate these same kids for 13 years without bankrupting the country, adding another 4 years should be a small increase, not a budget busting problem. https://www.governing.com/gov-data/education-data/state-education-spending-per-pupil-data.html https://www.governing.com/gov-data/education-data/state-educ... Which puts the average at $11k a year (about 1/2 to a 1/3 is overhead outside of first line teachers salaries).
kobiguru 7y ago
I would like to upvote this comment at least a few thousand times.
ChuckMcM 7y ago
I would like to believe that it would bring market pressure to bear on Higher Ed but the cynic in me is not too hopeful. I agree though that if this ruling holds on appeal and becomes the law of the land then we're going to see a lot of debt written off.
zzleeper 7y ago
Additional collateral? There's not even base collateral, as the whole thing is guaranteed by the govt.
throwaway17_17 7y ago
As for reducing costs, maybe, just maybe, “educational” institutions could not have the highest paid employees of said institution (and in most cases the highest paid public employee in the entire state) be a freakin football coach (or basketball if you are in Kentucky)!
- JackFr 7y ago
  As a fan of college basketball, I have no real love of John Calipari, but I assure you he is a profit center for the school. UK basketball takes in around $45 million in revenue and dies around $20 million in profit. Calipari’s ~$9 million a year may seem high for a state employee, but his performance is easily measurable and comparable to others in his field.
  - Wildgoose 7y ago
    That was confusing. I iniially read "UK" as "United Kingdom" which would be the normal reading but I presume you actually meant University of Kentucky?
    - JackFr 7y ago
      Of course UK means University of Kentucky. It has to, cause KU is Kansas. :-)
  - rhizome 7y ago
    If you want professional pay, go work for a professional team. If you work for a school, you work for the school, not yourself. Pay the coaches the same as teachers, they don't have any right to revenues or profit sharing.
- dalanmiller 7y ago
  As a graduate of UW in Seattle. I wish this weren't the case just as much as you but @JackFr makes the correct point that sports are largely profit centers for universities.
pcarolan 7y ago
You’re assuming market forces will kick in. Most student loans are made by the federal government which can decide to secure these loans or not. Today, they are not underwritten and there’s no reason to think they would be if bankruptcy is enabled. They could just view it as a subsidy which is likely the most politically popular and easy thing to do and push the costs onto taxpayers or raise the standard interest rate for everyone.
- sandoooo 7y ago
  What happened to non-bankruptable debt before? My guess is that the vast majority of them just sat in limbo with no repayment and are effectively just as worthless as defaulted debt. Really this just cleans up the books and force people to have a more realistic assessment of what the debt being held is actually worth, which is always a plus.
  - bandrami 7y ago
    The 2008 crash had as a proximate cause people finally admitting that stuff that had always been worthless was in fact worthless.
- Vinnl 7y ago
  We have subsidies in the Netherlands, but they're combined with a cap on tuition rates. (Although part of the tuition needs to be paid by students, for which they can get underwritten loans from the government.)
Consultant32452 7y ago
Forget discharging the debt. Make the universities pay it back. Go after the endowments. The universities committed widespread fraud against an entire generation.
- bandrami 7y ago
  Except they didn't, even remotely. A college degree is still an income premium, even after the debt is factored in. And I'm really iffy on the idea that the poorer two thirds of the country should have to subsidize the debt repayment of the richer third of the country
  - dgoldstein0 7y ago
    this assumes that college graduates can get better jobs because of their degrees. This is not true for everyone. And is largely false for college dropouts, who can end up with a large fraction of the debt from trying to get a degree, and none of the value of the degree. It's really unfortunate that we changed from an attitude that education is a public good that benefits everyone - e.g. employers getting access to a more educated workforce, the economy being better for everyone, etc - to it being an investment in individual people, that those same people are then expected to pay for up front.
    - prirun 7y ago
      To me, the biggest problem is that universities have hired huge administrative staffs that are largely unnecessary, and students are living in posh dorm apartments instead of the concrete block buildings back when I went to college. If student loans weren't so easily obtainable, universities would have to cut their administrative staff and become more efficient. As long as the money is flowing in, they have no incentive to do that.
  - deleted 7y ago
    [deleted]
  - Consultant32452 7y ago
    Two things can be true at once. It is true that having a degree allows workers to demand a wage premium. It's also true that University degrees have seen healthcare-like price inflation without a correlated wage inflation for degree holding workers. There are many causes of this, but two big ones have to do with rapid expansion of administration and pretending like the tenure system can sustain an exponential growth pattern which it was able to do up until about the 1980s. The latter trapped a lot of young people, particular in the science industries in low wage "grad student" positions which are never going to lead anywhere from a career perspective. The fraud is that they told the middle class this was their key to financial success, or at least financial security. And yet we're talking about a massive scale debt bubble that is holding back an entire generation of young workers. It was a lie. I believe they knew it was going to be a lie. But they also "knew" the taxpayer would be on the hook, so they didn't care. That's why I think the taxpayer should shove it back on the universities by holding them accountable for selling students a lie.
newguy1234 7y ago
Another unintended consequence I could see is this could be a lead up to a debt crisis by the US government. Right now we are running 1 trillion budget deficits. If people can start discharging student loans then that will be a loss of revenue for the federal government so unless there is an equal amount of budget cuts then this will most likely result in the budget deficit increasing. If creditors get worried it could spook the debt markets. US debt won't be viewed as "safest" in the world....then starts the chain reaction series of events. I also like to think back to what Peter Thiel says about higher education. It could be something similar to the 2008 housing crisis....where people were borrowing money to buy overvalued housing. Higher education to a certain extent could be people are borrowing large sums of money to get degrees that don't hold much value in the market place....so it becomes impossible for these people to ever repay the loans....overvalued assets and leverage spells bubble. I know people who borrowed 100k+ to get a degree in sociology only to realize after the fact that sociology is a worthless major. They then went back to spend another 100k to get a degree in nursing to finally become gainfully employed. https://www.youtube.com/watch?v=crAHDXdBCXg https://www.youtube.com/watch?v=crAHDXdBCXg
- simonh 7y ago
  >I know people who borrowed 100k+ to get a degree in sociology only to realize after the fact that sociology is a worthless major. And that decision is made when they are legally children, and they're bound to it for the rest of their lives.
  - blaser-waffle 7y ago
    You're not usually obligated to choose a major until you're 2+ years in. By then you're probably 20 years old. Hell, most Uni students are 18, which means they're a legal adult. Most of them have been driving cars and fucking for years before then -- why wouldn't they be able to make choices about a career?
    - Kye 7y ago
      They make equally misinformed decisions about sex and driving.
evandijk70 7y ago
You're forgetting the most likely option: d. Cut cost by reducing the number of teachers, lectures, computers/lab meterials.
gnicholas 7y ago
> 1. If it becomes possible to get out of student debt through bankruptcy, then there must be additional collateral posted by the debtors. I don't think we'd see an increase in collateral as an increase in interest rates, to account for the risk of non-collection. This would likely result in STEM and highly-qualified students lobbying to have interest rates take into account declared major or GPA or some such thing. But in general, we would still see your #2 as a consequence.
- oceanplexian 7y ago
  > This would likely result in STEM and highly-qualified students lobbying to have interest rates take into account declared major or GPA or some such thing. I think you're assuming that lenders care what kind of degree you have. Someone who takes a few gap years to establish savings and credit will end up with better interests rates. As it should be. Kids should rack up a few years in the real world before they drop 80-200k and ruin their lives with debt.
  - pjc50 7y ago
    If you want to be a software engineer in the high-paid zone, and are forced to delay a year, how much does that cost you in earnings?
systemtest 7y ago
From a Dutch point of view, would you save money by mimicking our University system? So no sports, no stadiums, no (or less) scholarships, privatise fraternities, privatise dorms, privatise cafeteria, privatise extracurricular activities, six-figure cap on income for all staff. We have a projected average student debt of only €21,000 which I believe is less than US students.
- garmaine 7y ago
  Fraternities are not publicly funded, no?
  - systemtest 7y ago
    My knowledge of US fraternities is limited to what is portrayed in Hollywood movies. Are they not funded by the associated University? What about the housing they have? Apologies if my view is limited.
    - dragonwriter 7y ago
      > My knowledge of US fraternities is limited to what is portrayed in Hollywood movies. Are they not funded by the associated University? Generally not, they are funded by members and alums.
    - garmaine 7y ago
      Privately funded, privately owned AFAIK. The fraternities are typically off campus for that reason.
  - mcv 7y ago
    Actually, for the largest fraternities/student unions in Netherland, the board often gets paid by the university. Not the smaller ones, though (and it's the larger ones that cause all of the problems).
  - samvher 7y ago
    They sometimes get some support from universities but generally they need to fund themselves or use donations from alumni.
bogomipz 7y ago
>"1. If it becomes possible to get out of student debt through bankruptcy, then there must be additional collateral posted by the debtors." Could you elaborate on this? Would that collateral just be a higher cash to loan ratio on the part of students or are you referring to something else?
- clarkmoody 7y ago
  Parents could put up a portion as cash. They could also stake the house or car on it -- some tangible property to repossess, just like other loans. Since students basically have zero assets, another commenter pointed out, the more likely scenario is simply higher interest rates due to the increased risk to the lender.
banannaise 7y ago
d. Offer a degree in return for a percentage of future income rather than a fixed payment. "Graduates of Outer Bumfuck University average an annual income of $60,000! We offer tuition at Outer Bumfuck for your choice of: - $10,000 per semester - 2% of your income for 10 years, per semester (deferred until your first full-time employment)" There are obvious holes in this plan (e.g. a short-term cash shortage, the potential for abuse by students), but it seems fundamentally sound. It also provides counter-pressure to inflating the job prospects of graduates, since the university comes up short in cashflow if their stated numbers are wrong. This system also provides a sort of insurance plan for college students. You'll never be stuck with loan payments exceeding your income, since your total cost is based on your income!
- SQueeeeeL 7y ago
  This feels like such a gameable/difficult system. Think of how many people at the average college can't even complete regular trainings. There's no incentive to pay, actually there's a disincentive, you have to give your salary to an office, something most people are very sensitive about. Currently, if you don't pay for college, they just stop you from enrolling in more classes. You don't enroll in classes, you don't get a degree. Very clear cause and effect. In a future income system, the student doesn't pay their fee, and maybe the school files a collection action on them, if they can track them down...
- ZainRiz 7y ago
  This is the system Lambda School is trying to implement for CS degrees, except you study from home, not form Bumfuck :)
HNBRN 7y ago
In France you could probably start a revolution in suggesting that the students should pay for university. https://www.study.eu/article/tuition-fees-in-france https://www.study.eu/article/tuition-fees-in-france

allovernow 7y ago

D. Fire bloated administration and maybe get rid of tenured professors who aren't pulling their weight.

rosybox 7y ago
How do you determine which tenured professors aren't pulling their weight? How do you pull your weight as a professor of some non-employable field of learning? Higher learning isn't vocational training, it's about creating an educated workforce.
- beatgammit 7y ago
  Well, I think that's pretty easy: - student reviews - consistency with publishing - faculty peer review If a professor isn't liked by the students and is lagging in publishing, there's a good chance they're mostly dead weight. Likewise, if their peers consider the professor's research worthless and teaching ineffective, they could actually be harmful for the University. In essence, does the professor still fit the reasons they were granted tenure? That being said, I don't think that's the right place to focus. I heard that there's a ton of overhead that could be trimmed, such as administration overhead (probably dealing with financials). It would be interesting to compare private and public schools to see what their costs look like and see if maybe we can simplify things to cut costs.
  - StillBored 7y ago
    Pubic vs Private? I'm not sure what your trying to say here, there is such a broad range on both sides with a lot of elite private schools having the most expensive tuitions. https://www.businessinsider.com/most-expensive-colleges-in-the-us-2017-2 https://www.businessinsider.com/most-expensive-colleges-in-t... I think if you really want to look at how to lower costs you look at how the community colleges do it. Rick Perry (for all that is wrong with that guy) was spot on, when he basically said that it shouldn't really cost much more per year for a 4 year college as it does at a community college. Thats really the key to free college. When people look at Sanders plans, the conveniently forget that we manage to educate these same kids for 13 years without bankrupting the country, adding another 4 years should be a small increase, not a budget busting problem. https://www.governing.com/gov-data/education-data/state-education-spending-per-pupil-data.html https://www.governing.com/gov-data/education-data/state-educ... Which puts the average at $11k a year (about 1/2 to a 1/3 is overhead outside of first line teachers salaries).

kobiguru 7y ago

I would like to upvote this comment at least a few thousand times.

ChuckMcM 7y ago

I would like to believe that it would bring market pressure to bear on Higher Ed but the cynic in me is not too hopeful. I agree though that if this ruling holds on appeal and becomes the law of the land then we're going to see a lot of debt written off.

zzleeper 7y ago

Additional collateral? There's not even base collateral, as the whole thing is guaranteed by the govt.

throwaway17_17 7y ago

As for reducing costs, maybe, just maybe, “educational” institutions could not have the highest paid employees of said institution (and in most cases the highest paid public employee in the entire state) be a freakin football coach (or basketball if you are in Kentucky)!

JackFr 7y ago
As a fan of college basketball, I have no real love of John Calipari, but I assure you he is a profit center for the school. UK basketball takes in around $45 million in revenue and dies around $20 million in profit. Calipari’s ~$9 million a year may seem high for a state employee, but his performance is easily measurable and comparable to others in his field.
- Wildgoose 7y ago
  That was confusing. I iniially read "UK" as "United Kingdom" which would be the normal reading but I presume you actually meant University of Kentucky?
  - JackFr 7y ago
    Of course UK means University of Kentucky. It has to, cause KU is Kansas. :-)
- rhizome 7y ago
  If you want professional pay, go work for a professional team. If you work for a school, you work for the school, not yourself. Pay the coaches the same as teachers, they don't have any right to revenues or profit sharing.
dalanmiller 7y ago
As a graduate of UW in Seattle. I wish this weren't the case just as much as you but @JackFr makes the correct point that sports are largely profit centers for universities.

pcarolan 7y ago

You’re assuming market forces will kick in. Most student loans are made by the federal government which can decide to secure these loans or not. Today, they are not underwritten and there’s no reason to think they would be if bankruptcy is enabled. They could just view it as a subsidy which is likely the most politically popular and easy thing to do and push the costs onto taxpayers or raise the standard interest rate for everyone.

sandoooo 7y ago
What happened to non-bankruptable debt before? My guess is that the vast majority of them just sat in limbo with no repayment and are effectively just as worthless as defaulted debt. Really this just cleans up the books and force people to have a more realistic assessment of what the debt being held is actually worth, which is always a plus.
- bandrami 7y ago
  The 2008 crash had as a proximate cause people finally admitting that stuff that had always been worthless was in fact worthless.
Vinnl 7y ago
We have subsidies in the Netherlands, but they're combined with a cap on tuition rates. (Although part of the tuition needs to be paid by students, for which they can get underwritten loans from the government.)

Consultant32452 7y ago

Forget discharging the debt. Make the universities pay it back. Go after the endowments. The universities committed widespread fraud against an entire generation.

bandrami 7y ago
Except they didn't, even remotely. A college degree is still an income premium, even after the debt is factored in. And I'm really iffy on the idea that the poorer two thirds of the country should have to subsidize the debt repayment of the richer third of the country
- dgoldstein0 7y ago
  this assumes that college graduates can get better jobs because of their degrees. This is not true for everyone. And is largely false for college dropouts, who can end up with a large fraction of the debt from trying to get a degree, and none of the value of the degree. It's really unfortunate that we changed from an attitude that education is a public good that benefits everyone - e.g. employers getting access to a more educated workforce, the economy being better for everyone, etc - to it being an investment in individual people, that those same people are then expected to pay for up front.
  - prirun 7y ago
    To me, the biggest problem is that universities have hired huge administrative staffs that are largely unnecessary, and students are living in posh dorm apartments instead of the concrete block buildings back when I went to college. If student loans weren't so easily obtainable, universities would have to cut their administrative staff and become more efficient. As long as the money is flowing in, they have no incentive to do that.
- deleted 7y ago
  [deleted]
- Consultant32452 7y ago
  Two things can be true at once. It is true that having a degree allows workers to demand a wage premium. It's also true that University degrees have seen healthcare-like price inflation without a correlated wage inflation for degree holding workers. There are many causes of this, but two big ones have to do with rapid expansion of administration and pretending like the tenure system can sustain an exponential growth pattern which it was able to do up until about the 1980s. The latter trapped a lot of young people, particular in the science industries in low wage "grad student" positions which are never going to lead anywhere from a career perspective. The fraud is that they told the middle class this was their key to financial success, or at least financial security. And yet we're talking about a massive scale debt bubble that is holding back an entire generation of young workers. It was a lie. I believe they knew it was going to be a lie. But they also "knew" the taxpayer would be on the hook, so they didn't care. That's why I think the taxpayer should shove it back on the universities by holding them accountable for selling students a lie.

newguy1234 7y ago

Another unintended consequence I could see is this could be a lead up to a debt crisis by the US government. Right now we are running 1 trillion budget deficits. If people can start discharging student loans then that will be a loss of revenue for the federal government so unless there is an equal amount of budget cuts then this will most likely result in the budget deficit increasing. If creditors get worried it could spook the debt markets. US debt won't be viewed as "safest" in the world....then starts the chain reaction series of events. I also like to think back to what Peter Thiel says about higher education. It could be something similar to the 2008 housing crisis....where people were borrowing money to buy overvalued housing. Higher education to a certain extent could be people are borrowing large sums of money to get degrees that don't hold much value in the market place....so it becomes impossible for these people to ever repay the loans....overvalued assets and leverage spells bubble. I know people who borrowed 100k+ to get a degree in sociology only to realize after the fact that sociology is a worthless major. They then went back to spend another 100k to get a degree in nursing to finally become gainfully employed. https://www.youtube.com/watch?v=crAHDXdBCXg https://www.youtube.com/watch?v=crAHDXdBCXg

simonh 7y ago
>I know people who borrowed 100k+ to get a degree in sociology only to realize after the fact that sociology is a worthless major. And that decision is made when they are legally children, and they're bound to it for the rest of their lives.
- blaser-waffle 7y ago
  You're not usually obligated to choose a major until you're 2+ years in. By then you're probably 20 years old. Hell, most Uni students are 18, which means they're a legal adult. Most of them have been driving cars and fucking for years before then -- why wouldn't they be able to make choices about a career?
  - Kye 7y ago
    They make equally misinformed decisions about sex and driving.

evandijk70 7y ago

You're forgetting the most likely option: d. Cut cost by reducing the number of teachers, lectures, computers/lab meterials.

gnicholas 7y ago

> 1. If it becomes possible to get out of student debt through bankruptcy, then there must be additional collateral posted by the debtors. I don't think we'd see an increase in collateral as an increase in interest rates, to account for the risk of non-collection. This would likely result in STEM and highly-qualified students lobbying to have interest rates take into account declared major or GPA or some such thing. But in general, we would still see your #2 as a consequence.

oceanplexian 7y ago
> This would likely result in STEM and highly-qualified students lobbying to have interest rates take into account declared major or GPA or some such thing. I think you're assuming that lenders care what kind of degree you have. Someone who takes a few gap years to establish savings and credit will end up with better interests rates. As it should be. Kids should rack up a few years in the real world before they drop 80-200k and ruin their lives with debt.
- pjc50 7y ago
  If you want to be a software engineer in the high-paid zone, and are forced to delay a year, how much does that cost you in earnings?

systemtest 7y ago

From a Dutch point of view, would you save money by mimicking our University system? So no sports, no stadiums, no (or less) scholarships, privatise fraternities, privatise dorms, privatise cafeteria, privatise extracurricular activities, six-figure cap on income for all staff. We have a projected average student debt of only €21,000 which I believe is less than US students.

garmaine 7y ago
Fraternities are not publicly funded, no?
- systemtest 7y ago
  My knowledge of US fraternities is limited to what is portrayed in Hollywood movies. Are they not funded by the associated University? What about the housing they have? Apologies if my view is limited.
  - dragonwriter 7y ago
    > My knowledge of US fraternities is limited to what is portrayed in Hollywood movies. Are they not funded by the associated University? Generally not, they are funded by members and alums.
  - garmaine 7y ago
    Privately funded, privately owned AFAIK. The fraternities are typically off campus for that reason.
- mcv 7y ago
  Actually, for the largest fraternities/student unions in Netherland, the board often gets paid by the university. Not the smaller ones, though (and it's the larger ones that cause all of the problems).
- samvher 7y ago
  They sometimes get some support from universities but generally they need to fund themselves or use donations from alumni.

bogomipz 7y ago

>"1. If it becomes possible to get out of student debt through bankruptcy, then there must be additional collateral posted by the debtors." Could you elaborate on this? Would that collateral just be a higher cash to loan ratio on the part of students or are you referring to something else?

clarkmoody 7y ago
Parents could put up a portion as cash. They could also stake the house or car on it -- some tangible property to repossess, just like other loans. Since students basically have zero assets, another commenter pointed out, the more likely scenario is simply higher interest rates due to the increased risk to the lender.

banannaise 7y ago

d. Offer a degree in return for a percentage of future income rather than a fixed payment. "Graduates of Outer Bumfuck University average an annual income of $60,000! We offer tuition at Outer Bumfuck for your choice of: - $10,000 per semester - 2% of your income for 10 years, per semester (deferred until your first full-time employment)" There are obvious holes in this plan (e.g. a short-term cash shortage, the potential for abuse by students), but it seems fundamentally sound. It also provides counter-pressure to inflating the job prospects of graduates, since the university comes up short in cashflow if their stated numbers are wrong. This system also provides a sort of insurance plan for college students. You'll never be stuck with loan payments exceeding your income, since your total cost is based on your income!

SQueeeeeL 7y ago
This feels like such a gameable/difficult system. Think of how many people at the average college can't even complete regular trainings. There's no incentive to pay, actually there's a disincentive, you have to give your salary to an office, something most people are very sensitive about. Currently, if you don't pay for college, they just stop you from enrolling in more classes. You don't enroll in classes, you don't get a degree. Very clear cause and effect. In a future income system, the student doesn't pay their fee, and maybe the school files a collection action on them, if they can track them down...
ZainRiz 7y ago
This is the system Lambda School is trying to implement for CS degrees, except you study from home, not form Bumfuck :)

HNBRN 7y ago

In France you could probably start a revolution in suggesting that the students should pay for university. https://www.study.eu/article/tuition-fees-in-france https://www.study.eu/article/tuition-fees-in-france