4 ms·

Student debt is a bubble created by making it non-dischargeable in bankruptcy.

lotsofpulp 4y ago
The bigger factor is the federal government giving out unlimited loans in the first place. Schools ask for $20k, government lends $20k. Schools ask for $30k, government lends $30k. $40k, $50k, $60k, $250k, why should the schools stop? Zero underwriting, zero incentives to not waste money.
lzooz 4y ago
If you make it dischargeable can't you just declare bankruptcy as soon as you leave college since you won't have a job or assets?
- HyperSane 4y ago
  Yes, and that risk would greatly reduce the loans made and prevent colleges from increasing prices so fast. Allowing colleges to garnish a percent of your wages would make a lot more sense actually.
  - lzooz 4y ago
    >Allowing colleges to garnish a percent of your wages would make a lot more sense actually. Is there any legal mechanism to do something like this?
    - HyperSane 4y ago
      We will make it legal. Maybe if the student signs a contract allowing the University to do so.
- filoleg 4y ago
  In the short-term, yes. However, that scenario you are describing is unlikely to last beyond those people who were given the loans before student loans became dischargeable. Lenders would simply become extremely picky when giving out student loans, in the scenario where student loans are dischargeable. Probably something along the lines of "oh, so your degree is not in CS/engineering/pre-med/<other-high-earning-potential-degree>? And you aren't taking the loan out to attend Stanford/UC/<random-Ivy-school>? And you don't have much in terms of collateral assets to be discharged in case of a bankruptcy either? Well, we cannot offer a loan, sorry". Which would essentially make student loans not an option for vast majority of students.
  - heavenlyblue 4y ago
    On the other hand, imagine giving a loan for someone to pursue Harry Potter Studies Masters?
  - itsyaboi 4y ago
    ...that sounds reasonable. Would probably force tuition prices down since colleges would prefer some income vs none at all.
    - filoleg 4y ago
      On the surface, it sounds reasonable, indeed. However, I followed the logical chain of thought of where that approach would lead. And I honestly don't want to live in a world where we reserve liberal arts and other non-STEM degree just for children of the wealthy, while the rest have to settle for "useful degrees". And I am saying that as someone who went to a college where almost everyone was doing STEM (which makes sense, given it was an engineering school).
  - deleted 4y ago
    [deleted]
singleshot_ 4y ago
Student debt is not “not dischargeable in bankruptcy.” It’s more difficult to discharge in bankruptcy than some other kinds of debt but it’s not “not dischargeable.”
- musicale 4y ago
  Not entirely sure why you were downvoted. It is probably more accurate to say that student loan debt is technically dischargeable in bankruptcy, but it is extraordinarily difficult to do so, since you need to prove undue hardship. It did happen once in 2020 however, so it may become more common in the future.
musicale 4y ago
It's a strange positive feedback cycle where student loans make universities more affordable, which increases demand, which enables universities to admit more students and then to raise tuition when they can't admit any more students.
- egberts1 4y ago
  Nah, it actually made for many a very bloated college administration. What's all the overhead is for if professors are being paid poorly.
  - viridian 4y ago
    The professors the university cares about will get their just pay. I know of a professor who makes well in excess of a million USD yearly, and I've also known adjuncts getting paid 30-something thousand a year. The ironic thing is that the former professor is an ex-CEO who had tens of millions before he ever taught a class. "For whoever has, to him shall be given..."
- HyperSane 4y ago
  We should cap annual tuition.

The bigger factor is the federal government giving out unlimited loans in the first place. Schools ask for $20k, government lends $20k. Schools ask for $30k, government lends $30k. $40k, $50k, $60k, $250k, why should the schools stop? Zero underwriting, zero incentives to not waste money.

lzooz 4y ago

If you make it dischargeable can't you just declare bankruptcy as soon as you leave college since you won't have a job or assets?

HyperSane 4y ago
Yes, and that risk would greatly reduce the loans made and prevent colleges from increasing prices so fast. Allowing colleges to garnish a percent of your wages would make a lot more sense actually.
- lzooz 4y ago
  >Allowing colleges to garnish a percent of your wages would make a lot more sense actually. Is there any legal mechanism to do something like this?
  - HyperSane 4y ago
    We will make it legal. Maybe if the student signs a contract allowing the University to do so.
filoleg 4y ago
In the short-term, yes. However, that scenario you are describing is unlikely to last beyond those people who were given the loans before student loans became dischargeable. Lenders would simply become extremely picky when giving out student loans, in the scenario where student loans are dischargeable. Probably something along the lines of "oh, so your degree is not in CS/engineering/pre-med/<other-high-earning-potential-degree>? And you aren't taking the loan out to attend Stanford/UC/<random-Ivy-school>? And you don't have much in terms of collateral assets to be discharged in case of a bankruptcy either? Well, we cannot offer a loan, sorry". Which would essentially make student loans not an option for vast majority of students.
- heavenlyblue 4y ago
  On the other hand, imagine giving a loan for someone to pursue Harry Potter Studies Masters?
- itsyaboi 4y ago
  ...that sounds reasonable. Would probably force tuition prices down since colleges would prefer some income vs none at all.
  - filoleg 4y ago
    On the surface, it sounds reasonable, indeed. However, I followed the logical chain of thought of where that approach would lead. And I honestly don't want to live in a world where we reserve liberal arts and other non-STEM degree just for children of the wealthy, while the rest have to settle for "useful degrees". And I am saying that as someone who went to a college where almost everyone was doing STEM (which makes sense, given it was an engineering school).
- deleted 4y ago
  [deleted]

singleshot_ 4y ago

Student debt is not “not dischargeable in bankruptcy.” It’s more difficult to discharge in bankruptcy than some other kinds of debt but it’s not “not dischargeable.”

musicale 4y ago
Not entirely sure why you were downvoted. It is probably more accurate to say that student loan debt is technically dischargeable in bankruptcy, but it is extraordinarily difficult to do so, since you need to prove undue hardship. It did happen once in 2020 however, so it may become more common in the future.

musicale 4y ago

It's a strange positive feedback cycle where student loans make universities more affordable, which increases demand, which enables universities to admit more students and then to raise tuition when they can't admit any more students.

egberts1 4y ago
Nah, it actually made for many a very bloated college administration. What's all the overhead is for if professors are being paid poorly.
- viridian 4y ago
  The professors the university cares about will get their just pay. I know of a professor who makes well in excess of a million USD yearly, and I've also known adjuncts getting paid 30-something thousand a year. The ironic thing is that the former professor is an ex-CEO who had tens of millions before he ever taught a class. "For whoever has, to him shall be given..."
HyperSane 4y ago
We should cap annual tuition.