Should student loans be dischargeable in bankruptcy court?

[AuH20]

I say let them sit in the crap that they voted for. They love education subsidized so let them experience firsthand the product of their own hand. Maybe they'll even learn something about the business cycle and how manipulative the government and their special interest cronies are.

 

[Kludge]

Remove gov't protections under bankruptcy altogether. Individual A can't pay Individual B, let Individual B decide how to handle it, including going to court for breach of contract. Corporation can't pay Bank? Let Bank call the loan up to 100% the value, and take the entirety of Corporation's assets when they can't raise the money for it, shareholders be damned. Loans/bills aren't some type of soft agreement where you agree to pay what you can, and they shouldn't be treated as such with gov't bankruptcy courts. Without the moral hazard created by bankruptcy laws, you can bet far fewer people will take loans out. Consumers constantly complain about banks, but in many cases, they have the bulk of unfair regulations in consumers' favor. In a free market, banks would be able to call loans in any amount for any reason if their contract permits. There wouldn't be a "bankruptcy protection" from a bank calling a corporation's or individual's loans. Banks simply aren't allowed to react to credit score changes as-is, and that's a big problem.

 

[Becker]

No, ideally I would prefer no debt to be dischargeable, and a person not allowed to have too much debts, no debt stacking...etc.

But student debts really shouldn't be dischargeable, because there's nothing to "take back".

I suppose a person can surrender his claim to an education, but the time, resources have been spent, to say he therefore walks away without paying for what he took, (however unreasonably overpriced) is an insult to people who chose to be responsible.

 

[EvilEngineer]

Sure, the debt can be liquidated.

They want their college debt erased, then in trade they need to lose their college degree.

If you are not going to pay the institution for you attended for your degree, they have no reason to honor your degree.

Or... just don't go into debt for college in the first place.

 

[Becker]

Sure, the debt can be liquidated.

They want their college debt erased, then in trade they need to lose their college degree.

If you are not going to pay the institution for you attended for your degree, they have no reason to honor your degree.

Or... just don't go into debt for college in the first place.

strange how nobody complains "they let me lend money, how dare they not turn me down when I wanted to go to college!"

 

[heavenlyboy34]

They could have done what my two oldest children did - Join the military and EARN their education!

That's not earned money. It's a transfer of wealth/bribery for soldier loyalty program. (every dollar the MIC spends comes from you and I)

 

[heavenlyboy34]

I say let them sit in the crap that they voted for. They love education subsidized so let them experience firsthand the product of their own hand. Maybe they'll even learn something about the business cycle and how manipulative the government and their special interest cronies are.

It was a scam to begin with, unlike a rational free market decision. I know if the market signals had been in place when I went a decade ago I would've skipped college altogether or found a different way of paying for it. It's possible that some people knew exactly what they were getting into, but the majority could not predict the inevitable crash. (it is not reasonable to expect an 18 year old to understand the business cycle and how markets work) The student loan business reminds me more of usury/predatory lending than a legitimate loan. You don't even have to put down any collateral for the loan.

 

[heavenlyboy34]

In regards to the OP, college debt should be dischargeable like other debt. (This would give lenders incentive to loan responsibly as well)

 

[Becker]

In regards to the OP, college debt should be dischargeable like other debt. (This would give lenders incentive to loan responsibly as well)

every other debt, takes back the collateral, am I wrong?

 

[Fr3shjive]

In regards to the OP, college debt should be dischargeable like other debt. (This would give lenders incentive to loan responsibly as well)

I agree. I just wanted to pose the question to RPFs. The tightening of lending standards would mean less money, which means tuition costs would fall too. It doesn't mean that people wouldn't be able to go to school they just wouldn't be able to finance as much as they want under the guise of going to school. Unfortunately they may need to go to a community college and a state school instead of some 50k a year liberal arts school.

 

[Fr3shjive]

every other debt, takes back the collateral, am I wrong?

A lot of debt is unsecured. Then again, unsecured debt has a much higher interest rate.

 

[Rael]

Yes.

 

[enoch150]

The reason student loan debt can't be discharged is because kids were borrowing money to get expensive degrees in fields that paid a lot of money and then filing for bankruptcy right out of college, before they got a job.

At that time, lenders probably wouldn't loan any money unless a kid was getting a degree that was worth something. Now that it can't be discharged, lenders don't care if kids are getting a degree in a field that will allow them to pay off the loan.

A compromise position might be that the loan can't be discharged for, say 15 years and for loans in default, 10% of your wages can be attached until that time.

 

[Becker]

A lot of debt is unsecured. Then again, unsecured debt has a much higher interest rate.

whats an unsecured, dischargeable debt?

 

[Becker]

The reason student loan debt can't be discharged is because kids were borrowing money to get expensive degrees in fields that paid a lot of money and then filing for bankruptcy right out of college, before they got a job.

At that time, lenders probably wouldn't loan any money unless a kid was getting a degree that was worth something. Now that it can't be discharged, lenders don't care if kids are getting a degree in a field that will allow them to pay off the loan.

A compromise position might be that the loan can't be discharged for, say 15 years and for loans in default, 10% of your wages can be attached until that time.

even if a degree was worth something, what's stopping one from abusing bankruptcy, even if they could afford to pay it back?

 

[nobody's_hero]

Yes, the bankruptcy option should exist. We have this irrational fear of bankruptcy in this country, and we've somehow bought into the belief that we should be responsible and repay our debt. In most circumstances, that would be true. We are not in most circumstances, however, in that debt does not result from a borrowing of someone else's savings.

Our debt under the Federal Reserve system is based on . . . debt. It's healthy for everyone if this stuff gets liquidated back into the thin air it came from.

 

[Revolution9]

Then you won't have a bunch of 22 year olds with $100k in debt and a sociology degree--because they never would've gotten lent the money in the first place.

They would learn more, better, faster with a 400USD bag of kind and a few good books, take a calligraphy class and construct their own diploma. Sociology, psych and "liberal arts" (not the Quadrivium) major degrees are trustafarian one armed time bandits. They produce "problem" solvers who don't have a frakkin' clue because the coddled never lived a real life.

Rev9

 

[angelatc]

Crybabies.

The Gimme gimme gimme generation.

 

[angelatc]

whats an unsecured, dischargeable debt?

Credit card debt.

 

[qh4dotcom]

They could have done what my two oldest children did - Join the military and EARN their education!

And who's going to pay for their education? The country can't afford it. I mean who cares about runaway inflation, billions of government debt and a massive tax burden on the next generation? It's all free right? (sarcasm).

Come on man, you really need to watch this video if you think it's such a good idea to get the government involved in education and let them pay for college for the military. Wake up
http://www.youtube.com/watch?v=AIcfMMVcYZg