4 ms·

Dumb question (and actually a question, I’m not trying to JAQ here) - wouldn’t that make the dominant strategy for many to as quickly as possible declare bankru

by 542458 5y ago

Dumb question (and actually a question, I’m not trying to JAQ here) - wouldn’t that make the dominant strategy for many to as quickly as possible declare bankruptcy upon graduation? Sure it would make it way harder to buy a house in the future… but many are resigned to renting forever anyways. Also wouldn’t this make it very hard for the poor to ever get student loans?

shadilay 5y ago
I think the idea is that it would shift the incentives to take on less debt, make college cheaper, and encourage shorter payback times.
- a-dub 5y ago
  that's correct. it would be market forces pushing down on tuition. that said, it also makes it harder for individuals to make big bets on themselves until the market corrects (assuming it even would)
bachmeier 5y ago
> wouldn’t that make the dominant strategy for many to as quickly as possible declare bankruptcy upon graduation Why not do that now as soon as you get any type of loan? You don't just "declare bankruptcy". And bankruptcy law can be changed as desired to prevent that. There's nothing special about student loan debt versus other types of debt. In any event, requiring repayment based on income (like 7% of income up to a certain monthly amount) is almost certainly a better policy. The students and lenders both have the right incentives with those schemes.
- 542458 5y ago
  That makes sense. The only thing I’ll say is: > Why not do that now as soon as you get any type of loan? With other assets your bank can repossess something - but there’s no real way to repossess an education.
ajsnigrutin 5y ago
If you have $200k of student debt, yeah, sure... but you probably wouldnt even get that much credit, and you'd have to pick a cheaper college. Going bankrupt with eg. $30k debt is a lot harder, because you can realistically pay that back in some sane amount of time. Colleges will have to adapt though, because there are not that many rich people to sustain such high prices.
- criticas 5y ago
  Colleges have already adapted - they've widened the net, looking for rich parents globally. They admit more foreign students, who pay full rate. That's particularly controversial for public schools because of taxpayer funding.
Manuel_D 5y ago
A better compromise might be Income Share Agreements. Yes, Lambda School did do some shady stuff with selling ISAs. But that payment structure does incentivize the school to actually improve the earning prospects of their students. The concept shouldn't be thrown out because Lambda School sold their ISAs while continuing to tell students that the company has a financial stake in their success. Some complain that this will make universities effectively become vocational schools and cut liberal arts and humanities programs. But I see that as a feature: putting more emphasis on education on the fields with higher labor demands.

by 542458 5y ago

shadilay 5y ago

I think the idea is that it would shift the incentives to take on less debt, make college cheaper, and encourage shorter payback times.

a-dub 5y ago
that's correct. it would be market forces pushing down on tuition. that said, it also makes it harder for individuals to make big bets on themselves until the market corrects (assuming it even would)

bachmeier 5y ago

> wouldn’t that make the dominant strategy for many to as quickly as possible declare bankruptcy upon graduation Why not do that now as soon as you get any type of loan? You don't just "declare bankruptcy". And bankruptcy law can be changed as desired to prevent that. There's nothing special about student loan debt versus other types of debt. In any event, requiring repayment based on income (like 7% of income up to a certain monthly amount) is almost certainly a better policy. The students and lenders both have the right incentives with those schemes.

542458 5y ago
That makes sense. The only thing I’ll say is: > Why not do that now as soon as you get any type of loan? With other assets your bank can repossess something - but there’s no real way to repossess an education.

ajsnigrutin 5y ago

If you have $200k of student debt, yeah, sure... but you probably wouldnt even get that much credit, and you'd have to pick a cheaper college. Going bankrupt with eg. $30k debt is a lot harder, because you can realistically pay that back in some sane amount of time. Colleges will have to adapt though, because there are not that many rich people to sustain such high prices.

criticas 5y ago
Colleges have already adapted - they've widened the net, looking for rich parents globally. They admit more foreign students, who pay full rate. That's particularly controversial for public schools because of taxpayer funding.

Manuel_D 5y ago

A better compromise might be Income Share Agreements. Yes, Lambda School did do some shady stuff with selling ISAs. But that payment structure does incentivize the school to actually improve the earning prospects of their students. The concept shouldn't be thrown out because Lambda School sold their ISAs while continuing to tell students that the company has a financial stake in their success. Some complain that this will make universities effectively become vocational schools and cut liberal arts and humanities programs. But I see that as a feature: putting more emphasis on education on the fields with higher labor demands.