Reply to controversial opinion: money & finances edition

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I’m totally fine with the idea that student loans can’t be discharged during bankruptcy, and I’m against any federally funded loan forgiveness programs.[/quote]

ME TOO! I took out loans for my degree and I paid them all back. Graduated in 97 with EE degree and 35K in dept. I paid it back 100% by 2002. If they forgive debt to students now I want a refund of my repayment.[/quote]

+1. If you're taking out 200k to study poetry at a university high on a hilltop that no one has heard of and then can't get a job that services your debt, that isn't my problem. I and many many others paid our debt and it's unfair to those that were responsible/chose traditional career paths and majors etc.[/quote]

I think the point that most people are trying to make when saying that college loans should be dischargable in bankruptcy is that lenders [b]wouldn't[/b] loan someone 200K for a worthless degree if the lenders might be stuck holding the bag.[/quote]

This is a good point.  From a risk management perspective, a bank should have far stricter credit underwriting standards on debt that can be discharged in bankruptcy than on debt that is nondischargeable.

I would be okay with making new student loans dischargeable in bankruptcy so that banks can adapt and revise their underwriting standards.  But it should not be retroactive to previously contracted student debt; that would be changing the rules in the middle of the game. And as PPs have pointed out, it is not just unfair to the banks, but also to the many responsible borrowers who have sacrificed to repay their student loans.

Where this should end up politically is another question.

Making student loans nondischargeable is a way to prevent moral hazard on the part of the borrower.  The idea is to make sure the borrower repays by blocking the strategy of bankruptcy as a way to avoid paying back the debt.  If we were to go to a model of allowing student debt to be dischargeable in bankruptcy, then banks would limit their losses by instituting far stricter lending standards.

The nondischargeable approach makes student loans more available to less credit worthy students.  The dischargeable route would limit access to loans as a means for paying for college for those with little means or poor credit histories.[/quote]

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