3 ms·

From my reading of the OP (and the original news reporting that the OP is summarising), this covers the case where someone was defrauded by their school. Not j

by mewse 6y ago

From my reading of the OP (and the original news reporting that the OP is summarising), this covers the case where someone was defrauded by their school. Not just harmed, defrauded. Fraud is a well-defined crime. It requires intentional deception for a small number of specific reasons (most commonly, to gain money or something else of value). If in doubt, consult an attorney in your jurisdiction to determine whether you have been the victim of fraud according to the laws of your local area (which do vary across state lines within the US, to say nothing of internationally). But this isn’t about forgiving student loans where someone has been harmed. It’s about forgiving student loans where someone has been the victim of fraud.

endisneigh 6y ago
> But this isn’t about forgiving student loans where someone has been harmed. It’s about forgiving student loans where someone has been the victim of fraud. This is a good point, however my take is that if what you're saying is true (and I believe it is) - there is less reason to forgive the debt. There already exists mechanisms to take assets from the institution that caused the harm, liquidate and compensate those who have been harmed. Is it necessary to unilaterally forgive the debt? Maybe (I'm not sure myself as I mentioned in the OP).
- pessimizer 6y ago
  > There already exists mechanisms to take assets from the institution that caused the harm, liquidate and compensate those who have been harmed. Those people will already have leveraged debt, and purchased services and depreciated goods with the cash gained by the fraud, making the people they purchased those things from secondary beneficiaries of that fraud. The people who made the loans to the students are also secondary beneficiaries of the fraud (if those loans are paid back with interest.) The real question is whether you want to put the onus of evaluating the risk that something may be a fraud on the sellers of goods, or on people making loans. I would argue from a lot of different directions that it was obviously put in the right place in this case. To begin with, you can buy a candy bar with fraudulently obtained funds, and if every candy bar seller was required to evaluate the risk that the funds used to buy the candy bar were obtained fraudulently, the economy would grind to a halt. Since this is a pragmatic argument, it obviously becomes less valid when someone sells 10,000 candy bars; we may not mind if they have to do some minor checking, like obtaining your full name, or maybe where you work. Another is that assessing (and taking) risk is literally the only job of someone making a loan, and assessing the risk of a school being a fraud seems an obvious part of that when you're making a loan specifically for attending that school. If someone making a loan isn't doing that, they aren't doing anything. It's just a rent being collected, a concession granted by the state (as the state is expected to expend effort to enforce the debt.) This isn't a proper function for a state, this is corruption. You think you're endorsing personal responsibility here, but you're really endorsing bailouts for investors. There's a business plan here (which I think is really common in the world if you look for it) where you create a fraud, loan money to the victims of that fraud, fold up and liquidate the fraud, then use the state to pursue the victims for the loan. If you also manage to be the beneficiary of the fraud - lets say that the fraud sells all of its buildings which are then leased back to them, resulting in the fraud having a negative worth when it is liquidated, and you pay yourself large consulting fees for creating that arrangement - you've double-dipped. In the closed system of 1) the fraud, 2) the victims, 3) vendors supplying the fraud, and 4) lenders to the victim, a loan for $10,000 can't be turned into $20,000 of benefit, all ultimately sourced from the victim. This only happens if the state steps in and chooses the benefit of the lender and the vendors above the victim. This would be the state officially designating the fraud to be a currency issuer. Lastly, it doesn't set a precedent because debt forgiveness, especially in cases like this, happens all the time. It's a sign of corruption if it doesn't happen.
  - alisonkisk 6y ago
    The responsibility for fraud or other failure to deliver should be on the entity perpetuating fraud. If fraud is a known risk in the industry, require insurance or a surety bond. This is how most industries work, like construction.
- lovich 6y ago
  Should the banks have no incentive to make sure fraud isn’t happening? They’re making profit off the deal and are benefiting from the fraud. If they had no downside from fraudulent transactions then wouldn’t they have zero reason to do any sort of due diligence on student loans? It’s not like they have to worry about the debt going away via bankruptcy
dragonwriter 6y ago
> Fraud is a well-defined crime. Criminal fraud is a thing, but the sense of “fraud” here is more related to the tort than the crime; the latter is much narrower, though both are well-defined.

by mewse 6y ago

endisneigh 6y ago

> But this isn’t about forgiving student loans where someone has been harmed. It’s about forgiving student loans where someone has been the victim of fraud. This is a good point, however my take is that if what you're saying is true (and I believe it is) - there is less reason to forgive the debt. There already exists mechanisms to take assets from the institution that caused the harm, liquidate and compensate those who have been harmed. Is it necessary to unilaterally forgive the debt? Maybe (I'm not sure myself as I mentioned in the OP).

pessimizer 6y ago
> There already exists mechanisms to take assets from the institution that caused the harm, liquidate and compensate those who have been harmed. Those people will already have leveraged debt, and purchased services and depreciated goods with the cash gained by the fraud, making the people they purchased those things from secondary beneficiaries of that fraud. The people who made the loans to the students are also secondary beneficiaries of the fraud (if those loans are paid back with interest.) The real question is whether you want to put the onus of evaluating the risk that something may be a fraud on the sellers of goods, or on people making loans. I would argue from a lot of different directions that it was obviously put in the right place in this case. To begin with, you can buy a candy bar with fraudulently obtained funds, and if every candy bar seller was required to evaluate the risk that the funds used to buy the candy bar were obtained fraudulently, the economy would grind to a halt. Since this is a pragmatic argument, it obviously becomes less valid when someone sells 10,000 candy bars; we may not mind if they have to do some minor checking, like obtaining your full name, or maybe where you work. Another is that assessing (and taking) risk is literally the only job of someone making a loan, and assessing the risk of a school being a fraud seems an obvious part of that when you're making a loan specifically for attending that school. If someone making a loan isn't doing that, they aren't doing anything. It's just a rent being collected, a concession granted by the state (as the state is expected to expend effort to enforce the debt.) This isn't a proper function for a state, this is corruption. You think you're endorsing personal responsibility here, but you're really endorsing bailouts for investors. There's a business plan here (which I think is really common in the world if you look for it) where you create a fraud, loan money to the victims of that fraud, fold up and liquidate the fraud, then use the state to pursue the victims for the loan. If you also manage to be the beneficiary of the fraud - lets say that the fraud sells all of its buildings which are then leased back to them, resulting in the fraud having a negative worth when it is liquidated, and you pay yourself large consulting fees for creating that arrangement - you've double-dipped. In the closed system of 1) the fraud, 2) the victims, 3) vendors supplying the fraud, and 4) lenders to the victim, a loan for $10,000 can't be turned into $20,000 of benefit, all ultimately sourced from the victim. This only happens if the state steps in and chooses the benefit of the lender and the vendors above the victim. This would be the state officially designating the fraud to be a currency issuer. Lastly, it doesn't set a precedent because debt forgiveness, especially in cases like this, happens all the time. It's a sign of corruption if it doesn't happen.
- alisonkisk 6y ago
  The responsibility for fraud or other failure to deliver should be on the entity perpetuating fraud. If fraud is a known risk in the industry, require insurance or a surety bond. This is how most industries work, like construction.
lovich 6y ago
Should the banks have no incentive to make sure fraud isn’t happening? They’re making profit off the deal and are benefiting from the fraud. If they had no downside from fraudulent transactions then wouldn’t they have zero reason to do any sort of due diligence on student loans? It’s not like they have to worry about the debt going away via bankruptcy

dragonwriter 6y ago

> Fraud is a well-defined crime. Criminal fraud is a thing, but the sense of “fraud” here is more related to the tort than the crime; the latter is much narrower, though both are well-defined.