U.S. Student Debt in ‘Serious Delinquency’ Tops $166B

> It's been injected in there for the benefit of the lenders.

Whether that's true depends on your moral framework, doesn't it?

> They charge an interest rate to cover their risk.

That's not exactly correct. I mean, a portion of the interest rate is due to risk, but another portion of it is because lenders need a return on their investment, or they won't lend. Moreover, student loan debt is not totally risk free (as we can see by the fact that $150B of it is in serious default).

> Like strikers refusing to work until better working conditions are provided, so too are debtors withholding payment doing something noble.

There is a difference. A person's agreement to work must be continuously in effect. They can withdraw it at any time, with no consequences other than that the ongoing benefits of their employment should also terminate immediately. That is, most non-union workers are working without a prospective agreement in place that obligates them to provide future labor. And when union members strike, it's normally when they are without a contract. Not in the midst of an existing contract with management.

The same is not true of an agreement to pay back a debt. It is prospective: "in the future, I will pay back such and such amount, on such and so terms." You can argue a lot of different things about these notes -- whether they're fair, whether the people agreeing to them are capable of understanding them, etc. Should the age of majority be raised? Should people be required to take a test to ensure they understand contracts before they are allowed to enter into them? And you can also argue about policy that might ameliorate the situation. But there is little contractual similarity between refusing to repay a loan and striking.

I would be interested to see this data scaled with the average price of attending college. That cost has 'surged' in recent years as well, most because colleges are so much better at teaching now!

Like you mention it'd simply create an equilibrium. People would declare bankruptcy when the discomfort of repaying the loans exceeded the discomfort of declaring bankruptcy. If I lend you an unsecured $10 which you then expend on something personal and materially intangible (such as an education) you're not going to declare bankruptcy to get rid of that $10 debt. If I lend you an unsecured $1,000,000, you almost certainly would declare bankruptcy to get rid of that debt. So we can say that my risk (as a lender) in lending you $10 would be 0%, while my risk in lending you $1,000,000 would be 100%. There's some curve there where I maximize my profit:risk in the middle that depends on the specifics. Like any loan it now becomes the job of the lender to assess that risk, determine eligibility, and profit off sound financial decisions - or, themselves, go bankrupt with poor financial decisions.

I think this would be a vastly better scenario simply because all interests would be aligned. Universities would have an incentive to keep prices reasonable because lenders would want to keep the total amount lent per individual relatively low. Universities would also have an incentive to ensure students would be likely to be able to comfortably provide for themselves after graduation because, once again, lenders would have an incentive to ensure that the people they're lending to will be able to comfortably pay back their loan once they graduate. And so forth and so on. In the end, we'd likely reach a scenario where it'd be relatively easy to obtain loans for majors likely to improve your ability to comfortably provide for yourself, and relatively difficult to obtain loans for majors likely to leave you with difficulties providing for yourself.

A world where anyone could pursue education, on public dollar, on any topic they'd like, is an interesting idea. I look forward to seeing the outcomes now that such systems are truly starting to be put to the test. Many nations are facing substantial pressures on their social systems such as aging populations, increasing costs of medical care, reduced fertility rates, immigration of lower earning individuals, etc. At the same time, the face of the job market is constantly changing such that an ever larger share of all desirable careers require some degree of educational specialization to even get your foot in the door. These are relatively new problems and I'm not entirely convinced that utopic ideas of decades past will remain viable in the decades to come - though I certainly hope to be proven wrong!

That would be the end of poor people going to college in this country, at least under the current legislative regime. The only reason anyone loans money to poor people to go to college right now is because they know the recipients can't get out from under the loans. A no-collateral loan to someone with few assets or prospects just wouldn't happen if that provision in the law didn't exist. Or the interest rate would be enormous. But if the interest rate were high then defaults would be high. So you'd probably have some sort of death spiral. No, I doubt such lending would happen any more.

Now, the legislative regime could change. But it would have to change quite a bit to get significant increases in funding for college. Or maybe it's better if poor people just don't go to college? That's questionable at best.

I think this problem is a lot harder than people on this thread are making it out to be. Making student loan debt bankruptcy proof is within the Overton window in this country. I guess not making it bankruptcy-proof with no other changes is also within that window. Free or reduced price college tuition for the vast swathes of people who need it to attend is just outside, so it's definitely a foreseeable outcome, but if we don't get there in the next two decades that wouldn't surprise me either.

In the states, there are many non-profit Universities running for profit. That's why every one can get admitted to whatever major/program at some school. This is like non-profit hospitals ripping off people.

For the European model to work in the states, many schools need to be shut down, so as to reduce the freedom of picking whatever major at some school.