It's a very bad idea to train everyone that their debts are optional, and that they have no obligation to pay them back. Loans for people who won't abuse the system will become much more expensive to make up for those who don't pay them back.
Student loans are completely outside of this framework because they're risk-free for the lender and can't be discharged at bankruptcy by the lendee.
Because of this the loan costs for those that present a good and bad debt proposition are basically the same - I'd call this more of an abuse.
And I know they're technically optional. What I was saying is that we shouldn't be trying to build the idea that it's OK to default if you're better off financially not paying people back into our culture. Trust is important to the functioning of society.
I disagree with this. We saw people during the GFC screwing themselves by continuing to pay mortgages that they were underwater on out of some misguided sense of honour.
In that case, they should have walked away and left the bank saddled with the stranded asset. Loans are a commercial proposition with a risk and a reward. Introducing washy hard to define concepts like 'trust' to pressure one side only screws the good guys - the unscrupulous ones will do what they want.
Better to have a clear playing field where both lenders and lendees understand there will be situations in which the loan isn't going to get repaid and have the risk of that priced in.
That's how you end up in a society that no one wants to live in. We should find ways to bring the standards of business up, not bring the standards of individuals down.
I bet people get really irresponsible when they realize they don't have to pay these debts, they just have to take a massive hit to their credit score....or maybe, most people don't become irresponsible, the people that really need the help get it, and a couple take advantage of the system.
You're spending other people's money. Treat it with respect.
What about the shame of the lender for making poor lending decisions?
> We shouldn't try to normalize it.
Why not? The only reasons you've given is "because it makes for a nicer society" but I don't actually see how it does. All you're doing is taking one of the few tools the individual has to mitigate financial problems away from them because you want to moralise their failure.
It's not like declaring bankruptcy is a walk in the park. It's a total pain and really negatively impacts your ability to do a lot of stuff. It is already a last resort for individuals and they shouldn't be stigmatised for taking it.
> You're spending other people's money. Treat it with respect.
No you're spending your own money, gained through a business transaction in which the lender has accounted for the risk of non-repayment.
I actually think it makes for a potentially nicer society if lenders are incentivised to have a stake in the successful outcome of their clients. If the client is culturally conditioned to try and pay their loan even after the point it makes no sense to, then the lenders will put more and more onerous terms and rates on loans because they know the person will never give up. Lenders will have to make sure it's a good deal for their clients, not just themselves.