Comment by AdamJacobMuller | Hacker News Reader

Comment by AdamJacobMuller | Hacker News Reader

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AdamJacobMuller

It seems like this would result in many just graduated college students choosing to declare bankruptcy immediately after graduating college. You're in an effectively perfect position to do so. You have massive debt, you have no job, you have no assets, you're not yet ready to do anything which requires credit and you're 7+ years away from buying a house.

Also, technically, student loans are dischargeable in bankruptcy, it's just much harder than other debt[1] nearly impossibly so, but, perhaps it should be. I think the alternative is that the issuance of student loan debt becomes so risky that you enter a feedback cycle of increased interest rates leading to increased bankruptcies leading to more risk leading to increased rates leading to increased bankruptcies etc.... where there only exit point is that nobody can take loans for college.

I also think there are much more elegant solutions to the problem.

1> https://studentloanhero.com/featured/student-loan-bankruptcy...

>It seems like this would result in many just graduated college students choosing to declare bankruptcy immediately after graduating college. You're in an effectively perfect position to do so.

How is this different from any other kind of debt a 22 year old might have?

The answer is, it's not - banks simply wouldn't loan outrageous sums of money to 18 year olds. If 18 year olds couldn't get 200k loans from banks, colleges wouldn't charge 50k/semester (unless you think colleges would simply close up shop if they can't charge 50k/year).

Unbankruptable loans + incredibly high demand today means that colleges can simply charge whatever they want.

Well, a 22 year old is far more likely to be approved for said debt than other kinds. I doubt unemployed and uneducated 22 year olds are generally approved to e.g. $100k home loans.

Institutions will stop giving student loans unless the parents co-sign. The student loans issue is a hard one to fix. There is always a catch.

The approval rate for other types of debt are lower. Getting a house loan at 22 is not easy and there is a physical thing to repo in that case.

I would assume any other kind of loan a 22 year old gets usually has an asset tied to it that can be repossessed. You can't really repossess knowledge

The most common type of loan a 22 year old would have is likely a credit card. Credit cards are unsecured loans. It's not unheard of to hear of people with tens of thousands of credit card debt that then go to bankruptcy.

Unsecured loans aren't new.

Are 18 year olds with no income, no assets, and close to no credit history often the ones able to get tens of thousands in credit card limit such that four years later they can default?

Maybe asked differently: how much of your personal retirement money would you lend to such an 18 year old for the prospects of a 7% or so yield?

I think you are missing my point. I'm sure you could lurk at /r/CreditCards to find young adults getting credit cards with limits of up to $1,500.

My point is that you won't find credit card companies willing to loan those same people $50,000 and they shouldn't. The ability for young adults to easily strap on large amount of debt has inflated the price of college. Banks only do it because they are guaranteed to be paid back. If banks were more strict with their loan requirements, they wouldn't give so much money away and, in turn, there would be fewer students out capable of paying high tuition.

Colleges would be forced to lower costs, ideally to the days where you could afford to pay tuition by working part time.

Harvard, MIT, and Stanford would continue to cost about what they cost now, which would price out a substantial portion of the population if loans were not available. (There are well more than enough people with the means to send their kids there out of pocket.)

For me, it would virtually ensure my kids would have their pick of several top or top-middle private colleges paid from 529 accounts and by co-signing or remortgaging our house; nevertheless, I’m still adamantly opposed.

I’m not convinced you can live for four years on part-time work alone, let alone buy tuition, lab fees, and books on top of just your housing, food, utilities, and minimal entertainment in many college towns.

Harvard, MIT and Stanford are schools with enormous endowments with generous aid packages that are already very inexpensive for students even if your parents make 6 figures. However most students are already priced out of those schools given how competitive they are.

The top and even top middle school (probably every school outside HYPS) would either lower in cost or dramatically cut class sizes. There is a small number of students who’s parents can actually afford the 50k sticker price - either prices drop or these colleges end their undergrad programs. These institutions will not cost 50k/semester.

The idea that parents should be responsible for the education costs of their adult children is an idea that should have died about 20 years ago.

My parents were both public school teachers (so our family income was definitely not high). The aid MIT offered was in the form of loans.

therein lies the rub.

There is essentially no risk for these loans because they are backstopped by taxpayers.

These loan sizes increase, the cost of tuitions increase.

Everything else that is open market loans, have no such growth pattern.

I fail to see the benefit of all this spend when the consequence is a bunch of PHDs ... working as teachers at profit AND nonprofit Universities, to produce more diplomas en masse so we have more university-degree retail associates and social media managers (if not unemployed 23yr olds).

You have to question why is it that no one would pay 25K in tuition if you had no ability to get loanable funds. Hint: there's no real market for it.

> Unbankruptable loans + incredibly high demand today means that colleges can simply charge whatever they want.

This is exactly right.

I was going to say you are wrong, but you're not. These loans should absolutely be forgivable in bankruptcy, so people stop making them so lightly.

We have to cut off the supply of easy money to students if we are ever going to deal with the absolutely insane tuition prices at schools.

Yes, this is correct, and it would have several effects.

One, banks would be unwilling to lend vast sums of money for education, and universities would have to cut back and offer education at a more reasonable price.

Two, income sharing agreements would become commonplace for economically productive degrees.

Three, pursuing economically useless degrees would go back to being the preserve of those of independent means.

Four, fewer high school graduates would go to college, and a lot of marginal colleges would close.

All of these are good things.

You have to go to bankruptcy court and convince a judge that you are actually bankrupt. I think it would be a particularly hard job for a recent graduate to persuade a court that they are bankrupt.

Underwriters would be well aware of that so what this really means is that loans would only be given to students least likely to do this, which could amount to very few.

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