balladofwindfishes
Member
That sounds like it would make it even easier to justify allowing bankruptcy because then the government takes on the financial burden for students.
Which they should be doing anyway.
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Should Student Loans be dischargable from Bankruptcy?
- Thread starter pgtl_10
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Which they should be doing anyway.
diffusionx
Gold Member
I'm not backing you into anything. It is a consequence of what you propose. It just is. If you make a lower middle class person work 40 hours a week while studying to go to college, it's just going to make it that much harder to go to college for those people, and less will go. If you think that less people should go, that only the really dedicated should be there, that's fine, but that's what would happen.
Like I said, the loans really helped me out. I'm glad they were there. I also think they should be paid back, as I paid them back. I don't support some bailout or anything.
IMO, the problem is not the dollar amount. Spending $100K to get (say) $1M in increased lifetime income is a very wise decision. The question is, does that math work? The problem is that we tell kids to follow their dreams and it will all work itself out. If you really love drawing you should go to college to get a degree in art and then you'll do fine. This is not realistic. It might be a cultural thing unique to this country but the reality is most degrees at what they cost are not viable for all but the richest students. They need to know this going in.
Basically credit itself is bad because it's a "use money to earn money" system that's legally stacked in the creditor's favor. We need to remove those protections which will restrict credit, which naturally forces other industries to compensate with cheaper alternatives. I see little sense arguing within this broken system.
I partially agree but if don't go to college or train in a vocation, what are one's choices? Burger flipper?
Bankruptcy isn't "a hit, sure" - applying for multiple credit cards at once, being late on your payments, letting an old loan go delinquent - those are "hits." Bankruptcy is an entirely different class of "fuck my shit up fam."
Many people can go to college without taking on debt. Many people can go work a minimum wage job, go to community college and work their way through school. Yeah, it might suck, but leaving school without debt is worth it. Most people can do that, but they don't want to. Community college isn't the "sexy" option where you get to live the supposedly super fun college life.
You make it sound like the only option for everyone is to go to an expensive four year university straight out of high school and live on campus. That's why I quoted the posts that I did.
Just because it's not easy doesn't mean it can't be done, like you implied.
If they go that route, do you know how many students would file bankruptcy just to rid themselves of the debt? When the government takes on the financial burden, they lose money. They would then have to increase taxes to compensate for the loss. If you want to go that route, then we might as well go back to FFEL loans (bank issued) and be done with it as the banks will be the ones losing money when the student files bankruptcy. This would probably lead to another credit crises because these banks would have to raise capital in other ways and we know how creative the banks can get.
dave is ok
aztek is ok
So it's a generation ruining event for a person to live with shitty credit for several years but completely doable to pay for full time college with cash? Doesn't it seem like if one of those things were possible, both would be?
Just want to point out that this was never case when student loans were dischargable.
It may very well be if it were changed now, but that has more to due with the greed of the schools.
balladofwindfishes
Member
No they wouldn't. That's not how taxes or Government spending works.
Angelus Errare
Banned
ITT: Not many people realize that you used to be able to file for bankruptcy on student loans.
Based on history about 2%.
Based on history about 2%.
The "I transferred in from community college" plan leaves you in a huge hole when it's time to get a job. Which is the entire point of the degree. You're not going to get many great internship opportunities going to a community college, which means you're effectively squandering a couple of summers when you could be building industry contacts and networking.
That said, even if you were to do it, most people are still going to require debt because the tuition has gotten so out of control. Living at home, making $10 an hour working at Wal-Mart, is not going to give you the $30,000 cash cushion required to attend 2-years of state school. It may reduce your debt burden, but not eliminate it. Even community colleges have gotten pretty pricey. 60 credit hours at my local community college is now almost $6,000. And that's assuming your parents are willing to cover most/all of your living expenses, many are not.
Student loans should absolutely be dischargeable in bankruptcy. It's going to cause a lot of pain when the current debt bubble bursts, but it never would've gotten started in the first place if students could've discharged their loans. If you look at a chart of aggregate student loan debt, you can correlate spikes with changes in the bankruptcy laws.
For-profit colleges are another problem. Getting rid of them would also help significantly.
I shouldn't have said they would have to. More like there would be an increased likelihood for it. Students would be cancelling millions upon millions of dollars of debt with no return on these government issued loans. How do you justify that to the American people? Loans are issued with the understanding that they will be making money off of the loan.
SillyEskimo
Member
Times have changed significantly since then. Loans are higher, for one. Stop using this as your trump card.
Angry Grimace
Two cannibals are eating a clown. One turns to the other and says "does something taste funny to you?"
It makes no sense to have exceptions from bankruptcy to begin with that's why its bankruptcy and that's why they have Means Testing for people attempting to file.
diablos991
Can’t stump the diablos
Only if the loans are privately funded. Once they are privately funded those institutions can charge an appropriate APR for the risk of the loan applicant.
If taxpayer money is being loaned out there should be no bankruptcy forgiveness.
If taxpayer money is being loaned out there should be no bankruptcy forgiveness.
Do you have a source for this?
Students were able to file for bankruptcy on student loans because they were issued by banks. The government and the banks didn't care because the banks sold the debt anyway.
Angelus Errare
Banned
Loans/Tuition are higher because they can't be discharged anymore.
dave is ok
aztek is ok
Yet, you can file bankruptcy on IRS tax debt.
One of the reasons loans are higher because there is no bankruptcy relief to the debtor. Tuition skyrocketing isn't because costs have grown that much.
balladofwindfishes
Member
This thinking seems so backwards. The government are the ones in the best position to take on junk debt...
"Stop using historical evidence!"
Now this question should be asked frequently.
Kinda both. In a pure sense it doesn't matter because the loaners will win some and lose some but that's not how it actually works. Modern loans are set up as a business and entities are legally forcing themselves to win more than they lose. It's basically gambling where you can dole out punishment when you lose and the only way to play is to be rich. It's especially problematic it's the expectation that everyone who's not rich has to get loans and if they don't everything crumbles.
Yep except tuition costs are not about to go down anytime soon. Most public universities have operating budgets close to a billion dollars a year. I highly doubt they can afford to make tuition cuts.
I don't believe that for a second. The low historical amount is based on significantly lower amounts of debt during that time. People are less likely to file when it's $10K. Completely different attitude when it's $100K.
If right now the government declared that bankruptcy can now be filed on student loans, do you really think only 2% would file? I think that lineup of students is going to be significantly longer, cheering all the way at the opportunity.
This is the system I hope we eventually move to. A few states are doing early exploration of the concept, though it's well proven already.
To the OP, yes, they should be discharged.
NinjaMouse
Member
especially when you have a generation that openly has no desire to own property or cars. What's a credit score to them? Credit checks when applying for jobs are useless when bankruptcy becomes a common item on every 22 year old's credit history.
Hari Seldon
Member
Doing this would cause interest rates to go through the roof obviously. The federal government can do a better job and managing price gouging of schools that accept federal loan money. Administration costs should not have gone up at like 200% increase from 1975-2000, for example.
To Far Away Times
Member
Why is the first big loan you take out when you are young and inexperienced the only one you can't default on?
To prepare you for modern serfdom.
timetokill
Banned
The reason it's $100k now is because you can't declare bankruptcy. Tuition rates have been skyrocketing because a degree is basically equivalent to what a high school diploma used to be.
It's a huge money-making enterprise.
And yes, most people would not file. I would because my life is already ruined as it is.
dave is ok
aztek is ok
The problem with this is that a 50 year old who never made too much money, either through disability or being widowed with kids or just plain old underachieving, all of a sudden has a tax bill on the $100,000.00 that is being written off.
Still is a better system than what we have currently.
The job I currently hold doesn't require a degree, but it's helpful. I'm a Systems Engineer and make pretty decent money. Enough to own a house and a car and have money for just about anything I want.
The problem is that people want things handed to them without looking or trying. I struggled for several years to find a way to make my life better and managed to find a way. A lot of people don't expend the effort to do so. That's on them.
timetokill
Banned
Ah, the ol' bootstraps argument. A classic.
shoplifter
Member
Discharging the debt will be followed by things like home purchases (eventually,) increased consumer spending, and people having children.
edit: or *gasp* investment in small businesses
I'll take a two year $10,000,000 loan at 0% interest and just buy some Tbills with it. Fuck it, free money.
timetokill
Banned
Exactly. Even when I was making decent money the vast majority it was going towards paying loans because I made the stupid mistake of getting private loans when I needed to finish college.
I've basically given up on ever owning a home or having children unless I win the lottery or something. I'll probably never buy a car either. My wife and I wanted kids but we decided it would be hugely irresponsible to have them considering our situation. And obviously there's only a specific window where having kids is viable in the first place.
I answered the mans question.
I'm doing well for pulling myself up by my bootstraps, anyway. Debt free. I guess I did something right.
timetokill
Banned
You did, and good for you. The question is whether it should be a "fuck everyone else, got mine" sort of argument, with some nuance shown that recognizes that not everyone is or will be as fortunate as you were.
ChetWilson
Banned
Gonna go with ...
Yes. Full retroactive too. I want the Student Loan bubble to go down like the Hindenburg.
Yes. Full retroactive too. I want the Student Loan bubble to go down like the Hindenburg.
It won't fly for those that have paid off their debt. If people want free education then simply say so. Lets not hide behind bankruptcy. Lets simply have "free" higher education (raised taxes) and be done with it.
timetokill
Banned
Those that paid their loans off won't have to deal with the crippling consequences of bankruptcy.
I swear I don't think you guys understand how much of a negative bankruptcy is.
The opposite is also true- Some responsibility falls on the student/family spending and exorbitant amount of money on an degree which will likely not offer a great ROI.
As much as I would like to live in a world where someone can follow their passion and make a good living, that isn't usually the case.
cpp_is_king
Member
If you're going to make student loans forgivable by bankruptcy, then expect interest rates to quadruple.
I think there needs to be programs that offset the drain that student loans place on recent grads.
One often overlooked statistic in the recent tuition increase is the reduction in state aid to public universities.
State governments looking to make budget cuts slash the funding they provide to universities and the only way that they can remain solvent is to increase tuition.
Over the past few generations there had been a huge shift towards higher education and higher competition for employment. As the importance of a high school diploma increased for a decent paying job it caused people to go to college to gain an advantage. The same thing is happening now. People are looking at the education as a hedge on their future earning potential because that's what history has indicated.
As the economy continues shifting towards a service based industry the need for higher educated people increases. For the government they need to realize that the investment that they are making on education is going to pay off in the future. Globalization is only going to increase competition, and having an educated populace increases countries ability to compete effectively.
One often overlooked statistic in the recent tuition increase is the reduction in state aid to public universities.
State governments looking to make budget cuts slash the funding they provide to universities and the only way that they can remain solvent is to increase tuition.
Over the past few generations there had been a huge shift towards higher education and higher competition for employment. As the importance of a high school diploma increased for a decent paying job it caused people to go to college to gain an advantage. The same thing is happening now. People are looking at the education as a hedge on their future earning potential because that's what history has indicated.
As the economy continues shifting towards a service based industry the need for higher educated people increases. For the government they need to realize that the investment that they are making on education is going to pay off in the future. Globalization is only going to increase competition, and having an educated populace increases countries ability to compete effectively.
The point is that it can be done. People make the argument that education must be free because "only the rich can afford to go to school" without going into a significant amount of debt. That is not the case.
People need to do research before jumping into debt that will cripple them for years. It's not rocket surgery to do some simple research in the career path you're interested in and some math to see if your expected (realistic.. far too many people think that college means they'll be getting an $80K job offer the day they graduate) income will be enough to support you, your goals and your debts.
It's not a "I got mine" issue. It's an issue of people going to an expensive school without doing any research first to see if it makes financial sense. People argue that teenagers and people in their early 20's are too young to know any better, but many people (myself included) knew better, so I don't take that as an excuse.
I'm not saying that the system isn't completely screwed up, but you have to learn to work around it and make something work that will fit with your life.
cubicle47b
Member
The costs may not have grown that much, but state funding for state universities has certainly fallen off a cliff. 30 years ago the state university I work at was 80% funded by the state and 20% by tuition. Now, it's more like 25% funded by the state and 75% funded by tuition. I'm sure guaranteed loans are part of the problem. Another part is just how willing people are to take on ridiculous amounts of debt at a young age.
yankeeforever2
Member
They need to fix the interest rate of them to be lower up to a certain amount (like only 1 or 2% rate) then over a certain amount have the market interest rate. Bankruptcy exception is needed because no one would give out money without that.
I do support the idea of community colleges and vocational colleges being free though.
I do support the idea of community colleges and vocational colleges being free though.
timetokill
Banned
Student loans were given out well before bankruptcy options were stripped away.
yankeeforever2
Member
Yeah but these privates schools are very expensive now especially with the amount of people getting masters. Student loans back in the day compared to now are completely different beasts.
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