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Bob, 35 years old, is an excellent cook (but not a great businessman). He takes out an SBA loan to start a restaurant (failure rate for restaurants: very, very

Bob, 35 years old, is an excellent cook (but not a great businessman). He takes out an SBA loan to start a restaurant (failure rate for restaurants: very, very high). The restaurant goes belly up. Bob is allowed to file bankruptcy and walk away from the debt. Jim, 50 years old, watches "house-flipping" shows on cable TV and decides that he wants to be a real estate baron. He starts flipping houses using VA/FHA loans. The real estate market tanks. Jim is allowed to file bankruptcy and walk away from the debt. Dave, 18 years old, isn't a very good student, but every authority figure in his life (parents, teachers, ministers, you name it) tells him he HAS to have a college education. He takes out government loans to get one in a field with easy classes but low employability. But unlike Bob and Jim, Dave isn't allowed to file bankruptcy and walk away from the debt. Can you justify Dave being held to a higher standard than Bob and Jim? I've asked this question many times, but have never seen a convincing answer.

leereeves 5y ago
The lender takes Bob's business and Jim's house. How is the lender going to take Dave's degree? Dave is the only one of the three who could keep the asset after declaring bankruptcy, if that were allowed.
- Turing_Machine 5y ago
  In this scenario, Dave's degree is likely worth little or nothing, so I'm skeptical that allowing him to keep it represents any kind of real advantage.
  - leereeves 5y ago
    But laws aren't made only for this scenario. If student loans were dischargeable in bankruptcy, the financially optimal decision would be to borrow as much as possible while in school, then declare bankruptcy immediately after graduation. And if you would suggest that the bankruptcy court should consider the value of the degree, I would respond that the appropriate time for that is before lending the money.
    - Turing_Machine 5y ago
      > If student loans were dischargeable in bankruptcy, the financially optimal decision would be to borrow as much as possible while in school, then declare bankruptcy immediately after graduation. Bankruptcies stay on your credit report for seven years. That doesn't sound particularly "financially optimal" to me, or likely to anyone else.

leereeves 5y ago

The lender takes Bob's business and Jim's house. How is the lender going to take Dave's degree? Dave is the only one of the three who could keep the asset after declaring bankruptcy, if that were allowed.

Turing_Machine 5y ago
In this scenario, Dave's degree is likely worth little or nothing, so I'm skeptical that allowing him to keep it represents any kind of real advantage.
- leereeves 5y ago
  But laws aren't made only for this scenario. If student loans were dischargeable in bankruptcy, the financially optimal decision would be to borrow as much as possible while in school, then declare bankruptcy immediately after graduation. And if you would suggest that the bankruptcy court should consider the value of the degree, I would respond that the appropriate time for that is before lending the money.
  - Turing_Machine 5y ago
    > If student loans were dischargeable in bankruptcy, the financially optimal decision would be to borrow as much as possible while in school, then declare bankruptcy immediately after graduation. Bankruptcies stay on your credit report for seven years. That doesn't sound particularly "financially optimal" to me, or likely to anyone else.