A few days ago a reader wondered if I could collate and summarize my multitude of posts on the topic of student loans. Anything for an interested follower!
Subsidizing all higher education here.
Subsidizing for-profit pseudo-education here.
Undoing the subsidy for private student lenders here and here.
One size does not fit all: pricing risk into student loans here and here.
Student loans can be discharged here, here, and here.
How to make money from deadbeat students here.
Subsidizing all higher education here.
Subsidizing for-profit pseudo-education here.
Undoing the subsidy for private student lenders here and here.
One size does not fit all: pricing risk into student loans here and here.
Student loans can be discharged here, here, and here.
How to make money from deadbeat students here.
Is there really a student loan crisis here?
Of course there are more posts but this should be enough to keep folks busy for awhile.
But what about a fundamental question of policy: Wouldn't permitting student loans to be freely discharged in bankruptcy invite impecunious students to walk away from college with their enhanced "human capital" and shift the cost to hapless lenders (or taxpayers)? In other words, wouldn't they have their cake and eat it too?
Four thoughts. First, student loans were freely dischargeable in bankruptcy before 1979 and the earth didn't stop turning on its axis. Of course, much has changed over the past forty years so perhaps we should not look to history for guidance.
Second, there are long-term costs associated with bankruptcy that even today dissuade many folks who are otherwise eligible from seeking bankruptcy relief. Two that stand out are social stigma and the increased cost of credit down the road.
Next, many students are not actually repaying their student loans as it is. There's not as much downside risk as many folks believe in permitting students to discharge debt they aren't likely to pay anyway. Related to this point is the possibility that permitting the discharge of student loans might actually increase economic activity by letting those former students borrow money for more productive things like houses and consumer goods.
Fourth, combining bankruptcy dischargeability with risk-base pricing could have a deflationary effect on the cost of higher education. Without an unending pipeline of tuition dollars, colleges and universities might refocus their activities on the mission of education (or at least training) without the cruise-ship frills and administrative bloat that we have also seen over the past forty years.
Anyway, there are some rainy-afternoon thoughts on an always interesting topic.
Of course there are more posts but this should be enough to keep folks busy for awhile.
But what about a fundamental question of policy: Wouldn't permitting student loans to be freely discharged in bankruptcy invite impecunious students to walk away from college with their enhanced "human capital" and shift the cost to hapless lenders (or taxpayers)? In other words, wouldn't they have their cake and eat it too?
Four thoughts. First, student loans were freely dischargeable in bankruptcy before 1979 and the earth didn't stop turning on its axis. Of course, much has changed over the past forty years so perhaps we should not look to history for guidance.
Second, there are long-term costs associated with bankruptcy that even today dissuade many folks who are otherwise eligible from seeking bankruptcy relief. Two that stand out are social stigma and the increased cost of credit down the road.
Next, many students are not actually repaying their student loans as it is. There's not as much downside risk as many folks believe in permitting students to discharge debt they aren't likely to pay anyway. Related to this point is the possibility that permitting the discharge of student loans might actually increase economic activity by letting those former students borrow money for more productive things like houses and consumer goods.
Fourth, combining bankruptcy dischargeability with risk-base pricing could have a deflationary effect on the cost of higher education. Without an unending pipeline of tuition dollars, colleges and universities might refocus their activities on the mission of education (or at least training) without the cruise-ship frills and administrative bloat that we have also seen over the past forty years.
Anyway, there are some rainy-afternoon thoughts on an always interesting topic.
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