9 ms·

Ok, but forgiving student loans doesn't do that. It signals to borrowers that they don't have to repay high loans if their career can't support it. It tells bor

by codexb 7mo ago

Ok, but forgiving student loans doesn't do that. It signals to borrowers that they don't have to repay high loans if their career can't support it. It tells borrowers that they can make risky loans without a chance of default. It tells universities that they can keep charging exorbitant tuitions because kids can still get loans to pay them. The solution is to allow judges the discretion to default them in bankruptcy after X number of years after graduation. Lenders need to accept the risk. With no risk, they can loan as much as they want and have guaranteed repayment. This drives tuition higher and higher.

cj 7mo ago
Allowing student debt to be canceled during bankruptcy would be a good first step (possibly even better than canceling student debt across the board). To your point, making it easy to cancel debt teaches borrowers that debt isn’t a serious thing. Requiring someone go through bankruptcy (and all of the associated negatives on your credit score, etc) seems like a good tradeoff. Allows you to get out from under the debt (the entire purpose of bankruptcy in the first place..) while not letting everyone pretend the debt never existed (need to live with the impact of bankruptcy on your ability to borrow in the future) I don’t know why we don’t hear more people lobbying for this. I guess it’s because the sound bite isn’t as sexy.
- SpicyLemonZest 7mo ago
  People who start lobbying for it quickly discover that 87% of people who petition for their student debt to be cancelled in bankruptcy get it (https://www.cnbc.com/2025/12/29/bankruptcy-student-loan-borrowers.html https://www.cnbc.com/2025/12/29/bankruptcy-student-loan-borr...). I support removing the special treatment entirely, but ultimately most student debt holders don’t go bankrupt.
  - isleyaardvark 7mo ago
    > Still, few people pursue the option because of a “pervasive” myth that the loans can’t be included in the proceeding It also says nothing about whether the person actually goes bankrupt, just which debts are discharged, which is one of the key parts of the bankruptcy process. Certain debts are discharged because the person can’t pay them back, which is the point of going into bankruptcy court.
- AnthonyMouse 7mo ago
  Bankruptcy affects your credit score for 7-10 years. Someone who graduates from college in their early 20s with six figures in debt could file for bankruptcy immediately and have it be off their credit history by the time they've saved up a down payment and want to get a mortgage. There is also the obvious drawback that if more people can discharge the debt, the interest rate goes up, and then everyone else has to pay for the people who took out loans they didn't pay back.
  - cj 7mo ago
    Imagine a world where lenders charged different interest rates depending on the risk profile of each school. Lower interest rates for schools where graduates repay their debt, higher interest for schools where many people default. Assuming it wouldn’t disproportionately affect disadvantaged populations, that could be an interesting way to incentivize schools to get their shit together and prepare students for starting their career
    - AnthonyMouse 7mo ago
      That effect would be drowned out by all the people defaulting en masse because getting out of a six figure unsecured debt is worth more than a temporary hit to your credit score.
      - cj 7mo ago
        If that’s true, why isn’t everyone already doing it? Especially if 87% of student loans are forgiven during bankruptcy - maybe people just aren’t aware it’s possible.
        AnthonyMouse 7mo ago
        "Possible" and "easy" are two different things. 87% is of the people who applied for it, but they would be the ones most likely to have it granted because there is little reason to pay lawyers to file a form which is likely to be rejected. But the more you relax the requirements, the more people do it, which is of course the problem.
OsrsNeedsf2P 7mo ago
Why would I work hard once I found out I was going to be defaulted X years from now?
downrightmike 7mo ago
Student loans currently carry no risk. They can't be discharged. Interest is the payment to the lender to accept risk. There is no risk in the current state of student loans. Therefore they should never-ever charge interest. Also schools need to be reigned in, if GA et al can pay each student athlete $40,000 a month, they MUST be held accountable for burdening the students and the state with unscrupulous debt.
- Ekaros 7mo ago
  They should charge rate. But rate should be similar to say interbank rate. Maybe plus something like 0.5%. This is how standard loaning often operates. You have risk free lending so you get loan from somewhere else and then take some margin.
- zeroonetwothree 7mo ago
  Around 6% of student loans are defaulted on. Some of those end up never being repaid while others are delayed substantially. Also interest is payment for the combination of losing use of money + risk + inflation.
- trothamel 7mo ago
  Interest also compensates for the other things that money could be doing. If I didn't loan it to you (or a student), then I would be doing something else with the money, even if just buying a government bond.
  - thatcat 7mo ago
    I'm not sure that is accurate. You need a borrower to do that. If there were other low risk borrowers they would also lend them money, it's not a zero sum game. I'm no banker, but pretty sure the bank doesn't lend itself fractionally reserved loans and buy t-bonds.
  - downrightmike 7mo ago
    College grads also pay on average 10x the taxes above a HS grad, so there is a huge disconnect on the repayment the lenders get. Once you pay the SL amount in taxes, you should be done.
Aurornis 7mo ago
I’m always surprised that student loan forgiveness appeals to anyone who should otherwise be able to think about all of the bad second order effects. The more we inject money into the education system, the higher prices go. Setting a precedent that the government will just pay off your loans if you don’t pay them off only encourages more people to take out loans without thinking about paying them back. There are so many things wrong with this idea that I can’t believe it continues to be popular. The only thing I can think of is that it’s a litmus test for who can and cannot consider second order effects of economic decisions, or who believes money can spent en masse without altering the system.
- TimorousBestie 7mo ago
  What are the second-order effects of a subclass of citizens permanently encumbered by debt that (with rare exceptions) cannot be discharged through bankruptcy? Perhaps your analysis of second-order effects is not thorough and complete? Have you really considered all of them?
  - horsawlarway 7mo ago
    Not really sure why this is getting downvoted. I don't really think we need to forgive student loans - I think they should absolutely be dischargeable through bankruptcy, though. Bankruptcy isn't a "get out of jail free" card - it puts a huge burden on a student relatively soon after graduating that makes it harder to start a family or buy a home. So it incentives are still aligned for the students taking the loans. But the option that a student defaults brings some real light and transparency into a loan system that just feels wildly disconnected from reality right now. If a student can't pay the loan back with the job options in the field and is like to default... don't issue the loan. I think it's absolutely abusive that student debt can't be discharged, and is pretty heinous as policy.
    - rootusrootus 7mo ago
      Yeah it's pretty amazing that we have loans which you can never escape and yet have high interest rates in spite of that. If I cannot declare bankruptcy, then at the least the interest rate should be 0%, appropriately reflecting the risk.
drakythe 7mo ago
That's why it should be a one time event in conjunction with reworking the whole system. Why can I, as an 18 year old, sign for a loan that _cannot_ be forgiven, graduate into a crashed economy, and still be held accountable for choices that impact me when I only had a small part in them? The system needs reformed, and we need to do something for the people still on the hook of the old system (and I say this as someone who has paid off all my student loans).
- chasd00 7mo ago
  As a parent of a 16 and almost 14 year old i'm effectively home schooling personal finance with them. My wife and I got none from our parents and were preyed upon constantly. I think I was 45 when i finally got my student loans paid off. My wife did many years in a dangerous, low-performing, HS as a teacher to get hers forgiven. Sending an 18 year old off to college without a solid understanding of finance is like throwing an 18 year old in the ocean while bleeding profusely and tasking them with swimming to shore, maybe a couple make it but the sharks will get the rest.
  - WalterBright 7mo ago
    It's a crying shame that public high schools do not teach basic finance, basic accounting, and how a business works. In other words, they don't teach anything about how our economy works.
    - jancsika 7mo ago
      https://www.wunc.org/show/due-south/2024-06-10/personal-finance-course-required-to-earn-high-school-diploma-for-ncs-public-school-class-of-2024 https://www.wunc.org/show/due-south/2024-06-10/personal-fina...
    - bdangubic 7mo ago
      they do. maybe not where you live but they do. my kid has had personal finance classes since 4th grade
Braxton1980 7mo ago
>. It signals to borrowers that they don't have to repay high loans if their career can't support it. The loan forgiveness wasn't a thing when many students took out the loans.
- rootusrootus 7mo ago
  It would be a signal to future borrowers.
  - Braxton1980 7mo ago
    Since credit card debt isn't forgiven why hasn't this stopped people overspending?
mschuster91 7mo ago
That's not a solution at all, because it will price out way too many students. The solution is to do what Germany and most of the EU does - pay universities with tax money and do not charge students anything at all (or maybe a few hundred to thousand euros).
- zeroonetwothree 7mo ago
  How many German universities are ranked top 40 globally? How many American?
  - disgruntledphd2 7mo ago
    > How many German universities are ranked top 40 globally? How many American? University rankings are mostly nonsense. They generally over-weight English speaking universities because most of the "high impact" journals are in English. The UK also does well by these metrics, but fundamentally academic research and teaching are very different things, and incentivising high output research institutions to focus on the research breaks the social purpose of universities which is to turn out educated undergraduates. The German model is to focus more on teaching, which is a more sustainable approach than chasing the finite research dollars.
- disgruntledphd2 7mo ago
  > The solution is to do what Germany and most of the EU does - pay universities with tax money and do not charge students anything at all (or maybe a few hundred to thousand euros). This is a totally fine system, but would change US tertiary education massively. Much of the state university increases in tuition since the GFC have been driven by exactly the opposite behaviour (cut state funding, make it up in tuition).
- WalterBright 7mo ago
  When students have "skin in the game", i.e. they are paying for it, they will work to get their money's worth out of it. People do not value things they get for free.
palmotea 7mo ago
> The solution is to allow judges the discretion to default them in bankruptcy after X number of years after graduation. Lenders need to accept the risk. With no risk, they can loan as much as they want and have guaranteed repayment. This drives tuition higher and higher. This. The whole student loan mess is a direct result of their special treatment during bankruptcy. > It tells universities that they can keep charging exorbitant tuitions because kids can still get loans to pay them. I wouldn't be opposed to some kind of tuition claw-back from schools, when a student loan goes into default (but only by the government, not private lenders). The universities need more skin in the game to keep tuition under control.
thatcat 7mo ago
so take the money back from the universities in all cases where they negligently misrepresented the future job market of the field of study to the borrowers or what?
andrewaylett 7mo ago
Surely the first step is to stop issuing loans in such a way that will cause the next generation of students to suffer the same problems, freeing us up to sort out the problems of previous generations without moral hazard. The UK had what I think was a really nice set up, although it's now not nearly as palatable. My student loan had an interest rate tied to inflation, and repayment was a fixed amount of my income above a limit, collected via the same mechanisms used for income tax. Any unpaid loan would be written off when I turn 60. The modern system is similar, but the interest rate has been decoupled from inflation which means that instead of paying back essentially the same value, no matter how slowly you pay it off, it's now definitely better to pay more earlier. Which makes it much more like a regressive "graduate tax" that you only have to pay if you don't earn enough.
- BoxOfRain 7mo ago
  > The UK had what I think was a really nice set up, although it's now not nearly as palatable. My student loan had an interest rate tied to inflation, and repayment was a fixed amount of my income above a limit, collected via the same mechanisms used for income tax. My problem is that it's presented as a loan but is in effect a tax. I would rather have a graduate tax which was honest on the face of it rather than wilfully misleading students that it's an ordinary loan. The 'loan' framing is harmful in my opinion, because if student loans were regulated like actual loans the government would have much less room to effectively change the deal after the fact. I also feel a lot of the current social and political toxicity around the student loan system comes from it being effectively a tax which you can get out of by lucking into having rich parents who pay your student fees upfront, it rubs people up the wrong way on class grounds. A graduate tax would avoid this problem as well.
  - nly 7mo ago
    It _is_ a loan because you can pay it off.
  - andrewaylett 7mo ago
    With the system as it existed in 2000, it was very much "free money". That was before the introduction of fees, which are still not applicable for Scottish students studying in Scotland, and in combination with the interest rate increase would very definitely tip the balance for me. I have a decent career that means I've paid off my loan. I can easily imagine that many folk with fees and modern loans won't ever even cover the interest payments.

by codexb 7mo ago

cj 7mo ago

Allowing student debt to be canceled during bankruptcy would be a good first step (possibly even better than canceling student debt across the board). To your point, making it easy to cancel debt teaches borrowers that debt isn’t a serious thing. Requiring someone go through bankruptcy (and all of the associated negatives on your credit score, etc) seems like a good tradeoff. Allows you to get out from under the debt (the entire purpose of bankruptcy in the first place..) while not letting everyone pretend the debt never existed (need to live with the impact of bankruptcy on your ability to borrow in the future) I don’t know why we don’t hear more people lobbying for this. I guess it’s because the sound bite isn’t as sexy.

SpicyLemonZest 7mo ago
People who start lobbying for it quickly discover that 87% of people who petition for their student debt to be cancelled in bankruptcy get it (https://www.cnbc.com/2025/12/29/bankruptcy-student-loan-borrowers.html https://www.cnbc.com/2025/12/29/bankruptcy-student-loan-borr...). I support removing the special treatment entirely, but ultimately most student debt holders don’t go bankrupt.
- isleyaardvark 7mo ago
  > Still, few people pursue the option because of a “pervasive” myth that the loans can’t be included in the proceeding It also says nothing about whether the person actually goes bankrupt, just which debts are discharged, which is one of the key parts of the bankruptcy process. Certain debts are discharged because the person can’t pay them back, which is the point of going into bankruptcy court.
AnthonyMouse 7mo ago
Bankruptcy affects your credit score for 7-10 years. Someone who graduates from college in their early 20s with six figures in debt could file for bankruptcy immediately and have it be off their credit history by the time they've saved up a down payment and want to get a mortgage. There is also the obvious drawback that if more people can discharge the debt, the interest rate goes up, and then everyone else has to pay for the people who took out loans they didn't pay back.
- cj 7mo ago
  Imagine a world where lenders charged different interest rates depending on the risk profile of each school. Lower interest rates for schools where graduates repay their debt, higher interest for schools where many people default. Assuming it wouldn’t disproportionately affect disadvantaged populations, that could be an interesting way to incentivize schools to get their shit together and prepare students for starting their career
  - AnthonyMouse 7mo ago
    That effect would be drowned out by all the people defaulting en masse because getting out of a six figure unsecured debt is worth more than a temporary hit to your credit score.
    - cj 7mo ago
      If that’s true, why isn’t everyone already doing it? Especially if 87% of student loans are forgiven during bankruptcy - maybe people just aren’t aware it’s possible.
      - AnthonyMouse 7mo ago
        "Possible" and "easy" are two different things. 87% is of the people who applied for it, but they would be the ones most likely to have it granted because there is little reason to pay lawyers to file a form which is likely to be rejected. But the more you relax the requirements, the more people do it, which is of course the problem.

OsrsNeedsf2P 7mo ago

Why would I work hard once I found out I was going to be defaulted X years from now?

downrightmike 7mo ago

Student loans currently carry no risk. They can't be discharged. Interest is the payment to the lender to accept risk. There is no risk in the current state of student loans. Therefore they should never-ever charge interest. Also schools need to be reigned in, if GA et al can pay each student athlete $40,000 a month, they MUST be held accountable for burdening the students and the state with unscrupulous debt.

Ekaros 7mo ago
They should charge rate. But rate should be similar to say interbank rate. Maybe plus something like 0.5%. This is how standard loaning often operates. You have risk free lending so you get loan from somewhere else and then take some margin.
zeroonetwothree 7mo ago
Around 6% of student loans are defaulted on. Some of those end up never being repaid while others are delayed substantially. Also interest is payment for the combination of losing use of money + risk + inflation.
trothamel 7mo ago
Interest also compensates for the other things that money could be doing. If I didn't loan it to you (or a student), then I would be doing something else with the money, even if just buying a government bond.
- thatcat 7mo ago
  I'm not sure that is accurate. You need a borrower to do that. If there were other low risk borrowers they would also lend them money, it's not a zero sum game. I'm no banker, but pretty sure the bank doesn't lend itself fractionally reserved loans and buy t-bonds.
- downrightmike 7mo ago
  College grads also pay on average 10x the taxes above a HS grad, so there is a huge disconnect on the repayment the lenders get. Once you pay the SL amount in taxes, you should be done.

Aurornis 7mo ago

I’m always surprised that student loan forgiveness appeals to anyone who should otherwise be able to think about all of the bad second order effects. The more we inject money into the education system, the higher prices go. Setting a precedent that the government will just pay off your loans if you don’t pay them off only encourages more people to take out loans without thinking about paying them back. There are so many things wrong with this idea that I can’t believe it continues to be popular. The only thing I can think of is that it’s a litmus test for who can and cannot consider second order effects of economic decisions, or who believes money can spent en masse without altering the system.

TimorousBestie 7mo ago
What are the second-order effects of a subclass of citizens permanently encumbered by debt that (with rare exceptions) cannot be discharged through bankruptcy? Perhaps your analysis of second-order effects is not thorough and complete? Have you really considered all of them?
- horsawlarway 7mo ago
  Not really sure why this is getting downvoted. I don't really think we need to forgive student loans - I think they should absolutely be dischargeable through bankruptcy, though. Bankruptcy isn't a "get out of jail free" card - it puts a huge burden on a student relatively soon after graduating that makes it harder to start a family or buy a home. So it incentives are still aligned for the students taking the loans. But the option that a student defaults brings some real light and transparency into a loan system that just feels wildly disconnected from reality right now. If a student can't pay the loan back with the job options in the field and is like to default... don't issue the loan. I think it's absolutely abusive that student debt can't be discharged, and is pretty heinous as policy.
  - rootusrootus 7mo ago
    Yeah it's pretty amazing that we have loans which you can never escape and yet have high interest rates in spite of that. If I cannot declare bankruptcy, then at the least the interest rate should be 0%, appropriately reflecting the risk.

drakythe 7mo ago

That's why it should be a one time event in conjunction with reworking the whole system. Why can I, as an 18 year old, sign for a loan that _cannot_ be forgiven, graduate into a crashed economy, and still be held accountable for choices that impact me when I only had a small part in them? The system needs reformed, and we need to do something for the people still on the hook of the old system (and I say this as someone who has paid off all my student loans).

chasd00 7mo ago
As a parent of a 16 and almost 14 year old i'm effectively home schooling personal finance with them. My wife and I got none from our parents and were preyed upon constantly. I think I was 45 when i finally got my student loans paid off. My wife did many years in a dangerous, low-performing, HS as a teacher to get hers forgiven. Sending an 18 year old off to college without a solid understanding of finance is like throwing an 18 year old in the ocean while bleeding profusely and tasking them with swimming to shore, maybe a couple make it but the sharks will get the rest.
- WalterBright 7mo ago
  It's a crying shame that public high schools do not teach basic finance, basic accounting, and how a business works. In other words, they don't teach anything about how our economy works.
  - jancsika 7mo ago
    https://www.wunc.org/show/due-south/2024-06-10/personal-finance-course-required-to-earn-high-school-diploma-for-ncs-public-school-class-of-2024 https://www.wunc.org/show/due-south/2024-06-10/personal-fina...
  - bdangubic 7mo ago
    they do. maybe not where you live but they do. my kid has had personal finance classes since 4th grade

Braxton1980 7mo ago

>. It signals to borrowers that they don't have to repay high loans if their career can't support it. The loan forgiveness wasn't a thing when many students took out the loans.

rootusrootus 7mo ago
It would be a signal to future borrowers.
- Braxton1980 7mo ago
  Since credit card debt isn't forgiven why hasn't this stopped people overspending?

mschuster91 7mo ago

That's not a solution at all, because it will price out way too many students. The solution is to do what Germany and most of the EU does - pay universities with tax money and do not charge students anything at all (or maybe a few hundred to thousand euros).

zeroonetwothree 7mo ago
How many German universities are ranked top 40 globally? How many American?
- disgruntledphd2 7mo ago
  > How many German universities are ranked top 40 globally? How many American? University rankings are mostly nonsense. They generally over-weight English speaking universities because most of the "high impact" journals are in English. The UK also does well by these metrics, but fundamentally academic research and teaching are very different things, and incentivising high output research institutions to focus on the research breaks the social purpose of universities which is to turn out educated undergraduates. The German model is to focus more on teaching, which is a more sustainable approach than chasing the finite research dollars.
disgruntledphd2 7mo ago
> The solution is to do what Germany and most of the EU does - pay universities with tax money and do not charge students anything at all (or maybe a few hundred to thousand euros). This is a totally fine system, but would change US tertiary education massively. Much of the state university increases in tuition since the GFC have been driven by exactly the opposite behaviour (cut state funding, make it up in tuition).
WalterBright 7mo ago
When students have "skin in the game", i.e. they are paying for it, they will work to get their money's worth out of it. People do not value things they get for free.

palmotea 7mo ago

> The solution is to allow judges the discretion to default them in bankruptcy after X number of years after graduation. Lenders need to accept the risk. With no risk, they can loan as much as they want and have guaranteed repayment. This drives tuition higher and higher. This. The whole student loan mess is a direct result of their special treatment during bankruptcy. > It tells universities that they can keep charging exorbitant tuitions because kids can still get loans to pay them. I wouldn't be opposed to some kind of tuition claw-back from schools, when a student loan goes into default (but only by the government, not private lenders). The universities need more skin in the game to keep tuition under control.

thatcat 7mo ago

so take the money back from the universities in all cases where they negligently misrepresented the future job market of the field of study to the borrowers or what?

andrewaylett 7mo ago

Surely the first step is to stop issuing loans in such a way that will cause the next generation of students to suffer the same problems, freeing us up to sort out the problems of previous generations without moral hazard. The UK had what I think was a really nice set up, although it's now not nearly as palatable. My student loan had an interest rate tied to inflation, and repayment was a fixed amount of my income above a limit, collected via the same mechanisms used for income tax. Any unpaid loan would be written off when I turn 60. The modern system is similar, but the interest rate has been decoupled from inflation which means that instead of paying back essentially the same value, no matter how slowly you pay it off, it's now definitely better to pay more earlier. Which makes it much more like a regressive "graduate tax" that you only have to pay if you don't earn enough.

BoxOfRain 7mo ago
> The UK had what I think was a really nice set up, although it's now not nearly as palatable. My student loan had an interest rate tied to inflation, and repayment was a fixed amount of my income above a limit, collected via the same mechanisms used for income tax. My problem is that it's presented as a loan but is in effect a tax. I would rather have a graduate tax which was honest on the face of it rather than wilfully misleading students that it's an ordinary loan. The 'loan' framing is harmful in my opinion, because if student loans were regulated like actual loans the government would have much less room to effectively change the deal after the fact. I also feel a lot of the current social and political toxicity around the student loan system comes from it being effectively a tax which you can get out of by lucking into having rich parents who pay your student fees upfront, it rubs people up the wrong way on class grounds. A graduate tax would avoid this problem as well.
- nly 7mo ago
  It _is_ a loan because you can pay it off.
- andrewaylett 7mo ago
  With the system as it existed in 2000, it was very much "free money". That was before the introduction of fees, which are still not applicable for Scottish students studying in Scotland, and in combination with the interest rate increase would very definitely tip the balance for me. I have a decent career that means I've paid off my loan. I can easily imagine that many folk with fees and modern loans won't ever even cover the interest payments.