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The reason they aren't dischargeable is because what bank in their right mind would give a loan to an 18 year old with no collateral? They only guarantee they g

by btilly 7y ago

The reason they aren't dischargeable is because what bank in their right mind would give a loan to an 18 year old with no collateral? They only guarantee they get that it will be paid back is the fact that it can't be discharged. And yet somehow banks were happy to do so until 2005. Student loans would dry up overnight if they could be discharged at bankruptcy. That being said, I actually think that's a good thing, because it would force colleges to charge reasonable tuition rates and also offer scholarships if they want to get the best students. Both of these statements I agree with. The larger the loan, the better the guarantee that banks want. Every measure that we take to make it easier for students to pay tuition without imposing cost controls results in increases in tuition. The result is that tuition has been growing faster than inflation for many decades, and the trend is unsustainable. But barring shifting to a European model of college funding, I don't see the US allowing dischargeable loans, nor do I think they should, because the reality of it is that colleges won't reduce their rates nor increase their scholarships, they would just be completely out of reach of poor and middle class students. This I disagree with. Universities are businesses. The bulk of their customers are able to pay thanks to loan guarantees backed by special government rules. Take away those loan guarantees and the universities will have to figure out how to live without customers, or without charging so much. That said, you can't get there without creating a crisis that forces universities to make hard choices that they have been avoiding for decades.

jefftk 7y ago
> somehow banks were happy to do so until 2005 Before 2005 most loans were already protected from bankruptcy, and for the others you generally needed your parents to co-sign.
- btilly 7y ago
  The loans that were protected from bankruptcy from 1978 to 2005 were student loans to the federal government. They weren't private loans to banks. Therefore before 2005, banks that lent money for student loans did so without that particular extraordinary protection.
  - labcomputer 7y ago
    > Therefore before 2005, banks that lent money for student loans did so without that particular extraordinary protection. Most of the pre-2005 loans required a parental co-signer. And I know that I wasn't able to take out non-federal loans all by myself.
    - btilly 7y ago
      Yours is a true statement that doesn't contradict what I said. Namely that until 2005, banks were lending to students without protection from non-payment during bankruptcy. In fact the fact that banks insisted on mitigating their risks with a co-signer is actually supporting evidence FOR what I said.
ZoomerCretin 7y ago
> The bulk of their customers are able to pay thanks to loan guarantees backed by special government rules. Universities are not businesses. Students are not customers. Student tuition was much more heavily subsidized by states, but funding from states to universities has declined in the past few decades. This is the reason for tuition hikes. In the past, there was an agreement between states and universities: The states will provide a certain level of funding for students, and in exchange the universities will be barred from raising tuition above a very small rate annually. Then some states decided that having a "balanced budget" during all years, including recessions, was better policy than keeping education well-funded. Now recessions cause huge drops in education funding, which are accompanied by removing the limits on yearly tuition hikes. Because it's generally better to have a more educated population, the federal government picks up some of the slack with grant and loan aid, and banks pick up more slack with private loans to students who otherwise couldn't afford it. Then funding never returns to prior levels. Stop blaming universities. The blame very clearly lies with states and their asinine balanced budget policies.
- btilly 7y ago
  Yours is a narrative that universities themselves like to put forth. However it doesn't make sense. Tuition rises are a long-term trend. As https://www.usgovernmentspending.com/education_spending https://www.usgovernmentspending.com/education_spending points out, from the 1950s to the present, the share of GDP spent by government on universities went from 0.4% to 1.7%. With sometimes progress, and sometimes a loss. But the long-term trend is that spending by states has gone up relative to both enrollment and inflation. Yes, there are recession years where universities blame tuition hikes on cutbacks in state spending. But tuition has outpaced inflation in good years as well. Which suggests that the long-term trend has other causes. How bad is it? At present average college tuition at a private school is $45k/year. Salaries for the people teaching vary from $40k for a postdoc to an average of $95k for a full professor. Which means that in an average classroom, a handful of students could hire the teacher as a private tutor, give the teacher a pay raise, and themselves save money! This basic fact suggests that it should be possible to teach students for a lot less than we consider normal today. Now why have caused risen? It turns out that a lot of causes have been proposed, from the cost of buildings going up to an increase in bureaucracy to deal with government regulation. But attempts to quantify all the different factors, such as https://www.nber.org/papers/w21967 https://www.nber.org/papers/w21967, find that the biggest single factor is the combination of restricted supply and artificially increased demand (thanks to the availability of loans and financial aid). Exactly as I said.
deleted 7y ago
[deleted]

by btilly 7y ago

jefftk 7y ago

> somehow banks were happy to do so until 2005 Before 2005 most loans were already protected from bankruptcy, and for the others you generally needed your parents to co-sign.

btilly 7y ago
The loans that were protected from bankruptcy from 1978 to 2005 were student loans to the federal government. They weren't private loans to banks. Therefore before 2005, banks that lent money for student loans did so without that particular extraordinary protection.
- labcomputer 7y ago
  > Therefore before 2005, banks that lent money for student loans did so without that particular extraordinary protection. Most of the pre-2005 loans required a parental co-signer. And I know that I wasn't able to take out non-federal loans all by myself.
  - btilly 7y ago
    Yours is a true statement that doesn't contradict what I said. Namely that until 2005, banks were lending to students without protection from non-payment during bankruptcy. In fact the fact that banks insisted on mitigating their risks with a co-signer is actually supporting evidence FOR what I said.

ZoomerCretin 7y ago

> The bulk of their customers are able to pay thanks to loan guarantees backed by special government rules. Universities are not businesses. Students are not customers. Student tuition was much more heavily subsidized by states, but funding from states to universities has declined in the past few decades. This is the reason for tuition hikes. In the past, there was an agreement between states and universities: The states will provide a certain level of funding for students, and in exchange the universities will be barred from raising tuition above a very small rate annually. Then some states decided that having a "balanced budget" during all years, including recessions, was better policy than keeping education well-funded. Now recessions cause huge drops in education funding, which are accompanied by removing the limits on yearly tuition hikes. Because it's generally better to have a more educated population, the federal government picks up some of the slack with grant and loan aid, and banks pick up more slack with private loans to students who otherwise couldn't afford it. Then funding never returns to prior levels. Stop blaming universities. The blame very clearly lies with states and their asinine balanced budget policies.

btilly 7y ago
Yours is a narrative that universities themselves like to put forth. However it doesn't make sense. Tuition rises are a long-term trend. As https://www.usgovernmentspending.com/education_spending https://www.usgovernmentspending.com/education_spending points out, from the 1950s to the present, the share of GDP spent by government on universities went from 0.4% to 1.7%. With sometimes progress, and sometimes a loss. But the long-term trend is that spending by states has gone up relative to both enrollment and inflation. Yes, there are recession years where universities blame tuition hikes on cutbacks in state spending. But tuition has outpaced inflation in good years as well. Which suggests that the long-term trend has other causes. How bad is it? At present average college tuition at a private school is $45k/year. Salaries for the people teaching vary from $40k for a postdoc to an average of $95k for a full professor. Which means that in an average classroom, a handful of students could hire the teacher as a private tutor, give the teacher a pay raise, and themselves save money! This basic fact suggests that it should be possible to teach students for a lot less than we consider normal today. Now why have caused risen? It turns out that a lot of causes have been proposed, from the cost of buildings going up to an increase in bureaucracy to deal with government regulation. But attempts to quantify all the different factors, such as https://www.nber.org/papers/w21967 https://www.nber.org/papers/w21967, find that the biggest single factor is the combination of restricted supply and artificially increased demand (thanks to the availability of loans and financial aid). Exactly as I said.

deleted 7y ago

[deleted]