7 ms·

It's not bad. But it doesn't matter how much tuition costs or what degrees offer pay or not. Everyone will study whatever they want, borrow at 1000% interest if

It's not bad. But it doesn't matter how much tuition costs or what degrees offer pay or not. Everyone will study whatever they want, borrow at 1000% interest if necessary or 1% interest for "profitable" degrees, and then dump the dept as soon as they graduate. Or am I missing something? Original question, what's stopping everyone from defaulting right after graduation?

leoedin 8y ago
What's to stop people defaulting on other unsecured loans, like credit cards? Some people do, but most people don't. Why? Because defaulting on a loan means a bad credit score and suddenly modern society becomes hard - no mortgage, no car loan, no more credit cards etc.
- prostoalex 8y ago
  To default on a credit card you have to qualify for a credit card. Which generally requires some history with a bank that for youngsters involves a secured credit card to build credit - e.g. a credit card with $500 monthly limit paired with a $500 savings account that allows no withdrawals. What happens when a lender decides you're unqualified for a student loan?
- volkl48 8y ago
  The difference is that other unsecure loans are only given out with some degree of expectation/evidence that the person will be able to repay them. A person with $10k/yr income does not get a $40k credit limit. On the other hand, college loans are given out with zero consideration of that. You're just as eligible to take out tons of loans as a poor person majoring in underwater basket weaving as you are are getting a CS degree from Stanford. Even though those have very different probabilities of being able to repay them.
- mrep 8y ago
  The main difference is a bank can repossess your house/car/possessions for normal loans thus making back some of the money they leant you (and you losing all of the stuff you bought with that debt). They cannot repossess any bit of the money spent on your education. This is why the federal government steps in because they legally can repossess some of your education by extracting it out of your future earnings.
  - chriswarbo 8y ago
    You're describing the difference between unsecured and secured loans. The parent explicitly stated that they were talking about unsecured loans (where there's no tangible thing to repossess).
    - mrep 8y ago
      Oh wow, reading more into it, some credit cards are actually unsecured (but some aren't [0]). However, credit card companies can still sue you even if it is an unsecured loan and then repossess some of your stuff depending on the state [1]. [0]: https://www.nerdwallet.com/blog/credit-cards/credit-card-bill-repossessed-purchased-secured-unsecured/ https://www.nerdwallet.com/blog/credit-cards/credit-card-bil... [1]: http://www.natlbankruptcy.com/credit-card-lawsuits/ http://www.natlbankruptcy.com/credit-card-lawsuits/
deleted 8y ago
[deleted]
lghh 8y ago
Nothing would stop everyone from defaulting. There would just be less student loans to default on in the first place. If defaulting was an option, student loans would either not exists or nearly not exist. If student loans didn't exist, colleges would have to drop their cost or not be able to fill seats. If colleges drop their cost, students don't need loans. The cycle ends.
- mrep 8y ago
  > If student loans didn't exist, colleges would have to drop their cost or not be able to fill seats. For lots of colleges, I agree. However, lots of people who come from well to do families have their entire colleges paid for by their parents even today with high tuition costs and thus top colleges could still increase feas as rich parents can afford it whereas poor people would have to grind out for years in low paying jobs just to afford the chance to go to the rich schools. Without guaranteed loans, poor students would practically never have the opportunity to go to rich schools.
brazzledazzle 8y ago
The entire premise is based on a questionable foundational assumption. The argument goes that you pay for an education but that can’t be taken back in bankruptcy proceedings or recovered when defaulted on. I’ll agree that what people pay for is an education, but what makes that education valuable in terms of employment is the paper that proves you have it. If the college won’t validate your attendance and degree what do you have except an unverifiable claim that makes you indistinguishable from candidates that don’t have a degree?

leoedin 8y ago

What's to stop people defaulting on other unsecured loans, like credit cards? Some people do, but most people don't. Why? Because defaulting on a loan means a bad credit score and suddenly modern society becomes hard - no mortgage, no car loan, no more credit cards etc.

prostoalex 8y ago
To default on a credit card you have to qualify for a credit card. Which generally requires some history with a bank that for youngsters involves a secured credit card to build credit - e.g. a credit card with $500 monthly limit paired with a $500 savings account that allows no withdrawals. What happens when a lender decides you're unqualified for a student loan?
volkl48 8y ago
The difference is that other unsecure loans are only given out with some degree of expectation/evidence that the person will be able to repay them. A person with $10k/yr income does not get a $40k credit limit. On the other hand, college loans are given out with zero consideration of that. You're just as eligible to take out tons of loans as a poor person majoring in underwater basket weaving as you are are getting a CS degree from Stanford. Even though those have very different probabilities of being able to repay them.
mrep 8y ago
The main difference is a bank can repossess your house/car/possessions for normal loans thus making back some of the money they leant you (and you losing all of the stuff you bought with that debt). They cannot repossess any bit of the money spent on your education. This is why the federal government steps in because they legally can repossess some of your education by extracting it out of your future earnings.
- chriswarbo 8y ago
  You're describing the difference between unsecured and secured loans. The parent explicitly stated that they were talking about unsecured loans (where there's no tangible thing to repossess).
  - mrep 8y ago
    Oh wow, reading more into it, some credit cards are actually unsecured (but some aren't [0]). However, credit card companies can still sue you even if it is an unsecured loan and then repossess some of your stuff depending on the state [1]. [0]: https://www.nerdwallet.com/blog/credit-cards/credit-card-bill-repossessed-purchased-secured-unsecured/ https://www.nerdwallet.com/blog/credit-cards/credit-card-bil... [1]: http://www.natlbankruptcy.com/credit-card-lawsuits/ http://www.natlbankruptcy.com/credit-card-lawsuits/

deleted 8y ago

[deleted]

lghh 8y ago

Nothing would stop everyone from defaulting. There would just be less student loans to default on in the first place. If defaulting was an option, student loans would either not exists or nearly not exist. If student loans didn't exist, colleges would have to drop their cost or not be able to fill seats. If colleges drop their cost, students don't need loans. The cycle ends.

mrep 8y ago
> If student loans didn't exist, colleges would have to drop their cost or not be able to fill seats. For lots of colleges, I agree. However, lots of people who come from well to do families have their entire colleges paid for by their parents even today with high tuition costs and thus top colleges could still increase feas as rich parents can afford it whereas poor people would have to grind out for years in low paying jobs just to afford the chance to go to the rich schools. Without guaranteed loans, poor students would practically never have the opportunity to go to rich schools.

brazzledazzle 8y ago

The entire premise is based on a questionable foundational assumption. The argument goes that you pay for an education but that can’t be taken back in bankruptcy proceedings or recovered when defaulted on. I’ll agree that what people pay for is an education, but what makes that education valuable in terms of employment is the paper that proves you have it. If the college won’t validate your attendance and degree what do you have except an unverifiable claim that makes you indistinguishable from candidates that don’t have a degree?