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Make student loan debt dischargeable through bankruptcy, like every other type of debt. This was the original corruption that's responsible for most of the horr

Make student loan debt dischargeable through bankruptcy, like every other type of debt. This was the original corruption that's responsible for most of the horrible dynamic - the all too common pattern of congress trying to have its cake and eat it too. Practically, this shouldn't make those who already paid off student loan debt regret having done so, as going through bankruptcy instead would have given them a much different life path. But it would give a way out to those hopelessly underwater.

johng 3y ago
If I take a loan on a house, or a car, or some other tangible good it can be taken back. I can't take back the education you never paid for. The government should have never gotten into backing college loans, house mortgages or any of those things. The free market should do it, it should be competitive and there are simply some people that don't deserve to go to college on someone else's dime...
- mindslight 3y ago
  Many debts are collateralized, and many are not. Pointing at some common collateralized debts doesn't really have bearing on the argument. I agree that the government shouldn't be loaning money for college, but I also don't think the government should be loaning money for housing, nor loaning money to banks at ridiculously low rates to bid up the everything bubble - listed in increasing order of importance. But OP asked what we can concretely do right now, to address the problem that has already been created. Stopping student loans cold turkey isn't going to make colleges magically downsize their bloated layers of administrators and lower their tuition - it's just raging at what has already occurred. Just like how raising interest rates a little bit didn't unroll the screwed up housing market, but rather just caused it to lock up and remain in the inflated state. So the first stab at a practical middle of the road approach is to end the poorly thought out legislative subsidy of non-dischargeability, and start letting the already-created financial situations be resolved through the standard processes. Bonus points if some of the money can be clawed back from the colleges that received it, but the basic dynamic has to be defined before that can happen. From the individual perspective, going through bankruptcy isn't instantaneous and has effects that last a significant amount of time for someone who just graduated from college. Courts do look at things like ability to generate income. The option is only going to be practical for those with little hope of actually benefiting from their degree.
  - light_hue_1 3y ago
    If colleges had skin in the game the system would work much better. Who are we to declare that they're bloated? If they provide massive value, great. When a student cannot pay back a loan that is not their fault. It is the fault of the college who claimed their education was worth x dollars when it was clearly not.
    - mindslight 3y ago
      > Who are we to declare that they're bloated? Software engineers that routinely dig through layers of abstraction to grok how systems function. Not everything needs to be treated as a black box. Like I know very little about medicine, and I'm certainly not capable of diagnosing medical problems. But when I try to ask a doctor a question, and get confronted with a phone tree in front of an answering service in front of a receptionist in front of a nurse in front of the actual doctor, with days of delay in between some of those layers, I can confidently say the place has organizational cancer.
- pauldenton 3y ago
  There's all kinds of unsecured or low secured loans. We don't need to give payday loan places immunity to bankruptcy for them to open up every block
Auracle 3y ago
Cue everyone graduating with more than 50k in debt immediately filing for bankruptcy.
- janejeon 3y ago
  which is, iirc, why it was even made to be this way ("un-bankruptable") in the first place. The "risk premium" on these loans likely would've been FAR higher (or rather, people might've just stopped making loans altogether) if people were just allowed to declare bankruptcy right after getting the education.
  - prepend 3y ago
    The “risk premium” is already jacked. I’m paying 6% on 10 year old debt that cannot be discharged. Shouldn't the risk be very low to lenders and have a much lower rate? Why would the most secure debt have such a high interest rate? (Treasuries at the time were 2-3%)
    - janejeon 3y ago
      I'm arguing that the current rate is without the additional percentages that the insane risk premium that would be attached to these loans, if they were made at all. > is already jacked If you're arguing why it's not the same rate as treasuries, I'm not sure what more I can say. There's more that goes onto pricing loans than just the risk premium. It's a part of it, but not the whole story ("why are government-backed MBSes not the same interest rate as treasuries?"). Furthermore, just look around: you sure there's no "risk" with these loans? You cannot in honesty argue otherwise.
      - prepend 3y ago
        I’m arguing that the rate is already artificial and borrowers are paying more than they should. So increasing lender costs would not necessarily increase rates since rates are set by something other than the market. When I took out student loans in 2013, I got a 6.5% rate for 25 years. It can’t be discharged and any default is guaranteed by US Department of Ed (eg, I die, or use income based repayment for 25 years and discharge the balance). So to the borrower, the “risk” is that the USG defaults. For comparison, I bought a house that year and got a 4.25% 30-year mortgage that has my house as collateral. Why would a student loan that can’t be discharged have a higher rate than a mortgage?
TexanFeller 3y ago
> Make student loan debt dischargeable through bankruptcy, like every other type of debt. This was the original corruption that's responsible for most of the horrible dynamic Apparently Joe Biden himself pushed and voted for the bill that made student debt not dischargeable in bankruptcy: https://www.theguardian.com/us-news/2019/dec/02/joe-biden-student-loan-debt-2005-act-2020 https://www.theguardian.com/us-news/2019/dec/02/joe-biden-st...

johng 3y ago

If I take a loan on a house, or a car, or some other tangible good it can be taken back. I can't take back the education you never paid for. The government should have never gotten into backing college loans, house mortgages or any of those things. The free market should do it, it should be competitive and there are simply some people that don't deserve to go to college on someone else's dime...

mindslight 3y ago
Many debts are collateralized, and many are not. Pointing at some common collateralized debts doesn't really have bearing on the argument. I agree that the government shouldn't be loaning money for college, but I also don't think the government should be loaning money for housing, nor loaning money to banks at ridiculously low rates to bid up the everything bubble - listed in increasing order of importance. But OP asked what we can concretely do right now, to address the problem that has already been created. Stopping student loans cold turkey isn't going to make colleges magically downsize their bloated layers of administrators and lower their tuition - it's just raging at what has already occurred. Just like how raising interest rates a little bit didn't unroll the screwed up housing market, but rather just caused it to lock up and remain in the inflated state. So the first stab at a practical middle of the road approach is to end the poorly thought out legislative subsidy of non-dischargeability, and start letting the already-created financial situations be resolved through the standard processes. Bonus points if some of the money can be clawed back from the colleges that received it, but the basic dynamic has to be defined before that can happen. From the individual perspective, going through bankruptcy isn't instantaneous and has effects that last a significant amount of time for someone who just graduated from college. Courts do look at things like ability to generate income. The option is only going to be practical for those with little hope of actually benefiting from their degree.
- light_hue_1 3y ago
  If colleges had skin in the game the system would work much better. Who are we to declare that they're bloated? If they provide massive value, great. When a student cannot pay back a loan that is not their fault. It is the fault of the college who claimed their education was worth x dollars when it was clearly not.
  - mindslight 3y ago
    > Who are we to declare that they're bloated? Software engineers that routinely dig through layers of abstraction to grok how systems function. Not everything needs to be treated as a black box. Like I know very little about medicine, and I'm certainly not capable of diagnosing medical problems. But when I try to ask a doctor a question, and get confronted with a phone tree in front of an answering service in front of a receptionist in front of a nurse in front of the actual doctor, with days of delay in between some of those layers, I can confidently say the place has organizational cancer.
pauldenton 3y ago
There's all kinds of unsecured or low secured loans. We don't need to give payday loan places immunity to bankruptcy for them to open up every block

Auracle 3y ago

Cue everyone graduating with more than 50k in debt immediately filing for bankruptcy.

janejeon 3y ago
which is, iirc, why it was even made to be this way ("un-bankruptable") in the first place. The "risk premium" on these loans likely would've been FAR higher (or rather, people might've just stopped making loans altogether) if people were just allowed to declare bankruptcy right after getting the education.
- prepend 3y ago
  The “risk premium” is already jacked. I’m paying 6% on 10 year old debt that cannot be discharged. Shouldn't the risk be very low to lenders and have a much lower rate? Why would the most secure debt have such a high interest rate? (Treasuries at the time were 2-3%)
  - janejeon 3y ago
    I'm arguing that the current rate is without the additional percentages that the insane risk premium that would be attached to these loans, if they were made at all. > is already jacked If you're arguing why it's not the same rate as treasuries, I'm not sure what more I can say. There's more that goes onto pricing loans than just the risk premium. It's a part of it, but not the whole story ("why are government-backed MBSes not the same interest rate as treasuries?"). Furthermore, just look around: you sure there's no "risk" with these loans? You cannot in honesty argue otherwise.
    - prepend 3y ago
      I’m arguing that the rate is already artificial and borrowers are paying more than they should. So increasing lender costs would not necessarily increase rates since rates are set by something other than the market. When I took out student loans in 2013, I got a 6.5% rate for 25 years. It can’t be discharged and any default is guaranteed by US Department of Ed (eg, I die, or use income based repayment for 25 years and discharge the balance). So to the borrower, the “risk” is that the USG defaults. For comparison, I bought a house that year and got a 4.25% 30-year mortgage that has my house as collateral. Why would a student loan that can’t be discharged have a higher rate than a mortgage?

TexanFeller 3y ago

> Make student loan debt dischargeable through bankruptcy, like every other type of debt. This was the original corruption that's responsible for most of the horrible dynamic Apparently Joe Biden himself pushed and voted for the bill that made student debt not dischargeable in bankruptcy: https://www.theguardian.com/us-news/2019/dec/02/joe-biden-student-loan-debt-2005-act-2020 https://www.theguardian.com/us-news/2019/dec/02/joe-biden-st...