Let Students Discharge College Debts In Bankruptcy? Yes, But...

Forbes ^ | July 24, 2014 | George Leef

[reaganaut1]

Ever since the obstreperous Occupy Wall Street protests of 2011, Americans have been getting an earful about the alleged crisis of student loan debt. Sensing a chance to appear both compassionate and pro-education, many lawmakers want to do something to ease the plight of indebted students.

Senator Elizabeth Warren, for example, is pushing her populist plan of allowing students to refinance their loans at absurdly low interest rates. President Obama recently expanded the touchy-feely repayment system so that students would never have to pay more than ten percent of their discretionary income for 20 years before the rest of the loan is forgiven.

And that is only ten years if the individual goes to work in a “public service” job. For more on Uncle Sam’s foolish generosity with our money, see this piece I wrote in May.

What about good old bankruptcy? Unlike other kinds of debts, the law does not permit students to wipe out their college debts by declaring bankruptcy. Should the law be changed?

[ReaganÜberAlles]

Prove it is a subsidy.

Also, the “government” ...you...may never recover many of the funds as many, many of the debtors will die in debt many tens of thousand s of dollars.

My option gets value for value given. Your plan loses value.

[9YearLurker]

Anything run by the government is a subsidy. How does letting the private sector make all student loans “lose value?” You sound like a socialist.

[ReaganÜberAlles]

And you are stupid. Here’s the choice dummy: The option I posit gets you, the taxpayer, at least some of your tax money back in the form of service.

Your way guarantees that many people will die or hide or go off the grid or go to a foreign country and never pay anything back. Your way is lose - lose. My option is win- win.

Ohhhh....And you would never call me a socialist to my face sweetie, I promise you that. But you can try.

[9YearLurker]

Can you even read? I don’t want taxpayers on the hook for loans at all. Your social engineering is a completely inappropriate role for the government. My tax money shouldn’t be paying for someone else’s five-year vacation. And letting them perform a couple of years of “government service” doesn’t make that better.

Get the government out of student loans. Period.

[ReaganÜberAlles]

Hey Einstein...... That wasn’t the argument. IDIOT. The government IS IN STUDENT LOANS RIGHT NOW!!! AND HAS BEEN FOR SOMETIME. THAT IS WHAT WE ARE DEALING WITH NOW!!

Clear enough yet?!

I agree with the idea of getting govt out of anything it can be and should be gotten out of.

Quit posting to me you are to dumb to deal with. Friggin jackass.

[Gene Eric]

>> Let someone else pay off the moocher students debt

The moochers’ peers will be responsible for paying their debt.

[cynwoody]

He's right that the incentives need changing. But his solution is overcomplicated. Colleges shouldn't be in the loan business. Down the road, his scheme would likely come to naught, and there would be a lot of political pressure to "fix" it and relieve the colleges who screwed up.

The proper solution is to make getting a college loan like getting a car loan or a house loan, but without the car or house available to cover default. College loans should be fully dischargeable in bankruptcy. And no way should be the taxpayers be making the loans!

Interest rates would shoot up. Tuition would necessarily come down. And the effect would be to bring college costs back in line with inflation, cut the deadwood out of university administration, and eliminate seven-digit / year college presidents.