The Student Loan Crisis: The Future of America is at Stake

originally posted by: projectvxn
Just for once, let's fix this problem before it gets bigger than we can handle.

The fix is extremely simple...

Pass a simple law allowing student loan debt to be discharged in bankruptcy.

This way the student twill still learn a (hopefully valuable) lesson, but it would give them an out.

a reply to: projectvxn

I live in a college town and it's quickly eating our small home town. Constant growth of students, raising tuition, increase in rent, traffic, not enough jobs for the students so they need more loans.

The university system is a business that only cares about money and sports. the bubble will burst.

a reply to: ketsuko

Good job describing these issues.

These are all reforms we can make to ease this burden. I do NOT believe in debt cancellation. Pay it back. But I don't believe in leaving people high and dry. My neighbors mortgage isn't my problem until millions of neighbors cause a systemic problem that affects me at the behest of and encouragement by government programs.

Yay....then you have millions of peeps with bad credit for 7 years....who wont be able to buy a house or car....so fhat market will crash. Then what do you do with the 1 trillion of debt????? U think the banks are gonna eat that?


a reply to: tanstaafl

originally posted by: tanstaafl

originally posted by: projectvxn
Just for once, let's fix this problem before it gets bigger than we can handle.

The fix is extremely simple...

Pass a simple law allowing student loan debt to be discharged in bankruptcy.

This way the student twill still learn a (hopefully valuable) lesson, but it would give them an out.

The problem with that is you can't repossess or take back an education. People will run up $200k in loans, file BK, but still be able to claim they have a degree from XYZ university to their benefit. BKs typically only stay on your credit for 7 to 10 years.

The best way to ensure quality loans AND the universities are containing costs and not turning into degree mills is to make the school be responsible for a portion of any debt of the student. This makes the University have skin in the game and also makes them more focused on ensuring their students don't default.

You simply mandate that the university has to guarantee at least 10% of a student's govt debt burden. So if a student defaults on $100k student loans, the university is on the hook for at least $10k of that debt.

This is how things work in mortgage market. Banks have "reps and warrants" that they underwrote a loan to published standards. If the homeowner defaults and the bank didn't underwrite properly, the originating bank is on the hook for that loan failure.

When the university's endowment is at risk because of loan failures, trust me when I say they will be evaluating every student with a fine tooth comb when it comes to their ability to succeed and likelihood of employment at graduation.

originally posted by: lakenheath24
Yay....then you have millions of peeps with bad credit for 7 years....

Yes - it is called learning a valuable lesson. No one forced them at gunpoint to borrow the money, or to use it to get a useless 'duhgree'.

who wont be able to buy a house or car....so fhat market will crash.

Like they can afford to do it now?

Be real. They will be able to, it will just cost them a lot more in interest.

Then what do you do with the 1 trillion of debt????? U think the banks are gonna eat that?

Yes. Maybe they will learn a valuable lesson too.

originally posted by: Edumakated
The problem with that is you can't repossess or take back an education.

Irrelevant. It eliminates the debt.

People will run up $200k in loans, file BK, but still be able to claim they have a degree from XYZ university to their benefit. BKs typically only stay on your credit for 7 to 10 years.

You seriously think the student loan model will continue as it exists now if said debt is dischargeable in bankruptcy?

No. What will happen is the laws will be rewritten to eliminate ridiculous free ride the student loan providers have gotten from the taxpayer (no more taxpayer guaranteed student loans).

Oh - another thing that simple law should do is eliminate the public guarantee of said loans too - existing, and future.

Yes, this means the banks or whoever made these terrible loans will pay the price.

a reply to: projectvxn

Make student loans dischargeable through bankruptcy. That will put an end to the majority of the shenanigans the government plays with student loans and create a realistic market.

originally posted by: tanstaafl

originally posted by: Edumakated
The problem with that is you can't repossess or take back an education.

Irrelevant. It eliminates the debt.

People will run up $200k in loans, file BK, but still be able to claim they have a degree from XYZ university to their benefit. BKs typically only stay on your credit for 7 to 10 years.

You seriously think the student loan model will continue as it exists now if said debt is dischargeable in bankruptcy?

No. What will happen is the laws will be rewritten to eliminate ridiculous free ride the student loan providers have gotten from the taxpayer (no more taxpayer guaranteed student loans).

Oh - another thing that simple law should do is eliminate the public guarantee of said loans too - existing, and future.

Yes, this means the banks or whoever made these terrible loans will pay the price.

It isn't irrelevant. People will game the system. They will run up student loans, file BK, and still claim the benefit of the degree. You can't take away someone's education. It is simple math. Do I sacrifice and pay back $200k in loans or just say screw it, file BK and get my debt wiped out while still being able to claim I am a graduate of XYZ school? People will do the math and say 10 years of screwed up credit is worth not having to pay back $200k or whatever.

Don't ever underestimate how shady people are when it comes to money.

I work in the mortgage business. We saw this during the housing bust. People were engaging in all kinds of "buy and dump" schemes. The value of the home declines, so now you just decide to "walk away" instead of paying back the debt as agreed.

Government should not be guaranteeing student loans in any capacity. We agree. However, we also have to accept that it means a lot of people may not be able to get financing for schooling. No private lender would make the types of loans that are being made now, especially if there is no government backstop. I have no issue with this.

If you are going to make student loans dischargable, you also have to make it so that once that is done, the diploma must also be revoked.

a reply to: tanstaafl

Clearly banks/lenders need to learn some lessons here.

It's not just the students. We've been heavily encouraging and propagandizing college enrollment for decades. That people would place themselves in crushing debt for the "promise" a college education provides is not surprising.

You encourage the behavior you want.

Now that we've done that it doesn't seem very prudent to tell all the students to just eat it. This is a predatory and corrupt system.

I agree with allowing bankruptcy discharge and I agree with both the banks and the schools getting schooled on irresponsible loan origination as well as the students having a 7 year bankruptcy where they learn the value of time and money investment.

a reply to: projectvxn

Where are the parents who are supposed to be guiding these kids?

a reply to: projectvxn

Most student loans are controlled by the government not banks.

originally posted by: Edumakated
It isn't irrelevant.

Whether or not you can 'repossess' the education is irrelevant to the problem of the debt.

People will game the system.

This is news to you? It has been like this since... when was the dawn of time again?

They will run up student loans, file BK, and still claim the benefit of the degree.

People can charge 10's if not hundreds of thousands of dollars in CC debt, and walk away without anything being repossessed.

So your point is...?

Do I sacrifice and pay back $200k in loans or just say screw it, file BK and get my debt wiped out while still being able to claim I am a graduate of XYZ school? People will do the math and say 10 years of screwed up credit is worth not having to pay back $200k or whatever.

I'll take the third option Alex - I'll work my way through school, won't go to the really expensive ones, and if I have to, mortgage my home to pay for it.

Bottom line: if you can't afford to go to school... you can't afford to go to school.

Government should not be guaranteeing student loans in any capacity. We agree. However, we also have to accept that it means a lot of people may not be able to get financing for schooling.

College is not for everyone. And College is certainly not a Right. So...

No private lender would make the types of loans that are being made now, especially if there is no government backstop. I have no issue with this.

Me neither... this simply points out the obvious: loans like this should not be made.

If you are going to make student loans dischargable, you also have to make it so that once that is done, the diploma must also be revoked.

Fine with me - they aren't worth much anyway, with a few possible exceptions...

a reply to: lakenheath24

These people can already barely do these things due to owing on the student loan, many for far longer than seven years.

What a stupid take IMO.
Colleges have been happy to accept student into programs AND offer them loans KNOWINZG the degrees are worthless. Obviously, you have never been anywhere near the higher education system, so try to educate yourself on education before commenting.



a reply to: tanstaafl

Who is to say the parents of these kids are educated...and know the system?

I didnt when I was 18.

Its the pompous, arrogant penis-craniums that talk smack about this subject with a barely cursory knowledge of what is going on that really pisses me off.






a reply to: OccamsRazor04

a reply to: lakenheath24

I am not sure I understand your reply. You said you didn't know at 18. That is why I said parents. Parents of an 18 year old are probably close to 50.

This situation is EXACTLY like the housing crisis in 2008 where predatory lending led to a housing bust. Except the diff is that in this case uneducated parents are being sold a poor degree as opposed to a poor mortgage.

And again...this debt will be with peeps forever. It will create a whole generation of peeps with bad credit right off the bat...and it is All down too predators.
And MOST ironically, colleges are liberal no? So liberals skools are enslaving their own peeps. Is this on purpose? Hmmmm.


a reply to: OccamsRazor04

a reply to: lakenheath24

I disagree. It's parents and society telling kids they need to get a degree and should stay on campus for that college experience. No lender is convincing kids to stay on campus when they don't want to.

I had zero debt with my first degree. My current one my debt will be paid off in 1 year. My next degree I anticipate 4 years. Even poor people can get a degree with their debt paid off reasonably fast if they do it right.

a reply to: OccamsRazor04

Disagree all ya want. $1 Trillion of student debt says otherwise.

Good on you for being fiscally responsible.....but its the 90/10 rule that rules this world.