7 ms·

Ah that's why they're complaining about the student loans. In The European countries I have been living in, the concept of personal bankcrupty doesn't exist in

Ah that's why they're complaining about the student loans. In The European countries I have been living in, the concept of personal bankcrupty doesn't exist in the same way, at least. People who get too much loans kind of just hang with them, after 15-20 years they are forgiven AFAIK.

eru 2y ago
Btw, my suggestion for the US would be to remove that special bankruptcy exception for new student loans. That's because once you do that, the supply of new student loans would most likely dry up. Thus shutting off the money fountain for the education industry.
- eleveriven 2y ago
  Actually it sounds really good
- rayiner 2y ago
  Your suggestion wouldn’t work because nearly all student loans (over 90%) are issued by the federal government, which does not (and for political reasons, never will) evaluate credit risk.
  - bumby 2y ago
    An alternative is to tie the federal student loan program to a regulation in school cost. If the school exceeds some threshold, their students are no longer qualify for federally-backed loans. Granted, it creates administrative burden but it’s the only proposal I’ve heard that seems to address the root problem of tuition costs and almost unfettered access to collateral-free loans.
    - rayiner 2y ago
      That would be a good idea.
    - Repulsion9513 2y ago
      That's unlikely to be accepted for other reasons. Putting a limit means most will approach that limit, and those that exceed the limit will be even more unaffordable. Plus no one will agree on what the limit should be. Which makes them extremely unpopular (except for benefits to individuals which of course should have the lowest limit possible nationwide)
      - bumby 2y ago
        >Plus no one will agree on what the limit should be. We do this with drug reimbursement costs and construction already and I’m pretty sure those for-profit companies would also disagree on what the limit should be. I also don’t think it needs to be a one-size-fits all threshold; it could be adjusted to COL and/or job prospects that are tied to graduate statistics. IMO that goes a long way to aligning the incentives of the student and the institution. I’m curious if you have an alternative solution
        Repulsion9513 2y ago
        Yeah, I intentionally didn't say it wouldn't happen, just unlikely :) Personally I think limits (and significantly higher grants to make student loans unnecessary for a basic post-secondary education) are needed. But I think it's worth recognizing that limits will make what's already a very divisive issue, even more divisive...
        bumby 2y ago
        I think more thoughtful limits would be a good idea. I also think the reduction of aid money has been part of the problem. I just don't know where the money comes from to shore up that problem. I have seen other pilot programs. I think it was Purdue who was considering "buying stock" in students, where the student would pay a portion of their income for a certain number of years in exchange for a scholarship.
    - eru 2y ago
      > [...] and almost unfettered access to collateral-free loans. If people voluntarily want to pay high costs, and other people voluntarily want to make loans, who are we to judge? We just need to get tax payer money out of the game. Afterwards, people can go nuts with their own money.
      - bumby 2y ago
        We are to judge because we are the taxpayers who guarantee the vast majority of those loans. That’s the mail reason I said “collateral-free.” Most of those loans would not happen in a private market because teenagers, in general, do not have collateral to secure the loan, meaning they have little to lose by defaulting.
        eru 2y ago
        > We are to judge because we are the taxpayers who guarantee the vast majority of those loans. Yes, get the taxpayer out of the loan guarantee business. Sorry, I thought that was a given.
        bumby 2y ago
        I’m not against that, but I do think just getting rid of federally backed loans previously causes more problems. (Ie it’s one of those simple cures that may ignore blowback) Do you think there is an opportunity gap to be closed? If so, how do you think that would work?
        eru 2y ago
        > (Ie it’s one of those simple cures that may ignore blowback) I actually want exactly the 'blowback': I want student loan creation to fall off a clip. > Do you think there is an opportunity gap to be closed? What is an opportunity gap? > If so, how do you think that would work? I'm guessing here what you mean by opportunity gap. I think the cheapest way is to open the US labour market to virtually anyone on the globe. That would be good for the US economy, wouldn't cost the tax payer anything (in fact you would save on border enforcement), and the people with the least opportunities globally would benefit enormously. If you only care about Americans, I would suggest to give poor people money, and let them decide what to do with it. Eg whatever the cost to subsidise education (including subsidised student loans) right now, just pay it out to poor people. Than they can buy education, or whatever else they deem more necessary.
  - filoleg 2y ago
    > nearly all student loans (over 90%) are issued by the federal government Not claiming you are wrong, because I genuinely don’t know, but how does it gel with the fact that the federal student loans for undergrads cap out at the max of around $9.5-12k for independent students and $5.5-7.5k for dependent students per year[0]? Given all the outrage I see online, where people claim paying upwards of $20-40k/yr for attendance, wouldn’t they need to supplement it with private loans? I dont doubt that there are more federal loans out there than private ones (because it always makes sense to get the federal ones first, and only go for private ones later if needed, so pretty much everyone who has private loans also has federal ones). But what about in terms of the actual loan dollar amount? 0. https://financialaid.umbc.edu/types-of-aid/federal-loans/direct-loan-limits/ https://financialaid.umbc.edu/types-of-aid/federal-loans/dir... (this is an UMBC page, but it breaks down the federal student aid limits that apply everywhere)
    - rayiner 2y ago
      https://www.usatoday.com/money/blueprint/student-loans/average-student-loan-debt-statistics/ https://www.usatoday.com/money/blueprint/student-loans/avera... (“As of the first quarter of 2023, student loan debt in the U.S. stands at a total of over $1.77 trillion. More than 92% of this is federal student loan debt while the remaining amount is owed on private student loans, according to Federal Student Aid (an office of the Department of Education).”). That 92% figure is in terms of debt amount, not number of loans. The limits you mention are per student. Parent PLUS loans are limited only by the school’s official cost of attendance: https://studentaid.gov/understand-aid/types/loans/plus/parent#loan-amount-limits https://studentaid.gov/understand-aid/types/loans/plus/paren... (“The maximum PLUS loan amount you can borrow is the cost of attendance at the school your child will attend minus any other financial assistance your child receives. The cost of attendance is determined by the school.”). Schools are extremely aggressive about ensuring parents are on the hook for the loans so students can take out the maximum.
      - filoleg 2y ago
        That’s a good point, thanks for bringing it up. It pretty much resolves the conundrum I was having in my original comment. Small caveat (that ultimately doesn’t negate your point): PLUS loans have credit check requirements for determing eligibility[0] (with exceptions available in certain cases if you can satisfy additional requirements, like bringing an eligible cosigner who can pass the credit check). 0. https://studentaid.gov/understand-aid/types/loans/plus/parent https://studentaid.gov/understand-aid/types/loans/plus/paren...
  - eru 2y ago
    Lots of bankruptcies just after people finish their education would still ring some political alarm bells.
- trashtester 2y ago
  Just make the college a guarantor for the student loan. That would solve a lot of the issues with higher ed in the US today....
  - bumby 2y ago
    I think that's a potential part, but to play devil's advocate: don't you think this may exacerbate the opportunity gap? I.e., those who are the best bets (in terms of not defaulting) are also those who come from well-off backgrounds?
    - eru 2y ago
      That's why we shouldn't subsidise education in the first place. The net benefits of education accrue to more than 100% to the customer. And, people from well-off backgrounds can and do take more advantage of education. We should just give poor people money, and let them decide for themselves how they want to spend it. If they want to spend it on (unsubsidised) education, that would be fine choice for them to make.
      - bumby 2y ago
        I do agree that when you subsidize something you get more of it. So there’s a case that in some instances like education, it’s a good thing. Most people probably agree that a more educated society is better than a less educated one (although I agree there’s still room for debate on what that education should entail). The issue with an open-ended handout is that you don’t know what you’ll be getting more of.
        eru 2y ago
        > So there’s a case that in some instances like education, it’s a good thing. That's where we disagree, I guess. I don't mind education in the sense of people learning something. That's harmless enough (but doesn't need special subsidies. Just give money to the needy, and let them decide whether they want to invest it in a library membership.) What I'm against specifically is education in the sense of getting a certificate at the end. A degree etc. That sort of education has negative externalities and should be highly taxed, not subsidised. It leads to an arms race of credentialism, and is a big reason why eg a high school graduate can't get a decent job these days. (There are plenty of jobs that used to be done by high school dropouts, that haven't changed all that much. But now require a degree, if you want to be considered for an interview.)
greenavocado 2y ago
Germany has Verbraucherinsolvenzverfahren. The individual's credit rating will be negatively affected for several years after the completion of the procedure. The insolvency proceedings are recorded in a public register, which can be accessed by anyone. The process typically lasts for six years, during which the individual must adhere to a strict budget and make payments to creditors. After completing the six-year period, the remaining debts are discharged, provided the individual has adhered to the terms of the insolvency plan. Step 1 is außergerichtliches Schuldenbereinigungsverfahren where the debtor attempts to reach an out-of-court settlement with creditors. This stage usually lasts up to 6 months. Then there is Eröffnung des Insolvenzverfahrens where if the out-of-court settlement fails, the debtor files for insolvency with the local court. The court appoints a trustee to manage the debtor's assets and liaise with creditors. This stage typically takes 1-2 months. Next there is either Regelinsolvenzverfahren or vereinfachtes Insolvenzverfahren. In the latter if the debtor's assets are insufficient to cover the costs of the proceedings, the court may initiate a simplified insolvency process. The debtor proposes an insolvency plan to the creditors, which includes a 6-year repayment period. If the plan is accepted, the court approves it, and the debtor begins making payments. In the former, if the debtor's assets are sufficient to cover the costs, regular insolvency proceedings take place. The trustee liquidates the debtor's assets and distributes the proceeds among creditors. The debtor proposes an insolvency plan, which typically includes a 6-year repayment period. After the insolvency plan is approved, the debtor enters a 6-year good conduct phase called Wohlverhaltensperiode. During this period, the debtor must adhere to the repayment plan, maintain gainful employment, and inform the trustee of any changes in their financial situation. The debtor is allowed to keep a portion of their income for living expenses. If the debtor complies with the terms of the insolvency plan during the good conduct phase, the court grants a discharge of the remaining debts called Restschuldbefreiung. This typically occurs 6 years after the opening of insolvency proceedings. This is really not that different from bankruptcies in America. I think Europeans are simply unaware of their options. In the US Chapter 7 bankruptcy will remain on the individual's credit report for up to 10 years, making it difficult to obtain credit, secure housing, or find employment. Chapter 7 bankruptcy is a matter of public record, which can be accessed by anyone. The process is relatively quick, typically lasting 4-6 months. Most unsecured debts, such as credit card balances and medical bills, are discharged upon completion of the process. Chapter 13 bankruptcy will remain on the individual's credit report for up to 7 years, which is less than Chapter 7. Like Chapter 7, Chapter 13 bankruptcy is a matter of public record. The repayment plan typically lasts for 3-5 years, during which the individual must make regular payments to creditors. After completing the repayment plan, the remaining eligible debts are discharged. Verbraucherinsolvenzverfahren lasts longer (6 years) than both Chapter 7 (4-6 months) and Chapter 13 (3-5 years). Verbraucherinsolvenzverfahren and Chapter 13 involve a repayment plan, while Chapter 7 does not. Chapter 7 has a longer-lasting impact on credit ratings (10 years) compared to Verbraucherinsolvenzverfahren and Chapter 13 (6-7 years). France has a procedure called "rétablissement personnel," which is similar to Chapter 7 in the US, allowing individuals to liquidate their assets and discharge their debts. In the UK, individuals can file for bankruptcy or enter into an Individual Voluntary Arrangement (IVA), which is similar to Chapter 13 in the US.

eru 2y ago

Btw, my suggestion for the US would be to remove that special bankruptcy exception for new student loans. That's because once you do that, the supply of new student loans would most likely dry up. Thus shutting off the money fountain for the education industry.

eleveriven 2y ago
Actually it sounds really good
rayiner 2y ago
Your suggestion wouldn’t work because nearly all student loans (over 90%) are issued by the federal government, which does not (and for political reasons, never will) evaluate credit risk.
- bumby 2y ago
  An alternative is to tie the federal student loan program to a regulation in school cost. If the school exceeds some threshold, their students are no longer qualify for federally-backed loans. Granted, it creates administrative burden but it’s the only proposal I’ve heard that seems to address the root problem of tuition costs and almost unfettered access to collateral-free loans.
  - rayiner 2y ago
    That would be a good idea.
  - Repulsion9513 2y ago
    That's unlikely to be accepted for other reasons. Putting a limit means most will approach that limit, and those that exceed the limit will be even more unaffordable. Plus no one will agree on what the limit should be. Which makes them extremely unpopular (except for benefits to individuals which of course should have the lowest limit possible nationwide)
    - bumby 2y ago
      >Plus no one will agree on what the limit should be. We do this with drug reimbursement costs and construction already and I’m pretty sure those for-profit companies would also disagree on what the limit should be. I also don’t think it needs to be a one-size-fits all threshold; it could be adjusted to COL and/or job prospects that are tied to graduate statistics. IMO that goes a long way to aligning the incentives of the student and the institution. I’m curious if you have an alternative solution
      - Repulsion9513 2y ago
        Yeah, I intentionally didn't say it wouldn't happen, just unlikely :) Personally I think limits (and significantly higher grants to make student loans unnecessary for a basic post-secondary education) are needed. But I think it's worth recognizing that limits will make what's already a very divisive issue, even more divisive...
        bumby 2y ago
        I think more thoughtful limits would be a good idea. I also think the reduction of aid money has been part of the problem. I just don't know where the money comes from to shore up that problem. I have seen other pilot programs. I think it was Purdue who was considering "buying stock" in students, where the student would pay a portion of their income for a certain number of years in exchange for a scholarship.
  - eru 2y ago
    > [...] and almost unfettered access to collateral-free loans. If people voluntarily want to pay high costs, and other people voluntarily want to make loans, who are we to judge? We just need to get tax payer money out of the game. Afterwards, people can go nuts with their own money.
    - bumby 2y ago
      We are to judge because we are the taxpayers who guarantee the vast majority of those loans. That’s the mail reason I said “collateral-free.” Most of those loans would not happen in a private market because teenagers, in general, do not have collateral to secure the loan, meaning they have little to lose by defaulting.
      - eru 2y ago
        > We are to judge because we are the taxpayers who guarantee the vast majority of those loans. Yes, get the taxpayer out of the loan guarantee business. Sorry, I thought that was a given.
        bumby 2y ago
        I’m not against that, but I do think just getting rid of federally backed loans previously causes more problems. (Ie it’s one of those simple cures that may ignore blowback) Do you think there is an opportunity gap to be closed? If so, how do you think that would work?
        eru 2y ago
        > (Ie it’s one of those simple cures that may ignore blowback) I actually want exactly the 'blowback': I want student loan creation to fall off a clip. > Do you think there is an opportunity gap to be closed? What is an opportunity gap? > If so, how do you think that would work? I'm guessing here what you mean by opportunity gap. I think the cheapest way is to open the US labour market to virtually anyone on the globe. That would be good for the US economy, wouldn't cost the tax payer anything (in fact you would save on border enforcement), and the people with the least opportunities globally would benefit enormously. If you only care about Americans, I would suggest to give poor people money, and let them decide what to do with it. Eg whatever the cost to subsidise education (including subsidised student loans) right now, just pay it out to poor people. Than they can buy education, or whatever else they deem more necessary.
- filoleg 2y ago
  > nearly all student loans (over 90%) are issued by the federal government Not claiming you are wrong, because I genuinely don’t know, but how does it gel with the fact that the federal student loans for undergrads cap out at the max of around $9.5-12k for independent students and $5.5-7.5k for dependent students per year[0]? Given all the outrage I see online, where people claim paying upwards of $20-40k/yr for attendance, wouldn’t they need to supplement it with private loans? I dont doubt that there are more federal loans out there than private ones (because it always makes sense to get the federal ones first, and only go for private ones later if needed, so pretty much everyone who has private loans also has federal ones). But what about in terms of the actual loan dollar amount? 0. https://financialaid.umbc.edu/types-of-aid/federal-loans/direct-loan-limits/ https://financialaid.umbc.edu/types-of-aid/federal-loans/dir... (this is an UMBC page, but it breaks down the federal student aid limits that apply everywhere)
  - rayiner 2y ago
    https://www.usatoday.com/money/blueprint/student-loans/average-student-loan-debt-statistics/ https://www.usatoday.com/money/blueprint/student-loans/avera... (“As of the first quarter of 2023, student loan debt in the U.S. stands at a total of over $1.77 trillion. More than 92% of this is federal student loan debt while the remaining amount is owed on private student loans, according to Federal Student Aid (an office of the Department of Education).”). That 92% figure is in terms of debt amount, not number of loans. The limits you mention are per student. Parent PLUS loans are limited only by the school’s official cost of attendance: https://studentaid.gov/understand-aid/types/loans/plus/parent#loan-amount-limits https://studentaid.gov/understand-aid/types/loans/plus/paren... (“The maximum PLUS loan amount you can borrow is the cost of attendance at the school your child will attend minus any other financial assistance your child receives. The cost of attendance is determined by the school.”). Schools are extremely aggressive about ensuring parents are on the hook for the loans so students can take out the maximum.
    - filoleg 2y ago
      That’s a good point, thanks for bringing it up. It pretty much resolves the conundrum I was having in my original comment. Small caveat (that ultimately doesn’t negate your point): PLUS loans have credit check requirements for determing eligibility[0] (with exceptions available in certain cases if you can satisfy additional requirements, like bringing an eligible cosigner who can pass the credit check). 0. https://studentaid.gov/understand-aid/types/loans/plus/parent https://studentaid.gov/understand-aid/types/loans/plus/paren...
- eru 2y ago
  Lots of bankruptcies just after people finish their education would still ring some political alarm bells.
trashtester 2y ago
Just make the college a guarantor for the student loan. That would solve a lot of the issues with higher ed in the US today....
- bumby 2y ago
  I think that's a potential part, but to play devil's advocate: don't you think this may exacerbate the opportunity gap? I.e., those who are the best bets (in terms of not defaulting) are also those who come from well-off backgrounds?
  - eru 2y ago
    That's why we shouldn't subsidise education in the first place. The net benefits of education accrue to more than 100% to the customer. And, people from well-off backgrounds can and do take more advantage of education. We should just give poor people money, and let them decide for themselves how they want to spend it. If they want to spend it on (unsubsidised) education, that would be fine choice for them to make.
    - bumby 2y ago
      I do agree that when you subsidize something you get more of it. So there’s a case that in some instances like education, it’s a good thing. Most people probably agree that a more educated society is better than a less educated one (although I agree there’s still room for debate on what that education should entail). The issue with an open-ended handout is that you don’t know what you’ll be getting more of.
      - eru 2y ago
        > So there’s a case that in some instances like education, it’s a good thing. That's where we disagree, I guess. I don't mind education in the sense of people learning something. That's harmless enough (but doesn't need special subsidies. Just give money to the needy, and let them decide whether they want to invest it in a library membership.) What I'm against specifically is education in the sense of getting a certificate at the end. A degree etc. That sort of education has negative externalities and should be highly taxed, not subsidised. It leads to an arms race of credentialism, and is a big reason why eg a high school graduate can't get a decent job these days. (There are plenty of jobs that used to be done by high school dropouts, that haven't changed all that much. But now require a degree, if you want to be considered for an interview.)

greenavocado 2y ago

Germany has Verbraucherinsolvenzverfahren. The individual's credit rating will be negatively affected for several years after the completion of the procedure. The insolvency proceedings are recorded in a public register, which can be accessed by anyone. The process typically lasts for six years, during which the individual must adhere to a strict budget and make payments to creditors. After completing the six-year period, the remaining debts are discharged, provided the individual has adhered to the terms of the insolvency plan. Step 1 is außergerichtliches Schuldenbereinigungsverfahren where the debtor attempts to reach an out-of-court settlement with creditors. This stage usually lasts up to 6 months. Then there is Eröffnung des Insolvenzverfahrens where if the out-of-court settlement fails, the debtor files for insolvency with the local court. The court appoints a trustee to manage the debtor's assets and liaise with creditors. This stage typically takes 1-2 months. Next there is either Regelinsolvenzverfahren or vereinfachtes Insolvenzverfahren. In the latter if the debtor's assets are insufficient to cover the costs of the proceedings, the court may initiate a simplified insolvency process. The debtor proposes an insolvency plan to the creditors, which includes a 6-year repayment period. If the plan is accepted, the court approves it, and the debtor begins making payments. In the former, if the debtor's assets are sufficient to cover the costs, regular insolvency proceedings take place. The trustee liquidates the debtor's assets and distributes the proceeds among creditors. The debtor proposes an insolvency plan, which typically includes a 6-year repayment period. After the insolvency plan is approved, the debtor enters a 6-year good conduct phase called Wohlverhaltensperiode. During this period, the debtor must adhere to the repayment plan, maintain gainful employment, and inform the trustee of any changes in their financial situation. The debtor is allowed to keep a portion of their income for living expenses. If the debtor complies with the terms of the insolvency plan during the good conduct phase, the court grants a discharge of the remaining debts called Restschuldbefreiung. This typically occurs 6 years after the opening of insolvency proceedings. This is really not that different from bankruptcies in America. I think Europeans are simply unaware of their options. In the US Chapter 7 bankruptcy will remain on the individual's credit report for up to 10 years, making it difficult to obtain credit, secure housing, or find employment. Chapter 7 bankruptcy is a matter of public record, which can be accessed by anyone. The process is relatively quick, typically lasting 4-6 months. Most unsecured debts, such as credit card balances and medical bills, are discharged upon completion of the process. Chapter 13 bankruptcy will remain on the individual's credit report for up to 7 years, which is less than Chapter 7. Like Chapter 7, Chapter 13 bankruptcy is a matter of public record. The repayment plan typically lasts for 3-5 years, during which the individual must make regular payments to creditors. After completing the repayment plan, the remaining eligible debts are discharged. Verbraucherinsolvenzverfahren lasts longer (6 years) than both Chapter 7 (4-6 months) and Chapter 13 (3-5 years). Verbraucherinsolvenzverfahren and Chapter 13 involve a repayment plan, while Chapter 7 does not. Chapter 7 has a longer-lasting impact on credit ratings (10 years) compared to Verbraucherinsolvenzverfahren and Chapter 13 (6-7 years). France has a procedure called "rétablissement personnel," which is similar to Chapter 7 in the US, allowing individuals to liquidate their assets and discharge their debts. In the UK, individuals can file for bankruptcy or enter into an Individual Voluntary Arrangement (IVA), which is similar to Chapter 13 in the US.