> I'm concerned about a situation similar to college tuition in the US where easy, risk free money leads to price gouging. Once everyone has an extra $XXXXX how quickly does the market realize that the cost of goods can be raised by that amount.
Yeah, I'm convinced state backed student loans has led to the crazy rise in college tuition. student loans should be private (but should 100% be dischargeable via bankruptcy). Alternatively, public institutions shouldn't charge for tuition. The current state makes absolutely no sense.
Imo the biggest problem with student loans is that they don’t assess the credit worthiness of what they’re paying for in any way. Student loans and mortgages are the only two times that most consumers access huge lines of credit on very good terms. But unlike mortgages (which are already prone to creating the occasional credit crisis), student loans don’t assess the value of the “asset” they’re underwriting. You can’t get a $100,000 mortgage on a house that’s only worth $50,000, but you can get a $100,000 student loan on a degree that’s worth exactly $0 in potential future earnings. If you assessed student loan applications on that basis, the student debt “crisis” goes away.
> student loans should be private (but should 100% be dischargeable via bankruptcy)
While I mostly agree, how do you prevent basically every student from going bankrupt immediately after graduation? None of the downsides to bankruptcy really apply to students so it's logically the best course of action if students loans could be discharged.
I'm not convinced you would need to. "Students" cease to be students immediately after graduation, so they wouldn't really be "students" anymore, right? So "none of the downsides to bankruptcy really apply to students" doesn't really seem accurate, does it?
Even reading it more charitably, students and recent graduates still probably would like access to credit cards, or the housing rental market, or whatever. Bankruptcies stick with you for 7(?) years, so you'd also have to think about whether you'd be locked out of the mortgage market, auto loan market, what-have-you, while your peers are able to make those moves.
Bankruptcies are also like a whole legal thing with a judge and everything, so I doubt we'd see every single student getting their whole debt discharged instead of a judge just being like "Didn't you, like, just spend all this money on getting the training required to get a high-paying job? Seems like if you plan on working anytime soon you should make some payments."
Also lenders can just like, be more selective or restrictive in other ways? Higher interest rates, requiring more established co-signers, etc etc etc. Honestly the strangest part of this is that we've normalized saddling 18 year-olds with tens or hundreds of thousands of dollars of debt.
Bankruptcy stays on your credit report for 7 years, but doesn't lock you out of the credit market. Someone with a high paying job has relatively easy access to credit regardless of recent bankruptcies. At most it effects them for a year or two, but new graduates aren't really making any big purchases using credit immediately after graduation anyway.
That's part of the risk. It will downsize annuity present/future values so as to reduce the windfall payout of bankruptcy vs its credit score and process costs. It will help keep college cheap: if what they teach is worthless then students should welch. The investor has more money, let him eat the friggin' risk! The student is otherwise forced to delay family for a decade and take a 67%+ cut in fertility rate as a result, a really bad outcome if we don't let students welch.
Maybe put the school on the hook in some way too, forcing it to actually screen for talent (which would absolutely murder DEI lol), that way investor isn't totally SOL if the school was the useless party.
Wow, I just made education affordable again by murdering any safety in financially speculating in it. Change the game, change the outcomes!
> It will help keep college cheap: if what they teach is worthless then students should welch.
Just the opposite, presumably the best colleges that product the highest earning graduates cost the most, those high earning graduates would be might more incentivized to start over than someone with a lesser degree because at least they'd be part of a high paying field and immune from needing to use credit.
>Maybe put the school on the hook in some way too, forcing it to actually screen for talent (which would absolutely murder DEI lol), that way investor isn't totally SOL if the school was the useless party.
You're so wrongheaded there, I don't even know how to get you on the right track, but companies, and schools, with so called diversity hires do better overall. Schools already screen for talent and the ability to graduate, DEI initiates just have them look a little harder in an expanded pool.
If you make student loans dischargeable and private, wouldn't lenders would tighten up and only give loans to people with good odds of repaying the loans? IE, people from middle class+ could still get loans, but how about the smart kid from a very poor family? Wouldn't they be too risky to give a massive loan to?
There might need to be some regulations made so that lenders should discount family background, but only consider grades/earnings potential/etc.
But on the plus side, this should theoretically bring tuition costs down as there won't be effectively unlimited capital for tuition. It also encourages potential students to consider more carefully whether getting a degree makes sense.
Perhaps Pell Grants should also be expanded in eligibility (to make it so that more poor, but motivated kids can get access to higher education).
The goal of these changes would be to: - Reduce the market distortions that are created by giving out federally backed student loans (reducing or at the minimum slowing the pace of growth of tuition costs) - Reduce the burden on taxpayers by eliminating public student loans - Makes it so that kids don't get stuck with student loans that are a drag on them for life, at worst, they'll have to deal with bankruptcy
Potential downsides: - Reduces number of people studying potentially useful/valuable to society degrees that don't have much expected monetary return - Potentially reduces average level of education in the population (could be untrue if it also sufficiently reduces tuition costs)
> Yeah, I'm convinced state backed student loans has led to the crazy rise in college tuition
I'm think it's pretty widely accepted that this is at least partially true.