Student Loans. Medical Debt. Criminal Justice Fees. Cancel It All.

Re:Student Loans. Medical Debt. Criminal Justice Fees. Cance... by Turing_Machine on Friday July 02, 2021 @12:30PM (#27713654)

Bob, 35 years old, is an excellent cook (but not a great businessman). He takes out an SBA loan to start a restaurant (failure rate for restaurants: very, very high). The restaurant goes belly up. Bob is allowed to file bankruptcy and walk away from the debt.

Jim, 50 years old, watches "house-flipping" shows on cable TV and decides that he wants to be a real estate baron. He starts flipping houses using VA/FHA loans. The real estate market tanks. Jim is allowed to file bankruptcy and walk away from the debt.

Dave, 18 years old, isn't a very good student, but every authority figure in his life (parents, teachers, ministers, you name it) tells him he HAS to have a college education. He takes out government loans to get one in a field with easy classes but low employability. But unlike Bob and Jim, Dave isn't allowed to file bankruptcy and walk away from the debt.

Can you justify Dave being held to a higher standard than Bob and Jim?

I've asked this question many times, but have never seen a convincing answer.

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Re:Student Loans. Medical Debt. Criminal Justice Fees. Cance... by leereeves on Friday July 02, 2021 @12:46PM (#27713867)

The lender takes Bob's business and Jim's house. How is the lender going to take Dave's degree?

Dave is the only one of the three who could keep the asset after declaring bankruptcy, if that were allowed.

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Re:Student Loans. Medical Debt. Criminal Justice Fees. Cance... by Turing_Machine on Friday July 02, 2021 @03:58PM (#27716085)

In this scenario, Dave's degree is likely worth little or nothing, so I'm skeptical that allowing him to keep it represents any kind of real advantage.

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Re:Student Loans. Medical Debt. Criminal Justice Fees. Cance... by leereeves on Friday July 02, 2021 @09:51PM (#27718712)

But laws aren't made only for this scenario. If student loans were dischargeable in bankruptcy, the financially optimal decision would be to borrow as much as possible while in school, then declare bankruptcy immediately after graduation.

And if you would suggest that the bankruptcy court should consider the value of the degree, I would respond that the appropriate time for that is before lending the money.

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Re:Student Loans. Medical Debt. Criminal Justice Fees. Cance... by Turing_Machine on Monday July 05, 2021 @01:19AM (#27734844)

> If student loans were dischargeable in bankruptcy, the financially optimal decision would be to borrow as much as possible while in school, then declare bankruptcy immediately after graduation.

Bankruptcies stay on your credit report for seven years. That doesn't sound particularly "financially optimal" to me, or likely to anyone else.

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