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Comment by jjoonathan | Hacker News Reader

Oof. What happens when a huge chunk of these default because educating everyone doesn't magically create jobs for everyone?

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They're protected from defaulting by law, because they can't be divested by bankruptcy.

... which merely means you need to calculate where the knee in the curve of issuing them was, extrapolate to life expectancy, and know when to cash out. Convenient!

Most of the student loan debt is owed to private creditors and it is the federal government that insures these loans. If a student doesn't make payments, the lender gets a guaranteed bailout by the government (no need for congress to step in like they did for the banks and auto companies). Basically, all the lenders are incentivized to give out as much money as possible, which incentivizes universities to raise tuitions, all because the US government decided to give lenders free money to play with at the cost of those who take on the debt and the ones footing the bill, which are usually the same people.

How is that bailout guarantee structured? Fixed pool, or the money will just come from "somewhere?"

Exactly!

> They're protected from defaulting by law, because they can't be divested by bankruptcy.

True. I think most people don't realize this. Government programs push young, naive people to borrow to pay for degrees that are unlikely to have positive ROI, and then if life doesn't go as planned there is effectively no bankruptcy protection.

> you need to calculate where the knee in the curve of issuing them was, extrapolate to life expectancy, and know when to cash out.

Sorry, what does that mean?

Debt doesn't pass on to kin, any that can be is paid off by your estate and what is left is written off.

You could theoretically calculate when the bubble is going to pop but figuring out when the majority of loans was issued, life expectancy and some financial details on student loan recipients. With details along these lines you can theoretically calculate an approximate picture of how much student loan debt will be written off and when.

I believe what they were implying was that such a bubble can only "pop" if a bunch of the debt is discharged at once, which in this case means a bunch of people who still owe student loans on their deathbed die with more debt than assets. The commenter suggested trying to figure out when this would happen, and making sure one is ahead of it.

Correct. The question is what, precisely, you'd use to bet against the student loan market. Since of the people who "successfully" shorted real estate found themselves running into trouble cashing out because the same institutions they'd bet against got hammered when housing popped and themselves defaulted. How do you successfully bet against the stability of the world-stabilizing fiat currency---the one other countries jam under their mattresses to back-stop against domestic economic turmoil?

> and making sure one is ahead of it.

I was with you till the last bit. How does one "keep ahead" with that timescale?

Calculate where, approximately, we get to the point where the average issuee will not be paying the value of the loan back in their lifetime. That's the point where the average loan is not worth is face value and a housing-style mass write-down is imminent.

Well, given the only way to escape student loans is death... good luck defaulting?

You can't get blood from a stone. If they don't have the money, they don't have it.

Right, and the gov't isn't exactly waiting on this money for solvency. This debt is just going to stick around for decades until people start to die.

2008.

The banks that loaned out all that money will need massive bailouts or else shut down.

Let’s be clear, students will NEVER be allowed to default these loans, nor should they. They must either pay it or take their debt to the grave and pass it down to their heirs.

Please don't post ranty flamebait to Hacker News. Divisive threads are low-quality enough as it is.

https://news.ycombinator.com/newsguidelines.html

Wait, what? Since when is debt passed on to heirs? If I die with credit card debt, that debt dies with me. My kids don't have to pay my debt. Any assets I own will be sold to help pay off my debts, but if the sale of my assets isn't equal to or greater than my debts, the debt holders have to write off that debt.

It isn't, student debt dies with you too, or at least federal debt does.

> Let’s be clear, students will NEVER be allowed to default these loans, nor should they. They must either pay it or take their debt to the grave and pass it down to their heirs.

You wanna try that again with a little empathy?

I have no empathy for bad short term thinking.

I could not afford to go to the college I wanted to go to, so I went to a cheaper one I could afford but no one really gives a fuck about. However, it left me with no debt, straight after graduating.

Today, as people struggle to pay off loans for universities they once boasted proudly about, it’s clear I made the right choice.

I did the same thing most of a decade ago. That pathway has unfortunately closed since the cheap college i went to tripled their tuition.

>pass it down to their heirs.

AFAIK, (and I'm a pretty ignorant fellow) debt in America isn't passed down, the creditors just take what they're owed out of a dead person's estate before its divied up by a will. So there could be a big "pop" if a bunch of people with lots of student loan debt and no assets die.

the creditors just take what they're owed out of a dead person's estate

You mean the estate that contains value I would otherwise get the full value of were it not for the student loan debt that was taken out? The debt is most certainly passed down, it's just abstracted away a bit. The only way the debt doesn't get passed down is if the debtor dies penniless.

Another way to put it is if the creditor extracts anything to pay that debt after the debtor dies, then the debt is most certainly passed on to someone because that money didn't materialize out of nowhere.

No, the money materialized from the lender when the loan was taken out. Some of the money might be recouped before or upon the death of the borrower - some might never be recouped.

> Let’s be clear, students will NEVER be allowed to default these loans, nor should they.

I think you mean “discharge in bankruptcy”, not “default”; default is what happens when you miss a scheduled payment; lots of students do default.

Also, they are dischargeable in bankruptcy, though the standard is harder than with other debt.

> Let’s be clear, students will NEVER be allowed to default these loans, nor should they.

Why not?

Because most of these students will likely default. And once the tax base drops, other government budgets are impacted resulting in a net loss for society. The alternative is the government only offers loans to students majoring in fields that lead to jobs capable of repaying.

Because that was the deal.

It is, of course, possible for the federal government to craft a deal that's actually bad for the American people.

When discovered to be so, it's also possible to alter the deal.

I agreed to this deal and I feel like I do need to pay off the debt, but I'm lucky in that I have a job that will allow me to do it the normal way if the crypto market crashes (heaven forbid, plz). What about the 18 year olds whose helicopter parents never allowed them to imagine a filthy reality like failing to go to college?

Regardless of whether that kid should have been free-thinking enough to see outside their existence's bubble, it's irresponsible to exploit their ignorance for profit. Most of these kids haven't ever seen a debt-ridden life like they're signing up for. I grew up with parents who ranted and raged about debt, and I still did it. Are you sure the problem lies with the kids signing the papers (I guess clicking the "Get your loan here!" button these days)?

The deal is that student loans in chapter 7 bankruptcy can only be discharged for undue hardship. Chapter 13 can't discharge student loans according to my understanding.

Last time I checked, "the deal" as it were indicates, in writing, that student loan debt from the federal government is forgiven on death.

1) The loans that are being discussed are not owned by private banks, so even if 100% were defaulted there would be no bailout of banks needed.

2) There are no blood debts in the US. Debts are NOT passed on to heirs like property.

>2) There are no blood debts in the US. Debts are NOT passed on to heirs like property.

Not yet, but given the steady rightward shift of American politics I can see it happening in the future.

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