We've been over this a thousand times: you would not be able to get loans for education if you could discharge them in bankruptcy. They would become a super-toxic bet. They would have to be conditioned on the ability of the student to make significant earnings, because otherwise the optimal play for many people would be to get the education, and then declare bankruptcy.

> We've been over this a thousand times: you would not be able to get loans for education if you could discharge them in bankruptcy.

This is literally an extremist statement (i.e. either you cannot get loans or you can) and as such an impossible oversimplification. Clearly it's more nuanced than that. The difficulty of discharging loans in bankruptcy certainly does affect the market of available loans though it's not black and white.

The statement is also obviously false. Students received loans before they couldn't be discharged in bankruptcy.

On a final note, who is "we" exactly? I don't remember conversing with you in the past.

> This is literally an extremist statement (i.e. either you cannot get loans or you can) and as such an impossible oversimplification.

I find that most times when people say, "You cannot," or, "You can," what they're actually saying is, "The probability of you being able to is very low/very high." Surely this is the case for my claim. If it helps, please read it as such.

> Students received loans before they couldn't be discharged in bankruptcy.

Other variables were different then. Particularly, the variables of cost and expected compensation relative to the baseline. (Cost has, infamously, been rising, while the expected compensation of graduates relative to the baseline has been falling.) You may be right that under current circumstances banks would be equally willing to lend. That strikes me as absurd, but I've been wrong before. Shall we roll the dice and find out?

> I find that most times when people say, "You cannot," or, "You can," what they're actually saying is, "The probability of you being able to is very low/very high." Surely this is the case for my claim. If it helps, please read it as such.

That's still a worthless statement honestly. A useful statement would be saying that by making it very difficult to discharge loans in bankruptcy (under certain specific terms), the number of loans increased by 15% and the terms changed by blah blah. Personally I've never heard such numbers. In fact, I've never been able to find any sources that showed that students declaring bankruptcy was ever originally a large problem.* (Why would it be? It's not like bankruptcy is some harmless thing even if you don't have assets.) It doesn't surprise me that this reason would be trotted out by the lending industry however. What part of the loan industry wouldn't want the government to enforce this against borrowers?

> Other variables were different then. Particularly, the variables of cost and expected compensation relative to the baseline. (Cost has, infamously, been rising, while the expected compensation of graduates relative to the baseline has been falling.)

So in other words the loans are _worse_ deal. Yet you don't want to revisit why the government is effectively subsidizing them by removing their risk? Why?

> You may be right that under current circumstances banks would be equally willing to lend.

When did I say they would be equally willing to lend? Why would we even want that? There are many examples of people that are extremely in debt for dubious payout. Would it not be a _good_ thing if they were not in that debt due to the inability to be granted a loan under such terms?

> That strikes me as absurd, but I've been wrong before. Shall we roll the dice and find out?

Wow such humility.

* Edit: For example, here is a quote from a write up that indicates it was not a problem:

> D. Protections Against Abuse

> One of the most common reasons legislators give for excluding student loans from discharge is the need to prevent abuse of the bankruptcy system. 135 The 1976 Bankruptcy Code included a five-year waiting period before student debts could be discharged because lawmakers were skeptical of new graduates discharging their debts while they still had few assets and then going on to more lucrative careers. 136 As stated earlier though, this fear of post-graduate abuse was baseless when the provisions were put into effect because, even then, student debt abuses accounted for less than 1% of all filings, and this fear remains baseless today. 137 Even if abuse of the bankruptcy system posed as large a threat as legislatures believe, existing anti-abuse measures can sufficiently curb abuse without having to resort to the harsh measure of exempting private student loans from discharge. 138

> Currently, the Code has independent abuse provisions, most notably the means test in § 707(b), which sets an objective and straightforward standard for a judge to detect and prevent abuse of the system. 139 Also, even if an individual’s filing passes the means test, a court can still dismiss the case if it finds that the filing was made in “bad faith,” or if “the totality of the circumstances . . . of the debtor’s financial situation demonstrates abuse.” 140 In addition, many student loans by private lenders today require a co-signing party to help ensure that the bank is secured in the event of abuse. 141 Together these protections effectively safeguard against abuse in the bankruptcy system, which this Comment will argue makes the exemption of student loans unnecessary.

http://law.emory.edu/ebdj/content/volume-32/issue-1/comments...

> A useful statement would be saying that by making it very difficult to discharge loans in bankruptcy (under certain specific terms), the number of loans increased by 15% and the terms changed by blah blah.

I'm afraid I don't have enough information to make such a specific statement. :(

> Yet you don't want to revisit why the government is effectively subsidizing them by removing their risk?

I don't object to the government stopping their subsidy. I'm just saying what I expect the result to be: either loans would stop being issued overall, or they would only be issued to certain majors, which the public would find unacceptable.

> I don't object to the government stopping their subsidy. I'm just saying what I expect the result to be: either loans would stop being issued overall, or they would only be issued to certain majors, which the public would find unacceptable.

The government could certainly choose to subsidize those students explicitly by providing loans on better terms itself. It's not like there are no other solutions.

Regardless, we as a society should get beyond some bizarre idea that there is no other way to provide university education without allowing the loans to be dischargeable. That's exactly how it used to be in the US. Furthermore, many other models are used elsewhere in the world. We should call it what it is: a government supported subsidization of the loan industry taking advantage of naive students. Of course it works out well for some people, but there should be recourse for those it does not. That's exactly the point of bankruptcy.

> The government could certainly choose to subsidize those students explicitly by providing loans on better terms itself. It's not like there are no other solutions.

Sorry if I gave the impression that I was trying to exhaustively enumerate the solution space. I was not! Thanks for the discussion.

Our Government (Australia) just gives us an interest free loan to any domestic student (it is indexed to CPI though, so does increase nominally but not in real terms). You pay it off as part of your tax return, about 4% per year once you're working, but only when you're making over a certain threshold (I think it's around $55K). Works pretty well - it can't really put anybody in financial hardship. Doesn't hurt that our university fees are way less what you'd pay in the US either (except for international students, they gouge them a bit).

I know socialism isn't particular popular in the US but in outher countries student loans are issued by a non-profit / government supported body. Repaying the loan is conditional on earning a reasonable wage.

I wouldn't say I am firmly against this approach, but I do feel that if you have that sort of system, you probably need some control over the types of studies that people can engage in. This is a somewhat unpopular opinion most places, but I do think it's possible for a major to be more or less useful to society. I think that (broad strokes) that is reflected by compensation and/or demand for the services offered by graduates of a given major (teachers and social workers notwithstanding). I think in general it's in the best interests of society to limit the number of people studying unproductive subjects.

> you would not be able to get loans for education if you could discharge them in bankruptcy.

Well, maybe it would have been better this way.

This way universities would be forced to be affordable, and use the money for teaching instead of today's tuition costs that goes 50% for a new stadium, 45% "administrative costs" 5% teachers and TAs

> Well, maybe it would have been better this way.

I don't deny it. There are considerations in both directions. You could also imagine a system of universal rate setting, where you can only offer loans to potential engineers if you do so to art students as well. You could imagine genuinely allowing a free market in student loans. There are a lot of possibilities, each of which would fall at different places on the multi-dimensional optimization problem that we've got in front of us.

But I argue that if you want folks to offer student loans, and don't want lenders to discriminate against certain majors, and don't want interest rates >10%, and want principles on the order of >$100k, you probably need to prevent discharging the loan in bankruptcy. You can't get all those other things and dischargeable loans at the same time.

That situation is US specific. Many other countries allow you to go bankrupt from student loans in various ways. (Or have an alternative way of supporting the debt, for example family co-signing) The fact the current system wouldn't work it doesn't mean the idea is impossible.

In most other countries, student loans aren't even a thing, because university is subsidized to the extent that it is free or relatively inexpensive. The size of the bet is absolutely integral to whether giving the loan makes sense, because it affects the benefit of discharging the loan. If you're saying, "We should make uni cheap or free, and also make loans dischargable," well, sure, but now you're talking about changing a lot of variables rather than just one, and correspondingly increasing the difficulty of reform.

That isn’t so much a question of sympathy as much as a question of the type of asset. If you go into bankruptcy they can claim the physical car and use it to reduce their loss.

If you could dischharge student loans you would have to sign over the rights to any future financial gain you would have from your education to let them reduce their loss. This is essentially what happens when they garnish your wage to reduce the loan, but ofcause not in a clean cut bankruptcy like process.