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Comment by gameman144 | Hacker News Reader

> It means that only rich people can go to college, because they are the only ones who can afford it.

I hear this a lot, but I don't understand the argument to be honest. If someone is poor today, then they can take an exorbitant amount of debt that they can't discharge in order to attend university.

In a world where loans are dischargeable in bankruptcy and the federal government limits subsidizes loans, we'd expect prices to fall somewhat and rates to rise somewhat. It seems like we would still expect the poor student to be able to take on a large amount of debt to attend university, though, no?

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The interest rates would be so high that it wouldn't make sense for a promising student to take that loan. If you're a loan company and someone comes to you asking for $100,000, and they have no credit and no family with assets, even with a 4.0 GPA and perfect SATs, they are still a huge risk.

This seems fine to me. If someone has no assets and no reasonable prospects to pay back $100,000 of debt, then saddling them with $100,000 of debt is a bad idea.

Additionally, discharging student loans in bankruptcy should absolutely not be a way to get off scot-free, it's meant as an escape valve. If your options are the terrible downsides of declaring bankruptcy and the terrible downsides of a life in extreme debt, neither option is great, but having the choice is useful.

Right but see the problem is how does a really smart poor person get an education so they can become a really smart rich person?

They study in a field which has a high likelihood of loan repayment, or study at a less expensive school.

If a really smart poor person wants to become a really smart rich person by pursuing a degree in film studies, it's reasonable (in my opinion) for a bank to say "borrowers whose only education is a bachelors in film studies tend to have trouble paying back loans, so we won't lend you very much".

If that very smart poor person is pursuing a degree in accounting or engineering, though, most banks can do the actuarial work to determine that the likelihood of payment is pretty good.

This all seems totally fine and fair to me. And if the really smart person does have trouble paying back their loan, bankruptcy can be the absolute last option they resort to, just as it is with most other loans.

I'm not sure loan companies want to get into the business of rating specific programs at specific universities and their ability to produce students who can get good jobs.

And also if they did do that, we get back to other problem which is that schools will only offer programs that lead to high paychecks making them just job training and not places of overall learning.

Loan companies might not want to do that, but it's absolutely part of the due diligence they have to do. If I borrow a few hundred thousand for a home, the loan company does a deep dive to ensure that my home is a sensible buy (e.g. appraisal) and that I'm in a position to pay back the loan (e.g. credit check, historical performance). It's absolutely wild that we'd absolve loan companies from this due diligence for young adults with less credit history and no ability to default on the loans.

Also, you may be right that schools start to prioritize programs that allow borrowers to earn enough to repay their debt. Why is this a bad thing? I would absolutely argue that a poor student would be better off being unable to obtain loans for a degree with poor returns then they would be taking on mountains of debt that they can never discharge.

For the rich, those talented enough to earn scholarships, and those willing to accommodate loan companies' stringent conditions on risky borrowing, degrees with poor monetary returns will absolutely stick around as they always have.

> It's absolutely wild that we'd absolve loan companies from this due diligence for young adults with less credit history and no ability to default on the loans.

We haven't absolved them per se. At first they tried to get the data and make smart decisions, but there just wasn't enough data for them to make good decisions, so they denied everyone. That's why the government got into the business of backing the loans in the first place -- it was the only way to get the loan companies to make the loans.

> For the rich, those talented enough to earn scholarships, and those willing to accommodate loan companies' stringent conditions on risky borrowing, degrees with poor monetary returns will absolutely stick around as they always have.

There wouldn't be enough students to support that, because amongst those people, many would still choose the lucrative majors.

> Also, you may be right that schools start to prioritize programs that allow borrowers to earn enough to repay their debt. Why is this a bad thing?

Now we have a philosophical debate. Do we want to live in a society where no one studies philosophy, poetry, art, music, creative writing, and so on? Ironically, someone who studied philosophy would probably be more suited to answering this question than I am.

I think we might have different fundamental viewpoints here, and that's okay.

In my view, current government policy is actively enabling people to dig themselves into holes of debt which they'll never be able to get out from.

It's great that people are choosing to study art, music, and philosophy. I personally have a degree in music, and it's one of the great joys of my life! Whether the government should loan me an absurd amount of money strictly for those pursuits, though, is a different question. There's great value in history, but I think most people would hardly endorse a government policy of loaning anyone a few hundred thousand dollars in living expenses to go to their public library and read about the Civil War for a few years.

Also, it's completely feasibly to encourage a broad range of studies while also conferring a degree in an employable field. This is the model of liberal arts schools: you study art, music, philosophy, literature, etc. but you can leave the school with a degree in an employable field.

As far as I understand it, your belief is that without the government lending people money with minimal constraints, fields that are less employable would go away almost entirely. I don't agree that this would be the case, but if that's where you're coming from I think that's a reasonable enough disagreement that we can land on.

“Hi bank. I want to open a coffee bar in Antarctica.”

After Rounds of laughter. “If I failed to pay, the government will pay you back.”

Bank. “Here’s 10 million dollars. Let us know if you’d like more. “

Banks and other lenders do basic sue diligence all the time. It’s government that screws this up.

Why wouldn't it be the first resort? I have a degree in hand, increasing my earning potential by, say, $50k a year. I also have 100k in student debt, and approximately zero assets to my name. Why wouldn't I declare bankruptcy the day my diploma arrives in the mail? It's not like they can repossess my knowledge.

The same reason you don't go on a drunken gambling traveling adventure on the multitude of credit cards you can get at 25 and then just declare bankruptcy, because now you are going to have a bankruptcy status over your head for the next 7 years and you won't be able to buy a house or get decent rent or get a car loan or even be able to sign up for a cell phone without fronting them the entire cost in cash ahead of time.

> They study in a field which has a high likelihood of loan repayment, or study at a less expensive school.

What you're saying here is that only rich people get to go for degrees which don't have a guaranteed return on investment. Is that the kind of society you want to live in? Where only the rich can study philosophy, or history?

Alternatively, university could be paid for like K-12 is and everyone could have a chance to go, or go into a trade school. You'll have a much more educated, diverse society and kids don't need to worry about bankruptcy and crushing loans.

Well, as a start states can start refunding their colleges and universities, to levels that used to be common [until roughly the 90s].

After that, it becomes more prescriptive around roles of operation, and that's murkier. For example, I'd be happy to see hard caps on $ of operational budget spent on admin. I'd also be happy if sports was budgeted for separately and that student athletes were separately admitted to both their sport(s) and for academic study. There are many things states could do that would impact how schools are managed, regardless of the federal government's rules for student loan lending.

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