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I’m totally opposed to predatory student loans, but your point seems kinda light on logic. If the number of student loans being discharged was “infinitesimally

I’m totally opposed to predatory student loans, but your point seems kinda light on logic. If the number of student loans being discharged was “infinitesimally small” and we can assume prohibiting bankruptcy drove the number of delinquent loans down even lower, why are student loan repayments considered a huge issue?

schimmy_changa 4y ago
I'm guessing that possibility kept a lid on predatory lending, especially by for-profit colleges. For instance, if you know that your students have an option to discharge, then you'll make sure not to charge them enough that they see that discharge and stain of bankruptcy as better than just paying off the loan. It was a (dramatic, drastic, and undesired) weapon that consumers had in their back pocket. Get rid of the safety valve, and then see what happens as the colleges realize there's no balance of power... you get the current situation.
- thathndude 4y ago
  This is also a salient point. When these lenders know that they can lend out money, it will be back completely by the federal government, and it can’t be discharged in bankruptcy, they have very little incentive not to lend. That completely destroys the standard economics and considerations behind any type of credit
  - dragonwriter 4y ago
    > When these lenders know that they can lend out money, it will be back completely by the federal government, Even with nondischargeability for student loans in general, only loans participating in specific federal programs (which have limits, both as to institutions and amounts) were eligible for federal guarantees, and the part of those programs that lenders other than the federal government itself participated in was ended in 2010.
- datavirtue 4y ago
  You can't just file for bankruptcy if you are making money. I guess the mass numbers of people filing where not making any money. That is the real issue. Why weren't they making enough to at least get forced into a repayment plan?
thathndude 4y ago
Well I didn’t have 25 pages to give you the full thesis. I mean, there’s a lot wrong with student loans, including predatory lending in the first place. But one subset of story you hear about are people who are followed for their entire lives by student loans because things never worked out for them in terms of income generation on their degrees. Those stories can be mitigated with proper bankruptcy protections. There’s 1000 other things we need to fix with the system too.
- NonNefarious 4y ago
  The primary problem with student loans is needing them in the first place. We as a society (and taxpayers) should not help people pay rip-offs, whether they be those perpetrated by colleges or those perpetrated by insurance companies. We should be stopping the rip-offs themselves.
  - kaashif 4y ago
    > We as a society (and taxpayers) should not help people pay rip-offs The solution here appears to be that the government should not be involved with subsidising or backing student loans at all. Then you have a free choice - invest in student loans if you want to "help people pay rip offs" or don't if you don't.
    - bee_rider 4y ago
      As a country, particularly one with an advanced economy, we need to subsidize education in order to remain competitive. Generally the left would have preferred to just directly subsidize schools by giving them money, but instead we have the compromise plan of student loans. And boy is our system compromised!
      - lotsofpulp 4y ago
        We have the compromise plan of transferring future cash flow of students and taxpayers in the case of defaulted borrowers into the pockets of college administrators. All under the guise of “helping” students while keeping taxes low.
Retric 4y ago
Being unable to discharge a loan means you can offer them to people who you expect to go bankrupt. Rather than trying to limit losses it’s an attempt to expand the industry.
dragonwriter 4y ago
> we can assume prohibiting bankruptcy drove the number of delinquent loans down even lower, Prohibiting bankruptcy doesn't drive delinquent loans lower.
hn_throwaway_99 4y ago
Since it's nearly impossible now to discharge student loans in bankruptcy, lenders have 0 incentive to do any due diligence on borrowers. Quite the opposite, their only incentive is to get students to take out heaps of loans that will keep them in debt servitude for a lifetime. This is why you have cooking schools, where most jobs barely pay more than minimum wage, charging many 10s of thousands of dollars but all students can get loans. If bankruptcy was a possibility lenders would be much more cautious about tuition rates and potential for a borrower to actually pay it back.
- pkaye 4y ago
  If bankruptcy was possible, couldn't every student declare bankruptcy after graduation since that point they have nothing to lose?
  - deleted 4y ago
    [deleted]
  - faeriechangling 4y ago
    In the US context there are already provisions for this, abusive debtors can be forced from a schedule 7 to a schedule 13 bankruptcy, and in any case if the creditor protections aren't sufficient there are ways to bolster those protections without just allowing the creditors to have debt slaves. For instance, you can disallow discharging debts for a period of years after the education ends. The status quo is pretty corrupt.
    - pkaye 4y ago
      I guess allowing bankruptcy after N years might make sense. By that time the bankruptcy judge gets a good idea on future income potential.
  - dhosek 4y ago
    Under bankruptcy, you don’t necessarily get everything wiped clean and a fresh start. A court will determine how much you can pay and to whom and assets will include a percentage of your future income. On top of that, your ability to get credit will be severely impacted for at least seven years meaning good luck getting a car loan at non-usurious rates, credit cards, etc. You may even find that getting something like a simple checking account becomes rather difficult (I had to sell my first house in a short sale in the 90s and even though the consequences were less dramatic than bankruptcy,¹ it still impacted my financial prospects for a long time afterwards). ⸻ 1. I went to a credit counseling agency in the midst of that financial distress and the counselors all insisted that I didn’t want to go through bankruptcy although in retrospect, that was exactly what I should have done. What I didn’t know then was that the credit counseling agencies are all run by the credit card companies.
lapcat 4y ago
The legal changes started in 1976 and got progressively stricter. Since then, college costs and student loans have skyrocketed.
faeriechangling 4y ago
By eliminating the ability to discharge bankruptcy, they enabled lenders to lend far more money to the point of turning students into modern day indentured servants. Once you sell all these moneylenders their slaves, it causes economic problems when you try and free them.

schimmy_changa 4y ago

I'm guessing that possibility kept a lid on predatory lending, especially by for-profit colleges. For instance, if you know that your students have an option to discharge, then you'll make sure not to charge them enough that they see that discharge and stain of bankruptcy as better than just paying off the loan. It was a (dramatic, drastic, and undesired) weapon that consumers had in their back pocket. Get rid of the safety valve, and then see what happens as the colleges realize there's no balance of power... you get the current situation.

thathndude 4y ago
This is also a salient point. When these lenders know that they can lend out money, it will be back completely by the federal government, and it can’t be discharged in bankruptcy, they have very little incentive not to lend. That completely destroys the standard economics and considerations behind any type of credit
- dragonwriter 4y ago
  > When these lenders know that they can lend out money, it will be back completely by the federal government, Even with nondischargeability for student loans in general, only loans participating in specific federal programs (which have limits, both as to institutions and amounts) were eligible for federal guarantees, and the part of those programs that lenders other than the federal government itself participated in was ended in 2010.
datavirtue 4y ago
You can't just file for bankruptcy if you are making money. I guess the mass numbers of people filing where not making any money. That is the real issue. Why weren't they making enough to at least get forced into a repayment plan?

thathndude 4y ago

Well I didn’t have 25 pages to give you the full thesis. I mean, there’s a lot wrong with student loans, including predatory lending in the first place. But one subset of story you hear about are people who are followed for their entire lives by student loans because things never worked out for them in terms of income generation on their degrees. Those stories can be mitigated with proper bankruptcy protections. There’s 1000 other things we need to fix with the system too.

NonNefarious 4y ago
The primary problem with student loans is needing them in the first place. We as a society (and taxpayers) should not help people pay rip-offs, whether they be those perpetrated by colleges or those perpetrated by insurance companies. We should be stopping the rip-offs themselves.
- kaashif 4y ago
  > We as a society (and taxpayers) should not help people pay rip-offs The solution here appears to be that the government should not be involved with subsidising or backing student loans at all. Then you have a free choice - invest in student loans if you want to "help people pay rip offs" or don't if you don't.
  - bee_rider 4y ago
    As a country, particularly one with an advanced economy, we need to subsidize education in order to remain competitive. Generally the left would have preferred to just directly subsidize schools by giving them money, but instead we have the compromise plan of student loans. And boy is our system compromised!
    - lotsofpulp 4y ago
      We have the compromise plan of transferring future cash flow of students and taxpayers in the case of defaulted borrowers into the pockets of college administrators. All under the guise of “helping” students while keeping taxes low.

Retric 4y ago

Being unable to discharge a loan means you can offer them to people who you expect to go bankrupt. Rather than trying to limit losses it’s an attempt to expand the industry.

dragonwriter 4y ago

> we can assume prohibiting bankruptcy drove the number of delinquent loans down even lower, Prohibiting bankruptcy doesn't drive delinquent loans lower.

hn_throwaway_99 4y ago

Since it's nearly impossible now to discharge student loans in bankruptcy, lenders have 0 incentive to do any due diligence on borrowers. Quite the opposite, their only incentive is to get students to take out heaps of loans that will keep them in debt servitude for a lifetime. This is why you have cooking schools, where most jobs barely pay more than minimum wage, charging many 10s of thousands of dollars but all students can get loans. If bankruptcy was a possibility lenders would be much more cautious about tuition rates and potential for a borrower to actually pay it back.

pkaye 4y ago
If bankruptcy was possible, couldn't every student declare bankruptcy after graduation since that point they have nothing to lose?
- deleted 4y ago
  [deleted]
- faeriechangling 4y ago
  In the US context there are already provisions for this, abusive debtors can be forced from a schedule 7 to a schedule 13 bankruptcy, and in any case if the creditor protections aren't sufficient there are ways to bolster those protections without just allowing the creditors to have debt slaves. For instance, you can disallow discharging debts for a period of years after the education ends. The status quo is pretty corrupt.
  - pkaye 4y ago
    I guess allowing bankruptcy after N years might make sense. By that time the bankruptcy judge gets a good idea on future income potential.
- dhosek 4y ago
  Under bankruptcy, you don’t necessarily get everything wiped clean and a fresh start. A court will determine how much you can pay and to whom and assets will include a percentage of your future income. On top of that, your ability to get credit will be severely impacted for at least seven years meaning good luck getting a car loan at non-usurious rates, credit cards, etc. You may even find that getting something like a simple checking account becomes rather difficult (I had to sell my first house in a short sale in the 90s and even though the consequences were less dramatic than bankruptcy,¹ it still impacted my financial prospects for a long time afterwards). ⸻ 1. I went to a credit counseling agency in the midst of that financial distress and the counselors all insisted that I didn’t want to go through bankruptcy although in retrospect, that was exactly what I should have done. What I didn’t know then was that the credit counseling agencies are all run by the credit card companies.

lapcat 4y ago

The legal changes started in 1976 and got progressively stricter. Since then, college costs and student loans have skyrocketed.

faeriechangling 4y ago

By eliminating the ability to discharge bankruptcy, they enabled lenders to lend far more money to the point of turning students into modern day indentured servants. Once you sell all these moneylenders their slaves, it causes economic problems when you try and free them.