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I'm curious what people think a fix to this would be. My suggestion would be to have regulations on who is allowed to take on a loan. The ultimate decision can
by salil999 3y ago
I'm curious what people think a fix to this would be. My suggestion would be to have regulations on who is allowed to take on a loan. The ultimate decision can be done by the bank but some basic requirements can be enforced via policy.
- paulpauper 3y agothe fix is the market adjusts itself with lower prices for homes, tuition, etc.
- bt4u 3y ago[dead]
- sooheon 3y agoA market cannot exist if the central government is guaranteeing loans (i.e. ensuring there are no survival incentives for lenders). Remove the guarantees, and market will correct itself.
- gpapilion 3y agoIsn’t this what happened with the credit default swaps? Banks found ways to lend money and pass the rush between them, causing failure for everyone. Yet here we are again with a new version of the same issue.
- sooheon 3y agoEven dumber. Because this time it's not the banks outsmarting regulators with opaque products, it's the regulators themselves saying "lend all you want, we'll back the loan!"
- Qwertious 3y agoI don't think housing is actually a bubble - a bubble is a situation that only exists due to widespread belief, but the current situation is fueled by real chronic problems. Namely: zoning laws that prohibit dense housing, and a widespread homeowner voting-base who vote to keep the laws as such. The market can't adjust itself because it's not broken; everyone buys houses because it lets them avoid future rent hikes, and basically everyone needs to buy/rent a house near their job if they don't want to go broke, so there's a huge captive market.
- sooheon 3y agoBetter answer: just stop central government guarantees on loans. State guarantees are what allow FM&FM to lend money without regard for actual risk management, because they know they will be bailed out. Remove the guarantees, and banks will actually have to do their due diligence on credit risk. No need for clunky regulation, when this is what the credit market is for.
- vxNsr 3y ago[flagged]
- PartiallyTyped 3y agoWhy not allow defaults on federal loans?
- sooheon 3y agoSure. Or why have federal loans at all?
- PartiallyTyped 3y agoPrecisely; tertiary education should be free as it’s a matter of natsec.
- thom 3y agoWhat effect would this have on the type of people would got to go to college?
- sooheon 3y ago1. It would lower price of education, because you no longer have a source of infinite credit. 2. More people would "get to" go to college, because 1. 3. Those who do get loans, would get loans proportional to the value the education will generate. 4. Unprofitable majors will become cheaper to take. Also, this isn't just about student loans, it's an even bigger problem for mortgages.
- Humboldtsnee 3y ago[dead]
- strken 3y agoFrom an Australian perspective, US loans are in an unfortunate middle ground where they're not dischargeable in bankruptcy and are protected by your government, but are owed to private companies and must be paid off regardless of your income. Making them dischargeable from the start would have stopped a lot of problems from forming, since borrowers could just default, thus lowering the average education fees due to downward pressure on loan amounts, and tightening lending requirements. Nationalising loans and only requiring repayment at high incomes would make them easier to deal with - the repayments just out of your tax, are only added at high tax brackets, and lower your borrowing capacity. Sitting in the middle of the two sides is the problem.
- Humboldtsnee 3y ago[dead]