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The interest rates would be so high that it wouldn't make sense for a promising student to take that loan. If you're a loan company and someone comes to you as

The interest rates would be so high that it wouldn't make sense for a promising student to take that loan. If you're a loan company and someone comes to you asking for $100,000, and they have no credit and no family with assets, even with a 4.0 GPA and perfect SATs, they are still a huge risk.

gameman144 3y ago
This seems fine to me. If someone has no assets and no reasonable prospects to pay back $100,000 of debt, then saddling them with $100,000 of debt is a bad idea. Additionally, discharging student loans in bankruptcy should absolutely not be a way to get off scot-free, it's meant as an escape valve. If your options are the terrible downsides of declaring bankruptcy and the terrible downsides of a life in extreme debt, neither option is great, but having the choice is useful.
- jedberg 3y ago
  Right but see the problem is how does a really smart poor person get an education so they can become a really smart rich person?
  - gameman144 3y ago
    They study in a field which has a high likelihood of loan repayment, or study at a less expensive school. If a really smart poor person wants to become a really smart rich person by pursuing a degree in film studies, it's reasonable (in my opinion) for a bank to say "borrowers whose only education is a bachelors in film studies tend to have trouble paying back loans, so we won't lend you very much". If that very smart poor person is pursuing a degree in accounting or engineering, though, most banks can do the actuarial work to determine that the likelihood of payment is pretty good. This all seems totally fine and fair to me. And if the really smart person does have trouble paying back their loan, bankruptcy can be the absolute last option they resort to, just as it is with most other loans.
    - jedberg 3y ago
      I'm not sure loan companies want to get into the business of rating specific programs at specific universities and their ability to produce students who can get good jobs. And also if they did do that, we get back to other problem which is that schools will only offer programs that lead to high paychecks making them just job training and not places of overall learning.
      - gameman144 3y ago
        Loan companies might not want to do that, but it's absolutely part of the due diligence they have to do. If I borrow a few hundred thousand for a home, the loan company does a deep dive to ensure that my home is a sensible buy (e.g. appraisal) and that I'm in a position to pay back the loan (e.g. credit check, historical performance). It's absolutely wild that we'd absolve loan companies from this due diligence for young adults with less credit history and no ability to default on the loans. Also, you may be right that schools start to prioritize programs that allow borrowers to earn enough to repay their debt. Why is this a bad thing? I would absolutely argue that a poor student would be better off being unable to obtain loans for a degree with poor returns then they would be taking on mountains of debt that they can never discharge. For the rich, those talented enough to earn scholarships, and those willing to accommodate loan companies' stringent conditions on risky borrowing, degrees with poor monetary returns will absolutely stick around as they always have.
        jedberg 3y ago
        > It's absolutely wild that we'd absolve loan companies from this due diligence for young adults with less credit history and no ability to default on the loans. We haven't absolved them per se. At first they tried to get the data and make smart decisions, but there just wasn't enough data for them to make good decisions, so they denied everyone. That's why the government got into the business of backing the loans in the first place -- it was the only way to get the loan companies to make the loans. > For the rich, those talented enough to earn scholarships, and those willing to accommodate loan companies' stringent conditions on risky borrowing, degrees with poor monetary returns will absolutely stick around as they always have. There wouldn't be enough students to support that, because amongst those people, many would still choose the lucrative majors. > Also, you may be right that schools start to prioritize programs that allow borrowers to earn enough to repay their debt. Why is this a bad thing? Now we have a philosophical debate. Do we want to live in a society where no one studies philosophy, poetry, art, music, creative writing, and so on? Ironically, someone who studied philosophy would probably be more suited to answering this question than I am.
  - eitally 3y ago
    Well, as a start states can start refunding their colleges and universities, to levels that used to be common [until roughly the 90s]. After that, it becomes more prescriptive around roles of operation, and that's murkier. For example, I'd be happy to see hard caps on $ of operational budget spent on admin. I'd also be happy if sports was budgeted for separately and that student athletes were separately admitted to both their sport(s) and for academic study. There are many things states could do that would impact how schools are managed, regardless of the federal government's rules for student loan lending.

gameman144 3y ago

This seems fine to me. If someone has no assets and no reasonable prospects to pay back $100,000 of debt, then saddling them with $100,000 of debt is a bad idea. Additionally, discharging student loans in bankruptcy should absolutely not be a way to get off scot-free, it's meant as an escape valve. If your options are the terrible downsides of declaring bankruptcy and the terrible downsides of a life in extreme debt, neither option is great, but having the choice is useful.

jedberg 3y ago
Right but see the problem is how does a really smart poor person get an education so they can become a really smart rich person?
- gameman144 3y ago
  They study in a field which has a high likelihood of loan repayment, or study at a less expensive school. If a really smart poor person wants to become a really smart rich person by pursuing a degree in film studies, it's reasonable (in my opinion) for a bank to say "borrowers whose only education is a bachelors in film studies tend to have trouble paying back loans, so we won't lend you very much". If that very smart poor person is pursuing a degree in accounting or engineering, though, most banks can do the actuarial work to determine that the likelihood of payment is pretty good. This all seems totally fine and fair to me. And if the really smart person does have trouble paying back their loan, bankruptcy can be the absolute last option they resort to, just as it is with most other loans.
  - jedberg 3y ago
    I'm not sure loan companies want to get into the business of rating specific programs at specific universities and their ability to produce students who can get good jobs. And also if they did do that, we get back to other problem which is that schools will only offer programs that lead to high paychecks making them just job training and not places of overall learning.
    - gameman144 3y ago
      Loan companies might not want to do that, but it's absolutely part of the due diligence they have to do. If I borrow a few hundred thousand for a home, the loan company does a deep dive to ensure that my home is a sensible buy (e.g. appraisal) and that I'm in a position to pay back the loan (e.g. credit check, historical performance). It's absolutely wild that we'd absolve loan companies from this due diligence for young adults with less credit history and no ability to default on the loans. Also, you may be right that schools start to prioritize programs that allow borrowers to earn enough to repay their debt. Why is this a bad thing? I would absolutely argue that a poor student would be better off being unable to obtain loans for a degree with poor returns then they would be taking on mountains of debt that they can never discharge. For the rich, those talented enough to earn scholarships, and those willing to accommodate loan companies' stringent conditions on risky borrowing, degrees with poor monetary returns will absolutely stick around as they always have.
      - jedberg 3y ago
        > It's absolutely wild that we'd absolve loan companies from this due diligence for young adults with less credit history and no ability to default on the loans. We haven't absolved them per se. At first they tried to get the data and make smart decisions, but there just wasn't enough data for them to make good decisions, so they denied everyone. That's why the government got into the business of backing the loans in the first place -- it was the only way to get the loan companies to make the loans. > For the rich, those talented enough to earn scholarships, and those willing to accommodate loan companies' stringent conditions on risky borrowing, degrees with poor monetary returns will absolutely stick around as they always have. There wouldn't be enough students to support that, because amongst those people, many would still choose the lucrative majors. > Also, you may be right that schools start to prioritize programs that allow borrowers to earn enough to repay their debt. Why is this a bad thing? Now we have a philosophical debate. Do we want to live in a society where no one studies philosophy, poetry, art, music, creative writing, and so on? Ironically, someone who studied philosophy would probably be more suited to answering this question than I am.
- eitally 3y ago
  Well, as a start states can start refunding their colleges and universities, to levels that used to be common [until roughly the 90s]. After that, it becomes more prescriptive around roles of operation, and that's murkier. For example, I'd be happy to see hard caps on $ of operational budget spent on admin. I'd also be happy if sports was budgeted for separately and that student athletes were separately admitted to both their sport(s) and for academic study. There are many things states could do that would impact how schools are managed, regardless of the federal government's rules for student loan lending.