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Comment by yummyfajitas | Hacker News Reader

This is probably a good idea. It's ridiculous that we coddle people who wastefully took out loans with the goal of improving human capital, and then failed to take advantage of them.

Previously student loans were a socialized losses, privatized gains situation. This gives borrowers some skin in the game and will hopefully give them more reason to carefully evaluate whether college is really a good idea for them.

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A professional VC will be wrong about some 80% of the startups they fund. Yet you want to punish a teenager for not correctly evaluating the chances of receiving a well-paying job 4+ years into the future?

The VC is "punished" by his own (and his investor's) voluntary investment losses. Who covers the teenager's losses?

Civilized societies.

And the startup founder isn't punished for failing to earn enough money; the wealthy fund with the risk capital accepts the loss and moves on rather than pursuing the broke founders for the rest of their life with 16% penalty interest rates and invented collection costs and special legislation to exempt them from bankruptcy

Why are people lending to students expecting to not be punished for their voluntary investment losses?

>Why are people lending to students expecting to not be punished for their voluntary investment losses?

I don't think they should be.

What? Borrowers already have skin in the game. Lenders have none.

Make student loans dischargeable and suddenly a lot more people are thinking about the actual utility of college and it's costs.

I agree with the downvote and the fact that borrowers have skin in the game, but not that lenders have none. Debt should not be dischargeable, else it's not debt at all.

Of course debt can be written off. Out there in the real world contracts are renegotiated all the time. More of that would be advantageous in the face of information asymmetry, the party with better insight would be less tempted to exploit their position.

You're talking about corporate debt not personal debt. Show me an example of personal date that is frequently discharged (outside of bankruptcy) and I'll adjust my position.

If you're referring to the fact that it can't be discharged as part of bankruptcy, then I tend to agree with you. It should be.

If you're referring to the fact that it can't be discharged as part of bankruptcy, then I tend to agree with you.

How else would they be dischargeable? I assume you were talking about bankruptcy.

As some sort of student loan forgiveness program.

How about medical debt? I understand that US hospitals will cut you a deal based on your ability to pay.

Yes that's true. However, they won't discharge it completely. They'll set you up with a payment plan and/or negotiate the total. I think they still report it to your credit profile though.

https://en.wikipedia.org/wiki/Jubilee_%28biblical%29

Bankruptcy is exactly the vector for discharging most personal debt. The problem is that student loans are exempt from bankruptcy.

Maybe we can focus on making a rich real estate investor's debt non-dischargeable before tightening the screws on broke student loan holders.

a lot more people are thinking about the actual utility of college

Yeah. It's time that lenders began doing diligence again on their borrowers. Even if the prospective borrower didn't know that that Kaplan degree wasn't such a great idea the loan officer at the bank would know and deny the loan.

>Borrowers already have skin in the game. Lenders have none

That's absolutely false. Lenders have skin in the game - they run the risk that the borrower fails to pay back the principal. That's why they charge risky borrowers more interest.

If lenders truly had no skin in the game then loans would be nearly interest free.

If lenders truly had no skin in the game then loans would be nearly interest free.

There's a testable hypothesis there: did rates for student loans go up much when they were made non-dischargeable? I'm too lazy to check.

It's a good point. I failed to caveat that my prediction might not be true: - in a situation where other "risk-free" investments are more profitable - in a situation where the supply of money lent is regulated or controlled enough to fail to bring down rates.

Except we've created a system in which you're told that you have to go to college your entire life. You can't be a damn hotel manager without a college degree these days. The price of college has been on the rise for decades and the only one assuming risk here is the borrower.

College should be a good idea for everyone. Sometimes I think the Renaissance never happened.

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