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Bankruptcy tanks your credit rating for years. Most of a decade, ~7 years IIRC. If student loans could only be cancelled via bankruptcy after 10-15 years, that

Bankruptcy tanks your credit rating for years. Most of a decade, ~7 years IIRC. If student loans could only be cancelled via bankruptcy after 10-15 years, that would mean students trying to cancel their loans through bankruptcy would be doing it in their early to mid 30s assuming they graduated at 21 years of age. Their credit scores would be ruined until their 40s at least. Few people would pursue this route just to save some money on education. If a graduate doesn't have enough assets by 30 to make bankruptcy a bad option, then I think it's fair to tell the lender that they made a bad investment and that the loss is reasonable. If this is how it worked, student loans to good universities would still yield a good return. It'd probably incentivize universities to track students' earnings after graduation, and focus on improving that figure. Lenders would probably stop writing loans to degree mills, or non-rigorous universities that don't substantially improve the employment prospects of students.

ntsplnkv2 6y ago
What problem does that solve, then? Wow, you can be bankrupt, and never be able to buy a house or car. How is that a solution? It's the same problem as now - "you can't get a house/car because your loan makes you unable to afford it." This doesn't solve the problem. See, it's just a garbage solution thrown out because it "sounds" good but on inspection it's just BS.
- manfredo 6y ago
  I'm not sure what I'm failing to explain. It's not feasible to make student loans able to be eliminated via bankruptcy without restriction, since students could just go through bankruptcy right after graduation and plan around being unable to get a mortgage or car loan until they're 30. If you graduated with a degree in CS, and landed a six figure tech job it'd still make sense financially to go through bankruptcy and save potentially hundreds of thousands of dollars in student loans, even though you could easily pay it off over several years. This let's the student exploit the lender. The status quo of making student loans not cancellable through bankruptcy makes it so that lenders can act in a predatory manner and issue loans to go to ineffective institutions that don't improve earning potential. They know students won't be able to pay for decades, but they don't care because the student is stuck with the debt and has no way of getting rid of it. This lets the lender exploit the student. Allowing student loans to be resolved through bankruptcy after 10-15 years is enough time so that most graduates have assets, and are probably looking for a mortgage on a home in the near future. Going through bankruptcy at 30 or 35 is a much bigger deal than doing so at 21. In this situation, the student can't easily exploit the lender. But at the same time the lender still has the potential for loss if they try to loan to a student studying basket weaving at a university with a 98% acceptance rate. The easier it is to eliminate a student loan the easier it is for a student to exploit the lender, and take the loan intending to go through bankruptcy. The harder it is to eliminate a student loan, the easier it is for banks to write loans they know students can't pay off. The optimal spot is somewhere in the middle, where the student has an escape valve - but one that is only feasible to take if you have no significant assets by the time you're 30 or 35. If the lender is worried that a student debtor won't have enough assets by 30-35 to make bankruptcy a bad option, then they will think twice about issuing the loan.
  - lotsofpulp 6y ago
    >The optimal spot is somewhere in the middle, where the student has an escape valve - but one that is only feasible to take if you have no significant assets by the time you're 30 or 35. The optimal spot is to not let 18 to 21 year olds borrow six figure sums without understanding the ramifications of it. There is no need for these loans to exist. The cost of higher education is high because the loans exist. The loans exist because exemptions to bankruptcy law were created specifically for those loans.
    - winphone1974 6y ago
      You're saying the same thing as the parent post, but they're describing mechanism to discourage lenders from making these loans and borrowers from gaming the system. You just say the system is broken and shouldn't be.
  - ntsplnkv2 6y ago
    You're not failing to explain anything, what you're explaining isn't a hard concept and everyone understands what you're saying. We're just saying: it doesn't work/nor does it make sense. > Allowing student loans to be resolved through bankruptcy after 10-15 years is enough time so that most graduates have assets, and are probably looking for a mortgage on a home in the near future. Going through bankruptcy at 30 or 35 is a much bigger deal than doing so at 21. In this situation, the student can't easily exploit the lender. But at the same time the lender still has the potential for loss if they try to loan to a student studying basket weaving at a university with a 98% acceptance rate. So instead of trying to solve the problem of crushing student debt, we let people at 30-35 tank their credit score so they can never buy anything again. So we're doing NOTHING for people 22-30, and we're ruining the 30+ year old's credit so they can't actually buy a house. It doesn't help anyone. That's our point. It does nothing to solve any real problem, it just makes everything worse.
    - manfredo 6y ago
      Yes, the 30+ year olds have to make the tough decision of defaulting on their loans and severely limiting their ability to secure loans in the future, vs. continuing to work towards paying off their student loans. If there was no repercussion to defaulting on loans why would anyone ever pay off a loan? This is precisely why it makes sense to restrict ability to default on student loans for a certain duration. Even if you have six figure salary as a new grad, it'd still make sense to default on your student loans immediately after graduation and plan your life around having a terrible credit score until your 30s. Pay for cars in cash, and don't plan on buying a house until one's 30s. Everyone would do this because it's basically getting money for free. And consequently nobody would issue student loans, even to students going to good schools and studying in demand majors, because students can effectively just walk away from the loans. Yes, it's not doing anything for people 22-30. This is deliberate. The point is to make sure students who can pay off their loans do pay off their loans. We make recipients of student loans wait until 30-35 to be able to default on loans so that only the ones who are genuinely stuck with loans they can't pay off go through with the default. Yes, their credit score will tank. But that's the consequence of defaulting on a loan. If you could default on a loan without impacting your credit score, you'd be a fool not to default on every loan you have right now - but you wouldn't actually have any loans because nobody would lend money under sucha scenario.
missedthecue 6y ago
"Few people would pursue this route just to save some money on education." You seem confident saying this, but countless youths have accumulated hundreds of thousands of dollars of debt they won't pay off until their mid 40s at no-name liberal arts schools and degree mills
- michaelt 6y ago
  That sounds like an argument they should be able to discharge the debt, not that they shouldn't
jldugger 6y ago
But what good is a credit rating? Plenty of people are willing to offer you a credit card after declaring, simply because of the 8 year prohibition on serial bankruptcy.

ntsplnkv2 6y ago

What problem does that solve, then? Wow, you can be bankrupt, and never be able to buy a house or car. How is that a solution? It's the same problem as now - "you can't get a house/car because your loan makes you unable to afford it." This doesn't solve the problem. See, it's just a garbage solution thrown out because it "sounds" good but on inspection it's just BS.

manfredo 6y ago
I'm not sure what I'm failing to explain. It's not feasible to make student loans able to be eliminated via bankruptcy without restriction, since students could just go through bankruptcy right after graduation and plan around being unable to get a mortgage or car loan until they're 30. If you graduated with a degree in CS, and landed a six figure tech job it'd still make sense financially to go through bankruptcy and save potentially hundreds of thousands of dollars in student loans, even though you could easily pay it off over several years. This let's the student exploit the lender. The status quo of making student loans not cancellable through bankruptcy makes it so that lenders can act in a predatory manner and issue loans to go to ineffective institutions that don't improve earning potential. They know students won't be able to pay for decades, but they don't care because the student is stuck with the debt and has no way of getting rid of it. This lets the lender exploit the student. Allowing student loans to be resolved through bankruptcy after 10-15 years is enough time so that most graduates have assets, and are probably looking for a mortgage on a home in the near future. Going through bankruptcy at 30 or 35 is a much bigger deal than doing so at 21. In this situation, the student can't easily exploit the lender. But at the same time the lender still has the potential for loss if they try to loan to a student studying basket weaving at a university with a 98% acceptance rate. The easier it is to eliminate a student loan the easier it is for a student to exploit the lender, and take the loan intending to go through bankruptcy. The harder it is to eliminate a student loan, the easier it is for banks to write loans they know students can't pay off. The optimal spot is somewhere in the middle, where the student has an escape valve - but one that is only feasible to take if you have no significant assets by the time you're 30 or 35. If the lender is worried that a student debtor won't have enough assets by 30-35 to make bankruptcy a bad option, then they will think twice about issuing the loan.
- lotsofpulp 6y ago
  >The optimal spot is somewhere in the middle, where the student has an escape valve - but one that is only feasible to take if you have no significant assets by the time you're 30 or 35. The optimal spot is to not let 18 to 21 year olds borrow six figure sums without understanding the ramifications of it. There is no need for these loans to exist. The cost of higher education is high because the loans exist. The loans exist because exemptions to bankruptcy law were created specifically for those loans.
  - winphone1974 6y ago
    You're saying the same thing as the parent post, but they're describing mechanism to discourage lenders from making these loans and borrowers from gaming the system. You just say the system is broken and shouldn't be.
- ntsplnkv2 6y ago
  You're not failing to explain anything, what you're explaining isn't a hard concept and everyone understands what you're saying. We're just saying: it doesn't work/nor does it make sense. > Allowing student loans to be resolved through bankruptcy after 10-15 years is enough time so that most graduates have assets, and are probably looking for a mortgage on a home in the near future. Going through bankruptcy at 30 or 35 is a much bigger deal than doing so at 21. In this situation, the student can't easily exploit the lender. But at the same time the lender still has the potential for loss if they try to loan to a student studying basket weaving at a university with a 98% acceptance rate. So instead of trying to solve the problem of crushing student debt, we let people at 30-35 tank their credit score so they can never buy anything again. So we're doing NOTHING for people 22-30, and we're ruining the 30+ year old's credit so they can't actually buy a house. It doesn't help anyone. That's our point. It does nothing to solve any real problem, it just makes everything worse.
  - manfredo 6y ago
    Yes, the 30+ year olds have to make the tough decision of defaulting on their loans and severely limiting their ability to secure loans in the future, vs. continuing to work towards paying off their student loans. If there was no repercussion to defaulting on loans why would anyone ever pay off a loan? This is precisely why it makes sense to restrict ability to default on student loans for a certain duration. Even if you have six figure salary as a new grad, it'd still make sense to default on your student loans immediately after graduation and plan your life around having a terrible credit score until your 30s. Pay for cars in cash, and don't plan on buying a house until one's 30s. Everyone would do this because it's basically getting money for free. And consequently nobody would issue student loans, even to students going to good schools and studying in demand majors, because students can effectively just walk away from the loans. Yes, it's not doing anything for people 22-30. This is deliberate. The point is to make sure students who can pay off their loans do pay off their loans. We make recipients of student loans wait until 30-35 to be able to default on loans so that only the ones who are genuinely stuck with loans they can't pay off go through with the default. Yes, their credit score will tank. But that's the consequence of defaulting on a loan. If you could default on a loan without impacting your credit score, you'd be a fool not to default on every loan you have right now - but you wouldn't actually have any loans because nobody would lend money under sucha scenario.

missedthecue 6y ago

"Few people would pursue this route just to save some money on education." You seem confident saying this, but countless youths have accumulated hundreds of thousands of dollars of debt they won't pay off until their mid 40s at no-name liberal arts schools and degree mills

michaelt 6y ago
That sounds like an argument they should be able to discharge the debt, not that they shouldn't

jldugger 6y ago

But what good is a credit rating? Plenty of people are willing to offer you a credit card after declaring, simply because of the 8 year prohibition on serial bankruptcy.