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Comment by codeddesign | Hacker News Reader

While not a slave, for many bankruptcy will ruin any chance of the ownership of assets for 7-10 years. While not slavery, bankruptcy will put you into the peasant category. Tobacco advertising is essentially banned, since it has long term affects. Credit should be no different. If used wisely it can be a good thing, but at the same time it’s marketed to the easiest and most vulnerable. Credit advertising itself should be banned with tax incentives given to companies that require everyone to go through a financial course.

In my personal opinion a free financial course should be required before you first get your SSN and then no higher than a $500 credit limit for 6 months after.

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> While not a slave, for many bankruptcy will ruin any chance of the ownership of assets for 7-10 years.

People declaring bankruptcy aren't in a position to have good credit scores or acquire more assets anyway. If you can't service your debts, you're not going to be securing more loans and buying more assets.

Bankruptcy is a chance to reset the debt to $0 and start over. The bankruptcy even drops off your credit score entirely after several years, making it a complete reset.

Bankruptcy is better in every way than forcing people to service those debts forever.

> People declaring bankruptcy aren't in a position to have good credit scores or acquire more assets anyway.

That's... kinda ridiculous. My twitter feed[1] is absolutely filled with flush 20-somethings who clearly aren't seven years into their careers showing off their NFTs and cars and condos and whatnot.

People right out of college with zero assets are getting loans. People right out of bankruptcy can't. So it's not the same.

[1] Seeded, it seems, from my following of a few Tesla-related accounts. There's... a somewhat distressing level of overlap.

I have no debt, but I hold this opinion:

Student loan debt should be able to be discharged in bankruptcy. If an institution gives someone a $200k education and that person can’t pay the debt back with their career, it was overpriced and should have never been give a loan.

I’ve seen people flee the country and live in Australia or Germany so as just to escape their student loans. Bad on them for making the poor financial choice but good for them sticking it to the industry that gives out these loans.

If you make student loans easier to discharge, you make them harder to get. That might be part of your plan, but it does make it harder for the less wealthy to afford college, so there's a trade-off here, not a straight victory.

After a year or two, college costs would drop dramatically. The breadth of degree programs, some of which lead to careers serving coffee, would also shrink.

Harvard and Stanford admit about 1 in 20 applicants. MIT around 1 in 15. I doubt you’d see those schools get cheaper as the demand far exceeds the supply. I think you would see a lot more legacy admissions and an overall wealthier student body in the top-tier colleges if poor people couldn’t easily borrow to attend. (As one of those people 35 years ago, I think that’s a way worse outcome than today.)

State schools and schools with high admission percentages might get cheaper in tuition, but it’s still going to be expensive to live and eat for 4 years with no income coming in for most of the year.

High school students apply to many colleges, and each student rarely goes on to attend multiple colleges concurrently. That ratio about applications is misleading, and is generally understood to be intended to be social signaling of exclusivity.

Why would a student not want to work part time to have a little income? I found it beneficial.

If people had to pay $200k to attend Harvard, the price will absolutely collapse.

1 in 20 applicants is only the top 5%. Being in the top 5% income earners in the country is not a high enough bar to shell out $50k a year extra post tax to pay a child’s tuition.

That 20:1 is the depth of applicant pool and almost entirely unconnected with the 95th percentile current income of one country.

Harvard draws from all over the world and many US upper-middle class parents/grandparents are willing to save for 20 years or use HELOCs; they don’t have to pay out of current income. Upper class can just pay for it (there are well over 1M households in the US alone with a net worth over $10M; those people would barely notice putting little Chris through Harvard).

If student loans were entirely outlawed, Harvard wouldn’t need to lower its prices; it would just end up not having poor people attending.

The top 5% of income for people who apply to Harvard is significantly higher than the top 5% of income for everyone in the country.

I somewhat agree, but it turns out the details are extremely tricky.

For example, how do you prevent people from finishing college, immediately declaring bankruptcy, and then getting a high-paying job with their degree? Unlike a house or car, the education can't be repossessed so the holder retains all of the upside.

It would be the ultimate financial hack to get a medical degree, declare bankruptcy, and then immediately start practicing once the bankruptcy went through.

So obviously there would need to be a lot of protections against abuse. Perhaps a provision that the student loan could only be discharged after a protracted period (many years) of too-low income.

Ironically, there's a huge resistance to this idea from within humanities departments. They fear (rightly so) that such provisions would make it harder to get loans for humanities degrees because they pay significantly less. I don't think that's really a bad thing, but you'll find some outspoken arguments against this from people in the academic world.

You can't. What you're describing is textbook indentured servitude, which is a form of slavery.

If you're suggesting that some things are only possible to fund through slavery, may I humbly submit that slavery is still wrong, and things which cannot be funded except through slavery have no right to existence?

Not absolutely every form of indentured servitude is wrong.

It is entirely possible to have fair deals where you get an education in exchange for X percent of the income you have over Y minimum, for Z years.

Yeah, see, I would personally contend that indentured servitude is ipso facto immoral, and so if your "fair deal" includes that, it is not actually fair.

Specifically, you're selling future labor in exchange for an asset that you can't immediately liquidate to pay off the debt. This is not acceptable, if the counterparty makes a profit from it. (If you could immediately liquidate it, at that point there would be no need to make recourse to your earning power)

> Yeah, see, I would personally contend that indentured servitude is ipso facto immoral, and so if your "fair deal" includes that, it is not actually fair.

And I personally wouldn't call a 10 year 0-10% cut of income "indentured servitude" so that's not a very useful way to figure things out.

> Specifically, you're selling future labor in exchange for an asset that you can't immediately liquidate to pay off the debt. This is not acceptable, if the counterparty makes a profit from it. (If you could immediately liquidate it, at that point there would be no need to make recourse to your earning power)

Doesn't the same thing happen if I use a loan to buy almost any product? As soon as it becomes mine, it becomes used, and liquidating it wouldn't be enough to pay off the loan. I don't think all those loans are immoral.

Is there a difference? Or do you think both are unacceptable?

And look, I'm fine with saying you could discharge this college revenue-repayment loan in bankruptcy if you were actually in need of doing so, but I'm trying to describe the kind of repayment terms where that would basically never be needed. If your income isn't above the threshold then you owe $0 and the loan goes away by itself after a few years.

> Is there a difference? Or do you think both are unacceptable?

Loans by themselves are acceptable; loans with interest are not, because you're making a profit from what could potentially be slavery.

A licit way to do it would be to have a purchase-repurchase agreement. I pay $5000 to "buy" a car, and I'm guaranteed to be able to sell it back for let's say $4000 a week later. That way, if I default on it, I can never end up in debt.

Loans backed by people's ability to earn income are a form of slavery, and earning interest off this is not licit.

Well if you think any loan with interest is unacceptable then I don't think there's any way to solve this.

If you want it to be easy to get the loan payments reduced or even cancelled when you're having money problems, then you need to make a profit off the people that do have plenty of money. And isn't that even better than returning what you got?

> Loans backed by people's ability to earn income are a form of slavery, and earning interest off this is not licit.

To my mind, the whole point of the minimum threshold for the type of loan I'm describing is so it can't be slavery. If you don't have lots of money, the debt just disappears. If you're wealthy... then you're wealthy, not a debt slave.

Currently only about 10% of student loans come from private institutions. I'm not sure if I want the government saying "You can't have a loan to study X because you won't make enough money". I'm not sure it's even possible to say that, except for using average life time earnings that could vary wildly over time.

Teenagers applying for college usually don't have personal credit histories to be evaluated. Either we give out lots of student loans, or we don't.

>In my personal opinion a free financial course should be required before you first get your SSN and then no higher than a $500 credit limit for 6 months after.

And when you have a lawsuit filed against you in a comparative negligence[0] jurisdiction, even if you have no debt at all, bankruptcy may be your only choice -- when the lawyer's fees will bankrupt you even if you win the lawsuit (let alone having to pay even a small percentage of a seven or eight-figure judgement).

What financial advice (free or otherwise) can you give to someone in that situation? I was in that situation and faced either bankruptcy after trial (even if I won) or bankruptcy before trial and still lose access to favorable credit terms.

Bankruptcy guaranteed. With no bad financial decisions or lack of financial education needed.

If your scenario (ignorant people making bad financial decision) were the only issue, I might agree with you. But there are a whole bunch of other scenarios that don't include bad decisions.

All you need is someone to sue you for some large amount of money (even if there's no merit to the suit, the lawyer's fees for going to trial will do the job) or incur large medical bills for injuries/illnesses that have nothing to do with poor choices.

[0] https://www.law.cornell.edu/wex/comparative_negligence

Edit: Added the missing link.

>In my personal opinion a free financial course should be required before you first get your SSN and then no higher than a $500 credit limit for 6 months after.

While I appreciate the sentiment, SSN is required for anyone to be claimed as a dependent. My Children had theirs issued shortly after birth. I rather see something alonog a required class before you can open your first credit card. I got mine in college and had a $25k credit limit by the time I graduated. It was very easy for classmates of mine to get into serious debt.

You always have human capital. Always. (Unless you're in a coma or some such.)

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