5 ms·

I think you covered part of the problem in the second half of your statement. In the US, part of the problem is that by making education debts non-dischargable

I think you covered part of the problem in the second half of your statement. In the US, part of the problem is that by making education debts non-dischargable in bankruptcy, and by the aforementioned proliferation of degrees that may qualify as 'nice to have' rather than 'increase earning potential'. The end result is a lot of people who got a college degree that doesn't really pay for itself, and instead leads to 20+ years of debt, or 10 years of indentured servitude to a non-profit.

bhupy 6y ago
Making education debts dischargeable in bankruptcy sounds good in theory, but against what collateral do you take out a college loan? Most bankruptcy includes collateral liquidation. What's to stop someone from obtaining a useless degree that doesn't contribute to the nation's economy, and then discharges the debt in bankruptcy? I think a big part of the problem is that debt is so readily issued for degrees that overwhelmingly leave the recipient incapable of providing for society in gainful ways.
- JumpCrisscross 6y ago
  > What's to stop someone from obtaining a useless degree that doesn't contribute to the nation's economy, and then discharges the debt in bankruptcy? I assume lenders would take the degree being pursued, institution at which it’s being pursued and applicant’s academic history (and this likelihood of completing it) into account. Currently, there is zero incentive to do that work.
  - bhupy 6y ago
    That's a great point.
  - nitrogen 6y ago
    Some commercial lenders do consider degree/program.
- bobthepanda 6y ago
  I mean, people got college educations before 1998, when student loans were made non-dischargeable except in cases of "undue hardship".
  - iguy 6y ago
    I never knew the date, 1998 sounds super-recent. But digging a bit, it sounds like that's the last step of many, with the first bankruptcy restrictions in 1976 (when the only concern imagined was medical & law degrees!) https://www.savingforcollege.com/article/history-of-student-loans-bankruptcy-discharge https://www.savingforcollege.com/article/history-of-student-...
- simplify 6y ago
  > What's to stop someone from obtaining a useless degree that doesn't contribute to the nation's economy, and then discharges the debt in bankruptcy? Nothing, and that's exactly why education debts need to be dischargeable like anything else. Dischargeable loans makes loan companies have actual responsibility and consequences in deciding who to give loans to. Otherwise, they blindly give out loans (why not, there's no risk!), putting all that much money in the system, which college institutions are happy to absorb in higher tuition.
  - AuryGlenz 6y ago
    But it could lead to plenty of people making the smart decision to file for bankruptcy even when they have a good degree. Bankruptcy at 22 isn’t that big of a deal, generally. I’m not sure what the answer is, though I think an economic approach is key.
    - codekansas 6y ago
      If the lender can garnish future wages, I think the incentives are still pointing in the right direction. The only way the lender loses money is by lending too much to someone who will never be able to pay it back - which is what you want, presumably.
    - simplify 6y ago
      Bankruptcy negatively affects your credit score by a large amount, so it's not exactly an easy decision.
      - lozaning 6y ago
        It would be a very easy decision I think. Can you rebuild your credit in less time than it would take you to pay off your loans? If you're still going to be paying your loan off in 7 years, bankruptcy would be an easy choice.
        simplify 6y ago
- throwaway894345 6y ago
  It seems like we should make the debt conditional on the degree pursued. How much you’re allowed to take out in federal loans ought to be a function of the pay associated with that degree. I’m sure it’s not a perfect system, but it seems a lot better than the status quo or solutions that involve burdening society with the economic liability of a glut of (economically) low-value degrees.
  - iguy 6y ago
    My suggestion to achieve this is to cap repayments (of non-dischargable loans), perhaps at 15% of taxable income, and written off 20 years after signing. That would make lenders very interested in the outcomes of various courses. And their offers to prospective students would convey useful career advice, too.
    - throwaway894345 6y ago
      That seems reasonable.
    - mcguire 6y ago
      Note that the average (mean, I assume) student loan payment is $393, according to the article. The median student loan payment is $222 (https://www.forbes.com/sites/zackfriedman/2020/02/03/student-loan-debt-statistics/#35eb6f47281f https://www.forbes.com/sites/zackfriedman/2020/02/03/student...). $393 is 15% of $2620 which annualizes to $31,512, which is about the median personal income for full-time workers (whoops, before taxes). ($222 is 15% of $17,760 annual, about the poverty line for two.) That's not a wildly big change over the current state. How about 10% of taxable income?
      - tracker1 6y ago
        20% pretax deduction would probably be sufficient for repayment. Of course loan reform in general would probably be a good idea. If there are 10k graduating with a degree in a field with only 100 jobs/year needing that degree, or likewise paying less than $40k/year, should probably not be granting loans for those degrees in the first place.
- deleted 6y ago
  [deleted]

bhupy 6y ago

Making education debts dischargeable in bankruptcy sounds good in theory, but against what collateral do you take out a college loan? Most bankruptcy includes collateral liquidation. What's to stop someone from obtaining a useless degree that doesn't contribute to the nation's economy, and then discharges the debt in bankruptcy? I think a big part of the problem is that debt is so readily issued for degrees that overwhelmingly leave the recipient incapable of providing for society in gainful ways.

JumpCrisscross 6y ago
> What's to stop someone from obtaining a useless degree that doesn't contribute to the nation's economy, and then discharges the debt in bankruptcy? I assume lenders would take the degree being pursued, institution at which it’s being pursued and applicant’s academic history (and this likelihood of completing it) into account. Currently, there is zero incentive to do that work.
- bhupy 6y ago
  That's a great point.
- nitrogen 6y ago
  Some commercial lenders do consider degree/program.
bobthepanda 6y ago
I mean, people got college educations before 1998, when student loans were made non-dischargeable except in cases of "undue hardship".
- iguy 6y ago
  I never knew the date, 1998 sounds super-recent. But digging a bit, it sounds like that's the last step of many, with the first bankruptcy restrictions in 1976 (when the only concern imagined was medical & law degrees!) https://www.savingforcollege.com/article/history-of-student-loans-bankruptcy-discharge https://www.savingforcollege.com/article/history-of-student-...
simplify 6y ago
> What's to stop someone from obtaining a useless degree that doesn't contribute to the nation's economy, and then discharges the debt in bankruptcy? Nothing, and that's exactly why education debts need to be dischargeable like anything else. Dischargeable loans makes loan companies have actual responsibility and consequences in deciding who to give loans to. Otherwise, they blindly give out loans (why not, there's no risk!), putting all that much money in the system, which college institutions are happy to absorb in higher tuition.
- AuryGlenz 6y ago
  But it could lead to plenty of people making the smart decision to file for bankruptcy even when they have a good degree. Bankruptcy at 22 isn’t that big of a deal, generally. I’m not sure what the answer is, though I think an economic approach is key.
  - codekansas 6y ago
    If the lender can garnish future wages, I think the incentives are still pointing in the right direction. The only way the lender loses money is by lending too much to someone who will never be able to pay it back - which is what you want, presumably.
  - simplify 6y ago
    Bankruptcy negatively affects your credit score by a large amount, so it's not exactly an easy decision.
    - lozaning 6y ago
      It would be a very easy decision I think. Can you rebuild your credit in less time than it would take you to pay off your loans? If you're still going to be paying your loan off in 7 years, bankruptcy would be an easy choice.
      - simplify 6y ago
throwaway894345 6y ago
It seems like we should make the debt conditional on the degree pursued. How much you’re allowed to take out in federal loans ought to be a function of the pay associated with that degree. I’m sure it’s not a perfect system, but it seems a lot better than the status quo or solutions that involve burdening society with the economic liability of a glut of (economically) low-value degrees.
- iguy 6y ago
  My suggestion to achieve this is to cap repayments (of non-dischargable loans), perhaps at 15% of taxable income, and written off 20 years after signing. That would make lenders very interested in the outcomes of various courses. And their offers to prospective students would convey useful career advice, too.
  - throwaway894345 6y ago
    That seems reasonable.
  - mcguire 6y ago
    Note that the average (mean, I assume) student loan payment is $393, according to the article. The median student loan payment is $222 (https://www.forbes.com/sites/zackfriedman/2020/02/03/student-loan-debt-statistics/#35eb6f47281f https://www.forbes.com/sites/zackfriedman/2020/02/03/student...). $393 is 15% of $2620 which annualizes to $31,512, which is about the median personal income for full-time workers (whoops, before taxes). ($222 is 15% of $17,760 annual, about the poverty line for two.) That's not a wildly big change over the current state. How about 10% of taxable income?
    - tracker1 6y ago
      20% pretax deduction would probably be sufficient for repayment. Of course loan reform in general would probably be a good idea. If there are 10k graduating with a degree in a field with only 100 jobs/year needing that degree, or likewise paying less than $40k/year, should probably not be granting loans for those degrees in the first place.
deleted 6y ago
[deleted]