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Comment by simplify | Hacker News Reader

> What's to stop someone from obtaining a useless degree that doesn't contribute to the nation's economy, and then discharges the debt in bankruptcy?

Nothing, and that's exactly why education debts need to be dischargeable like anything else.

Dischargeable loans makes loan companies have actual responsibility and consequences in deciding who to give loans to. Otherwise, they blindly give out loans (why not, there's no risk!), putting all that much money in the system, which college institutions are happy to absorb in higher tuition.

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This is spot on. Currently there is very little accountability for predatory student lending. For my mortgage I had to talk to multiple people on the phone, show proof of income, and have a background check. For my student loan I just had to give my parents' socials and prove I was attending college. I know nothing about the laws around this, but I suspect it was set up this way with good intentions. Unfortunately changing this will probably require a nation-wide acceptance that not all degrees are created equal.

It would be interesting to see insurance companies have more skin in the game - we would probably start getting much more accurate breakdowns of ROI by major, degree, and school.

But it could lead to plenty of people making the smart decision to file for bankruptcy even when they have a good degree. Bankruptcy at 22 isn’t that big of a deal, generally.

I’m not sure what the answer is, though I think an economic approach is key.

If the lender can garnish future wages, I think the incentives are still pointing in the right direction. The only way the lender loses money is by lending too much to someone who will never be able to pay it back - which is what you want, presumably.

Bankruptcy negatively affects your credit score by a large amount, so it's not exactly an easy decision.

It would be a very easy decision I think. Can you rebuild your credit in less time than it would take you to pay off your loans?

If you're still going to be paying your loan off in 7 years, bankruptcy would be an easy choice.

What if you need do anything significant with your money in those 7 years? Like rent an apartment? Have a car to get to work?

The debt doesn't just magically go away. Chapter 7 requires liquidating assets, and chapter 13 requires paying some loans back anyway. And besides, I don't see why loan companies couldn't require cosigners to reduce risk on these college loans.

>Like rent an apartment? Have a car to get to work?

Then you rent an apartment or buy a car. Are you implying you can't do this after bankruptcy? It's much easier to do these with a bankruptcy on your "record" than with a $1000 monthly payment.

I'm implying that these things are affected by your credit score.

Cash is King

If you've got an 800 score and no money, no one will give you a loan. If you've got a trash credit score, but an extra $1000 that isn't going to loans, then you can 'afford' to get fleeced on 36% 72 month auto loans for 7 years until your credit is rebuilt.

Depending on the market, I can’t imagine it being easy/straightforward for someone with “trash credit” to find a landlord willing to lease an apartment at the market-rate.

That $1000 is likely getting spent no matter what, either in repaying loans, or paying a premium over the market rate to get a landlord to agree to lease you an apartment instead of someone with an 800 score.

Make 10% of the balance become dischargeable at the end of each year after graduation.

This will increase inequality, people from richer background will get loans easily.

What America has now is a good system, where anyone can use these loans to pull themselves up.

What government or maybe banks need to invest is in more career counseling.

Agree, that’s a strong point.

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