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Should Student Loans be dischargable from Bankruptcy?
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Angelus Errare
Banned
Butts-a-plenty
Banned
0% interest rate and require payment on loans only once a certain income level is reached.
Is this talking about private loans? Because federal loans have multiple repayment options and forgiveness thresholds.
These are unsecured loans for tens of thousands of dollars to a typical applicant who has no assets and no stable job. No sane entity would grant these loans if they could be easily discharged.
Unless you want to push all the loan losses to the government, at which point you might as well make college tuition free.
Unless you want to push all the loan losses to the government, at which point you might as well make college tuition free.
diffusionx
Gold Member
If companies are on the hook for defaulted student loans, they would be more prudent in giving them out. On the other hand, if they are more prudent, who is going to loan tens of thousands of dollars to a 18 year old with no income?
Obviously having the government swallow the cost of default is not going to happen nor should it, since it's just privatizing gains and socializing losses.
IIRC, this is why loans were made non-dischargeable in the first place.
Obviously having the government swallow the cost of default is not going to happen nor should it, since it's just privatizing gains and socializing losses.
IIRC, this is why loans were made non-dischargeable in the first place.
In the seventies, a rumor came out that doctors where going to medical school then pleading bankruptcy to get out of debt.
From my understanding it was false.
In the UK you don't pay back money towards your student loan unless you earn over a certain amount of money (for me it's £15 for newer students it £20k) and then it's a percentage (<10%) of what you earn over that amount. if you don't pay if off in 30 years the debt is written off. It's done this way so that student debt won't bankrupt you.
In the case of bankruptcy, you assets are reclaimed and distributed to recover as much as possible. How would that work with education?
You could make it so the person can not legally get a job in the field for which they got the degree, but even if that could be enforced that would do nothing for the debt holder.
You could make it so the person can not legally get a job in the field for which they got the degree, but even if that could be enforced that would do nothing for the debt holder.
Tal Shiar Agent
Member
Less loans would be given out so college admission rates would plummet so colleges would cut tuition costs so people wouldn't need loans to go.
Technosteve
Banned
Hear that sucking sound? Thats the sound of entitlement
Indentured servitude, huh.
That term gets thrown around quite a bit. Perhaps this debate could benefit from a little less hyperbole... And misery can often be attributed to picking a worthless degree that is widely known to be of little use in the job market.
On topic, it should absolutely be treated like any other debt, and the interest should be much, much lower.
But honestly, the student (and the family) has to be smart when choosing a major and program. You can't invest 100,000 in a liberal arts degree then complain when there are no jobs.
enanogrande
Member
Yes. Of course this would mean a lot less student loans would be given out, meaning less students. That's the reason they're not dischargeable after all, to incentivize banks to give an 18-year-old with no job and no credit history an $80.000,00 loan to study. Once you remove that incentive, you're gonna see a much stricter vetting process to give out these loans.
dave is ok
aztek is ok
That's the reason people were given, but there is no evidence that this type of fraud was ever committed en masse.
Student loans were dischargable for many many many years. I'm not sure why everyone is buying into this fiction that it's impossible to allow them to be discharged.
NoblesseOblige
Banned
I don't know anything about bubbles, but yes,it should. I would never do it because having good credit is like gold to me, but if others struggle under the weight of their loans they should have the option for an out.
Bankruptcy destroys your credit. Which becomes necessary as you buy a car, or a home, or even finding a job.
Bankruptcy destroys your credit. Which becomes necessary as you buy a car, or a home, or even finding a job.
Hexa
Member
Which would be for the best honestly.
And if you're worried about people doing it right out of college, just put like a 5 year after graduation requirement on it or something.
There is no easy answer. SL unquestionably prop up our unsustainable education system but they also make it possible for virtually anyone to attend/afford college. The main issue with SLs is that they are not the same as home or business loans because of the clientele. Most folks taking out student loans have little to no prior credit history. They are banking (pun intended) on a student's ability to find work post graduation and repay the loan. SL (not including cosigned loans) are not secured by any tangible good to mitigate losses like a home loan. If you make SL dischargable in Bankruptcy then you have eliminated any recourse a bank might have which means that banks are less likely to issue such "risky" loans. If students cannot get loans then they can go attend college which hurts their chances to find a job down the road. It additionally hurts colleges which are counting on high attendance numbers to meet their operating budgets.
But doesn't it basically normalize after 7 years? Better than paying off a gigantic loan for 10-20 years
It also turned out to be complete bullshit
there should never be non-dischargeable loans. It flies in the face of why a loan even exists. A loan should never be guaranteed to the lender.
Nope. The reason loans go up and up now is because colleges can literally name a price and that money is 100% guaranteed cash in pocket. There is no reason to ever reduce your price. If colleges were actually in competition with each other, they'd have more incentive to accept more students to minimize their risk as more payers = more crumple zone if someone defaults on you = lower tuition to attract more students.
Arthr2ShdsJcksn
Banned
They should be discharged without Bankruptcy for everyone. Public college education should be a right, not a burden.
Muppet of a Man
Member
See above. There is already a major disincentive in place to curtail bankruptcy filing. It is the destroying of credit. The fact that the government constantly needs to appeal to the needs of the rich when creating laws which broadly support the robustness of this country's labor pool speaks volumes. Higher education is not for this purpose, at least it no longer is. Higher education and the educational loans that go with it are solely a money making enterprise in the eyes of those who have crafted the laws making filing for bankruptcy impossible for those with student loan debt. The alternative for the rich is much worse: having a free or highly subsidized higher education system.
outunderthestars
Banned
This right here. Why do you think a 17-18 year old kid can get a $25,000 loan when they can barely get a $500 high interest rate credit card?
The vast majority of that debt is held by the government. What do you think they will do with a 1 trillion dollar hole in their wallet?
Then set-up your own lending institution with allowable discharge. You'll have a million applicants within a week with zero advertising.
Basically since the government backs these loans anyway, the taxpayer has literally already paid all the loans - we should just switch over to an "we're making sure you're serious" fee system where the government just drops the the whole facade and charges you a level fee based off income + a certain % of your check after graduation for 10 years and that's it. Colleges should have to notarize down to the the bed linen the reasoning for their tuition costs. You'd start seeing that price drop like a rock.
As it is if you're certain corporation in this country, you are the ONLY people that are allowed to get 100% guaranteed money, with zero risk. Hell, you even get to own the collection agency and double dip on the loan payments! fuck that shit. It's stupid how they have access to risk free money while nobody else does. It's insanity.
As it is if you're certain corporation in this country, you are the ONLY people that are allowed to get 100% guaranteed money, with zero risk. Hell, you even get to own the collection agency and double dip on the loan payments! fuck that shit. It's stupid how they have access to risk free money while nobody else does. It's insanity.
I don't blame people for wanting their student loans to disappear. They will believe any plan plus do and say anything to make it happen.
It's not going to happen. What needs to happen is a change in the system going forward. People incurring massive amounts of debts needs to stop. But there is no way that history is going erase. For decades too many people have spent most of their lives paying off their debt so for this generation to suddenly get a free pass is never going to happen.
"They must experience pain because the last generation went through pain" is one of the most shortsighted methods of governance ever.
I'm not talking about tuition. I'm talking about loan interest rates. Student loans have very artificially low rates for unsecured loans, the lack of dischargeability has a lot to do with that.
All other things being equal rates would have to go up to cover the losses from defaults.
biggersmaller
Banned
Sure, but nobody is willing to lend $50k to a teenager with no income or credit history without the bankruptcy exception.
diffusionx
Gold Member
So what terms would it take for a lender to loan tens of thousands of dollars to an 18 year old who won't be earning significant income for at least four years, if ever?
Colleges are in competition with each other, but not on price. On amenities, basically, which is another reason why tuition and other fees have gone up so quickly (dorm pools, rooms that look like luxury hotels, Equinox tier gyms, and massive student life bureaucracies are not cheap!). But I don't know how you get a 17 year old to care about price. 17 year olds are dumb as a matter of course. They can't think of what life is going to be as a 27 year old paying student loans. It just doesn't compute.
You might as well put up a sign that says "free money" because that's how it would be treated by the majority. Students wouldn't care about ruining their credit rating.
There are already thousands lining up to take on huge debt as it is. Provide a bankruptcy out and it becomes a complete no doubter for everybody.
With most loans, there's something to repossess if the loan defaults. They can repossess a car, they can foreclose on a home. They can't do that with an education.
It would be incredibly difficult to secure a student loan if they were dischargeable. In the current state, in my mind it comes down to responsibility on the students part. Don't go to school if you can't afford it and do your homework to make sure that there's a market and a good enough salary in the field you're studying before taking out a significant amount in loans. Live at home, got to community college.
It would be incredibly difficult to secure a student loan if they were dischargeable. In the current state, in my mind it comes down to responsibility on the students part. Don't go to school if you can't afford it and do your homework to make sure that there's a market and a good enough salary in the field you're studying before taking out a significant amount in loans. Live at home, got to community college.
shoplifter
Member
Conversely, the value of a given degree/major to society isn't actually proportional to the amount of pay that field provides.
Fenderputty
Banned
Bush JR added to this making private loans non-dischargable as well.
Making them dischargeable would hike the interest rate sky-high. Making them dischargeable while capping the interest rate would probably dry up the supply of loan providers or make it purely a government function since the chance of losing money would be too high.
The best antidote is tackling state aid to public schools. Get average in-state tuition down to, say, $3000/semester and take steps to keep it there (pegged to overall inflation, e.g. use policy to slow cost-of-college inflation), then keep most everything else the same.
The best antidote is tackling state aid to public schools. Get average in-state tuition down to, say, $3000/semester and take steps to keep it there (pegged to overall inflation, e.g. use policy to slow cost-of-college inflation), then keep most everything else the same.
SynthFetish
Member
Yes they should. It would be a step towards government paid tuition. Because let's me completely honest, most people will never be able to pay back their student loans in full. It's already a predatory scam, that I am admittedly riding with no intention of ever being able to pay them back.
Absolutely true, but you have to know that going in. Maybe spending ~100,000 on a private education in such a field isn't the wisest decision? Why not try a local college or University?
LUFTRAUSER
Banned
From a financial perspective, no. These loans are given to young people who often possess little to no assets to begin with so a bankruptcy to eliminate them would have no consequences at all. Almost none of these loans would be paid back if that were allowed.
Angelus Errare
Banned
Student loans used to be dischargable via bankruptcy and guess what? It wasn't widespread at all. Someone on GAF linked the statistics that showed that like only 2% of people ever declared bankruptcy on their student loans. Makes sense since student loans were only like 1/10 of what they are now, and them being dischargable was one of the reasons why tuition rates were so low. Colleges wouldn't dare price education out of reach for a middle class 17 y/o who could only get a $1,000 - 10,000 loan because he/she had no credit built up.
Because they made student loans nondischargable it effectively told colleges "You can ramp up tuition to your heart's content because these guys are on the hook for these loans for life!" And we saw a major uptick in tuition rates (that continues to climb at a ridiculous rate).
Now we're at the point where tuition rates outpace income rates by a hilarious degree (pun!).
As I've always said in these threads. America is willing to bail out everyone but our most vulnerable. Shit is so backwards.
If people weren't paying the high tuition rates for degrees that are less valuable in the job market, the schools would likely have to do something to combat that. When there's a demand, there's a supply.
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