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Comment by brownbat | Hacker News Reader

> All of us should be regularly lobbying our lawmakers to make student loans dischargeable by bankruptcy,

I thought so too. This always made me so angry. Last time I posted a rant about that here someone urged me to read the REPAYE Act, and it completely changed my mind.

Under REPAYE, students get income based repayment, even down to $0 payments if you're anywhere near poverty level. After a certain number of years of repayment, the government just pays off your entire balance.

This solves the same problems bankruptcy is designed to solve without ruining people's credit. It also prevents doctors from declaring bankruptcy right after medschool -- I'm honestly unsure whether that was a real or just anecdotal problem, but income based repayment for a fixed term seems like a better way to let people escape debt while still expecting them to pay what they can.

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This still inflates the cost of university for everyone. Basically the govt is taxing society to funnel the money into student loans which are then ploughed into college facilities and administration staff.

It’s a massive misallocation of societal resources.

And I suspect many people earning a mediocre wage are still stuck repaying, and would have been happier had loans not existed and college have been forced not to be bloated.

Exactly, we need cost pressure. Not to mention the fact you would still have to go into debt and live with that psychological pressure until the government so generously decides to forgive you...

An obvious solution would be a comprehensive tuition cap for public institutions. Financial aid makes college more affordable, but allows colleges to raise tuition. Getting rid of financial aid could lower tuition cost due to market pressure but bring back the problem of affordability that it intends to solve.

I would like someone to point out why a tuition cap would be a bad idea, since regulation often carries unintended consequences.

one immediate unintended consequence I can think of is flattening the distribution of net tuition paid. For example, a 40k sticker price University might cost 40k to a wealthy foreigner, 25k to an upper middle class student, and be practically free to a poor student (after need based grants and scholarships, not loans). Tuition is capped at 20k, so suddenly everyone has to pay 20k, at least if the university wants to maintain the same income.

Of course, the numbers are already flatter than that at most public institutions but the general effect could still occur. Not saying tuition caps are necessarily a bad idea, but I can see potential downsides.

This program only applies to federal student loans. Anyone with private student loans (before ~2010 IIRC) is SOL.

I went to MIT. MIT is corrupt as !@#$. The amount of money flowing into private pockets at the higher levels is insane. Corrupt isn't the same is criminal -- most of the activity goes through networks of lawyers and loop holes (although criminal activity happens too).

My opinion is that to be eligible for federal financial aid, there ought to be some cap on tuition+expenses at a level students can afford. Subsidizing $200k tuition makes no sense to me. Either students are already very rich, or they'll end up with a painful amount of debt.

I'd much rather have an MIT with old, rundown buildings, low-paid professors, few administrators, and a focus on science and learning (rather than a focus on $300 million buildings, yachts, fancy faculty dining clubs, and increasingly creative ways to funnel money into people's pockets).

Be aware REPAYE can be voided if your loan is resold (which you have no control over) and any missed payments or extra payments or any changes to your program (ie, if you apply for lower interest, your REPAYE is reset).... this has occured to people who go through the public service path.

Personally, this right here is the crux of the problem. Debts should not be resaleable. Loans are supposed to be about risk-sharing first, profit-taking second.

However, seeing as that will never happen I would settle for no resale without a meeting of seller, buyer, and borrower, with right of refusal of transfer of service by the borrower. to ensure that any changes/terms associated with the initial debt contract are properly transferred and honored; and no resets of timers as long as your account is in good standing. I.e. your debt holder selling your balance should still qualify as the same fundamental debt you originally entered into.

I don't particularly give a damn if that ruins/misses the point of securitization.

I wish... there are people who have been on the public servant program for 8 years and had their timers reset by a resale... without any missed payments.

Doctors declaring bankruptcy to get out of medical school debt sounds like anecdata. If student loans were dischargeable, that would change nothing for MDs because they're still going to make enough money to service the debt after residency/fellowship.

Even if you're going to be making $200,000 a year after your residency, why not declare bankruptcy as soon as you graduate. It'll save you $200,000 which is totally worth a 10 year hit to your credit

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