Easy solution. LET the students default. Seriously, if students could default like they can buying a used car there would be lower tuition and better attention to whom you give a loan to.
I'm guessing the developed version of your proposal would be for the government to step in and make the payments to the banks. But.. that's ridiculous. If you want to throw around government money to reduce education burden, what you do is pay the schools directly by offering grants. You don't prop up the imbalanced loan system by making loan payments with tax dollars.
No offense, but the banks should take on risk if they're charging interest. Right now, they can have their cake and eat it, too, which is stupid - no offense.
i'll skip the faux politeness of "no offense" and just point out that this is foolish.
even if payback is literally guaranteed, interest is still required, because money now is worth more than money later, due to opportunity costs. the US federal government, which everyone considers the pinnacle of credit worthiness, still has to pay interest.
further, just because the debt can't be discharged doesn't mean its paid off in a timely fashion. the interest rate has to be further increased to account for folks who just don't make payments for years at a time.
>You'd think a surefire bailout would decrease resistance to debtor relief. But investors want timely payments; they fear federal relief programs might slow cash flow from an otherwise "bulletproof asset class." This creates twisted incentives, especially for SLABS players involved in loan servicing: They often have a stake in borrowers defaulting rather than paying smaller amounts over a longer period of time.
It's perverse policy — bankers are pampered because student debtors are hounded and pounded. To help borrowers, the government should facilitate bankruptcy reform and expand federal relief programs. But we have deeper problems: Lenders, servicers, collectors and investors prosper while students suffer because schools increasingly rely on private tuition rather than public funding.
http://www.rollingstone.com/politics/news/how-wall-street-pr...
But where can I get the kinds of returns that banks get from student loans? Especially without doing any real work?
If it were possible, many people would choose to file for bankruptcy to release the loans, take the temporary hit, and start again. This would burn the treasury and banks who hold the loans, just like they get burned when they loan mortgage money to people who can't afford one and later default on it.
But bankruptcy isn't the ability to "walk away" from a loan. You literally need to be bankrupt: you can't hold any other assets beyond the statutory minums. Most people suffering with student debt aren't literally destitute (obviously some are), they just have a cash flow problem. Bankruptcy won't help them.
Students get off easy as far as assets go. they don't have any yet, so there's nothing to get rid of.
Almost nobody who uses the term "Drumpf" is taken seriously. It's the 2017 equivalent of using M$ to refer to Microsoft. It's a way to immediately get your opinion written off.
In general, if your income is below the state median (which most recent grads' income will be), your debt is more than half your income (easily the case for most recent grads), it would take more than 5 years to pay off (again, easily the case), and your disposable income is low, you can file for Chapter 7.
[1] http://bankruptcy.findlaw.com/chapter-7/who-can-file-for-cha...
[1]2015 Study by the New York Federal Reserve - https://www.newyorkfed.org/medialibrary/media/research/staff...
Why shouldn't Americans bail out Americans for the collective decisions of Americans?
which translates to "fewer people getting loans". i'm fine with that, but a huge chunk of the population and >=51% of politicians thought it was terrible that there were people who were denied loans.