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Comment by TylerE | Hacker News Reader

I am leery of government-backed loans. Look what FHA did to the housing market and what student loans have done to the cost of college.

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I'm not entirely sure what FHA did to the housing market, but as for student loans, yes it wasn't a great outcome, but it is a substantially better outcome than everyone being in debt with high interest rates with predatory lenders.

Except that student loans can't be abandoned even if you declare bankruptcy. That one little factor makes them some of the worst loans imaginable in terms of long-term prospects.

Still not worse than triple digit interest rates

Those unpaid predatory loans fall off your credit report after about a decade.

Student loans are forever.

the tradeoff is insanely low interest rates. Without the federal backstop student loans would have the interest rates of credit cards because as soon as new graduates get into the workforce, can't find a job, they'll file for bankruptcy to get out of the loan. Managing that risk without a backstop means incredibly high interest rate to cover for the losses of loans lost in bankruptcy.

Student loans didn't have those kinds of interest rates back when they could be discharged in bankruptcy 20+yr ago. Why would they now?

The downside/risk to the lender is about 10x higher per loan than it was 20+ years ago

No, it's not a better outcome than if the market was private because frankly no one would graduate with $150k in debt for a degree in basket weaving if private lenders were backing the loans. A well regulated private market would prevent the extreme situations that we are seeing today.

You can make a (somewhat legitimate) argument that we shouldn't require young kids to major in subjects that result in good paying jobs, but on the other hand you wind up with the mess that we are in if you don't.

The status quo cannot go on. I'm in favor of either fully privatizing the system again, OR fully socializing it. In either case, the government would absolutely not be backing loans anymore.

What does it mean to “fully socialise it” in the context of being from the US?

Do you mean buying out all of the universities?

PS: I come from Europe, studied in the UK when the tuition was capped at £3K/year.

No, it would mirror the European experience. Essentially just capping the cost of tuition, fees and room/board and subsidizing the schools to an extent to make up the difference.

> No, it's not a better outcome than if the market was private because frankly no one would graduate with $150k in debt for a degree in basket weaving if private lenders were backing the loans

People get private loans for bullshit degrees all of the time. Lenders don't care, because private student loans are non-dischargeable.

In a privatized system student loans would be dischargeable under the existing bankruptcy laws, as they were before Congress changed the law.

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