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Soaring Student Debt Prompts Calls for Relief

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Re: Soaring Student Debt Prompts Calls for Relief

#421

Post by dpark »

dragonwriter wrote: post #259
deegles wrote: post #200

Earlier quoted context omitted.

How would one repossess an education? Isn't that the reason student loans are not dischargeable?

> How would one repossess an education? You can't. > Isn't that the reason student loans are not dischargeable? No. First, student loans are, in fact, dischargeable, though there is a higher bar to discharging them. So expalanations of why they are not dischargeable are unnecessary (and necessarily incorrect.) But, more to the point, unsecured loans in general are dischargeable without the heightened requirements tha…

> First, student loans are, in fact, dischargeable, though there is a higher bar to discharging them. So expalanations of why they are not dischargeable are unnecessary (and necessarily incorrect.)

Explanations of why they are more difficult to discharge is certainly necessary, though.

I'm also curious how student loans can be discharged except via death of the lendee. It probably happens, but I don't personally know anyone who has discharged subsidized student loans in bankruptcy. (I do know people who have discharged unsubsidized private student loans in bankruptcy.)

Re: Soaring Student Debt Prompts Calls for Relief

#422

Post by Blackthorn »

dpark wrote: post #416
mgkimsal wrote: post #405

Earlier quoted context omitted.

"for other people's bad financial decisions" Why is making loans to people that have, statistically, a very low chance of paying off somehow not also a "bad financial decision"? We pay for "bad financial decisions" regardless of who makes them - debt forgiveness for individuals or bank bailouts when they get in over their heads. Banks only lend for education because it's not dischargeable - there's no penalty for the…

> Why is making loans to people that have, statistically, a very low chance of paying off somehow not also a "bad financial decision"? It's important to recognize that you're talking about the federal government and not really banks. Whether it's a bad decision to issue student loans to people who are unlikely to pay them back is irrelevant to the parent question about fairness. The government doesn't have money of i…

When I took out my student loans it absolutely was the banks. Federal takeover is only a recent thing.

Re: Soaring Student Debt Prompts Calls for Relief

#423

Post by morgante »

mgkimsal wrote: post #405
morgante wrote: post #176

Am I the only one who hates the notion of being forced to pay for other people's bad financial decisions? I made the choice to go to a slightly less prestigious school so I wouldn't have to go into debt for college. I also worked all through college to pay for my expenses. Should I now be punished for that decision? Why should we make people's financial mistakes consequence-free? I think the government should get out…

"for other people's bad financial decisions" Why is making loans to people that have, statistically, a very low chance of paying off somehow not also a "bad financial decision"? We pay for "bad financial decisions" regardless of who makes them - debt forgiveness for individuals or bank bailouts when they get in over their heads. Banks only lend for education because it's not dischargeable - there's no penalty for the…

> Why is making loans to people that have, statistically, a very low chance of paying off somehow not also a "bad financial decision"?

I agree that the government shouldn't be making bad loans to people who are unlikely to pay them back. In fact, that's exactly what I said in my comment: the government should get out of the loan business.

Unfortunately, loan forgiveness would mean me (a current taxpayer) having to pay for the past poor decisions of students.

> We pay for "bad financial decisions" regardless of who makes them - debt forgiveness for individuals or bank bailouts when they get in over their heads.

Banks pay significant penalties for bailouts, while people seem to want debt forgiveness with 0 repercussions. Not to mention this whole issue of banks is orthogonal because most loans are from the government.

If we let the bankruptcy system handle it, people could get out of their loans but there would still be consequences.

Re: Soaring Student Debt Prompts Calls for Relief

#424

Post by [deleted] »

dpark wrote: post #417
gozur88 wrote: post #397

Earlier quoted context omitted.

>Federally-backed student loans, undischargeable and given to all and sundry, to be spent wherever on whatever, is a gigantic short in the moral-hazard circuit. I'm not sure you're using the term "moral hazard" correctly. If the loans were dischargeable that would be a moral hazard, because the smart thing to do would be to borrow up to your eyeballs and then declare bankruptcy ten years later on graduation day.

Is it not also a moral hazard to lend unceasingly knowing that you'll destroy the economy before taking a hit on the bad loans you've issued?

[deleted]

Re: Soaring Student Debt Prompts Calls for Relief

#425

Post by morgante »

rayiner wrote: post #362
morgante wrote: post #211

Earlier quoted context omitted.

Like toomuchtodo mentions, we could treat it like other unsecured debt (like credit card debt). Just because it's unsecured doesn't mean we shouldn't be able to discharge it with bankruptcy. Get the government out of the loan business and the market will correct itself. You won't be able to get a loan for a useless degree and if you end up being unable to pay off your loan you can go through normal bankruptcy proceed…

Poor minorities also won't be able to get student loans. That makes your proposal a total non-starter in a society that emphasizes education as the path to economic advancement for minorities.

That's an unproven assumption.

If existing lenders aren't willing to loan to minorities, then there would be a fantastic opening to make a profit in loaning money to poor minorities with high test scores to study STEM.

Re: Soaring Student Debt Prompts Calls for Relief

#426

Post by dpark »

WalterBright wrote: post #302
zanny wrote: post #294

Earlier quoted context omitted.

The class that lends is also the class whose marginal increases in wealth do not produce goods demand or consumption, it just goes back into lending and / or investment / and or bonds. The best way to grow an economy is to give a dollar to its poorest participant, not its richest, because the poor class will immediately spend it on goods, creating demand, where the richer you are the less of your income goes to consu…

This is another variation on the "rich people hoard money" theory. The reality is that rich people's lending, investment, and bonds all spend that money, too. Nobody borrows money unless they plan to spend it (otherwise it would make no sense). Nobody hoards cash.

That's not really true. If you're truly poor, you'll spend every dollar basically as soon as you get it. If you're moderately wealthy, an extra dollar you receive might pay off a dollar on a loan, or turn into an extra dollar in your savings account, both of which actually reduce the amount of money in circulation. This isn't "hoarding" but has a different effect on the economy than spending.

Re: Soaring Student Debt Prompts Calls for Relief

#427

Post by Blackthorn »

beachstartup wrote: post #249
MrQuincle wrote: post #213

Earlier quoted context omitted.

Schools can charge a lot because other people pay a lot. As individual you cannot single-handedly decide to pay less. Compared to Europe the education system in the US looks like a system that is trying to get as much money out of young adults as possible rather than getting as many people as possible an affordable education.

> Compared to Europe the education system in the US looks like a system that is trying to get as much money out of young adults as possible rather than getting as many people as possible an affordable education. the private college system is what you are describing. the community college and public university system does exactly that, but nobody talks about it, because it's un-glamorous and un-dramatic.

Let's not pretend public universities are low-cost options now. Their cost has ballooned along with private universities.

Re: Soaring Student Debt Prompts Calls for Relief

#428

Post by morgante »

brianwawok wrote: post #413
morgante wrote: post #176

Am I the only one who hates the notion of being forced to pay for other people's bad financial decisions? I made the choice to go to a slightly less prestigious school so I wouldn't have to go into debt for college. I also worked all through college to pay for my expenses. Should I now be punished for that decision? Why should we make people's financial mistakes consequence-free? I think the government should get out…

So I don't weigh 600 pounds and smoke. But I have to pay higher health insurance premiums than I rightfully should. Why don't they get consequences? It's a tricky problem. To both provide consequences and support the weak amoung us.

> So I don't weigh 600 pounds and smoke. But I have to pay higher health insurance premiums than I rightfully should. Why don't they get consequences?

Moral hazard and consequences are exactly why smoking is one of the few things which are allowed to affect premiums under ACA.

Re: Soaring Student Debt Prompts Calls for Relief

#429

Post by gozur88 »

dpark wrote: post #417
gozur88 wrote: post #397

Earlier quoted context omitted.

>Federally-backed student loans, undischargeable and given to all and sundry, to be spent wherever on whatever, is a gigantic short in the moral-hazard circuit. I'm not sure you're using the term "moral hazard" correctly. If the loans were dischargeable that would be a moral hazard, because the smart thing to do would be to borrow up to your eyeballs and then declare bankruptcy ten years later on graduation day.

Is it not also a moral hazard to lend unceasingly knowing that you'll destroy the economy before taking a hit on the bad loans you've issued?

I don't think so. Getting companies to lend to students was the whole point of the program. Normally you'd use the term to describe unwanted side effects.

Re: Soaring Student Debt Prompts Calls for Relief

#430

Post by morgante »

GarrisonPrime wrote: post #415
morgante wrote: post #176

Am I the only one who hates the notion of being forced to pay for other people's bad financial decisions? I made the choice to go to a slightly less prestigious school so I wouldn't have to go into debt for college. I also worked all through college to pay for my expenses. Should I now be punished for that decision? Why should we make people's financial mistakes consequence-free? I think the government should get out…

I agree. I'll just say though, that when jobs are very scarce, people are broke, and everyone and their brother keeps saying "get an education to improve your job prospects", then what do you expect the swarms of unemployed young people to do? We should absolutely stop subsidizing this craziness though.

> I'll just say though, that when jobs are very scarce, people are broke, and everyone and their brother keeps saying "get an education to improve your job prospects", then what do you expect the swarms of unemployed young people to do?

Get a degree in something useful (ex. CS) instead of political science or musical theater.

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