Posted on 07/09/2020 6:10:09 AM PDT by grundle
Kurt Schlichter just wrote this excellent column, with a whole bunch of ways to improves colleges.
Of Schlichter’s many excellent ideas, this one is my favorite. He wrote:
Third, student loans need to come from the school and to be dischargeable in bankruptcy. A school is going to be a lot less eager to say, “Sure, go ahead and major in Norwegian Feminist Dance Theory” if they are on the hook when their ardent young scholar can’t get a gig that can pay back the sticker price.
That’s brilliant – absolutely brilliant.
I hope Schlichter’s idea gets adopted as national policy.
An alternative would be to have the school co-sign for the loan. Student doesn’t pay, the college eats it.
Another variation: too high a default rate, and the college loses eligibility for student loans.
Except the student who just discharged his loans through bankruptcy.
The objective is to have no more student loans in majors that have high default rates.
Also, no more student loans to people who are unqualified to be in college in the first place.
Don't make your car payment and they take their car back. Don't pay your student loan and what do they take?
And here I was just suggesting that the colleges be on the hook for the first 30% of which could be subject to bankruptcy. Schools with endowments over X amount being on the hook for 100% would be great.
As well as engineering, medicine, science, and business.
The result would be no more student loans period. If a graduate, any graduate, can discharge their student loans through bankruptcy then what student regardless of major is not going to take advantage of that? Run up $500,000 for your medical degree? Declare bankruptcy and it's gone. Your Masters in Electrical Engineering set you back $150,000? Not to worry, file the paperwork and presto! It's history. Student loans become a financial black hole for the university so they're not going to make them. To anyone. Regardless of major.
Or didn't Schlichter think of that?
“As well as engineering, medicine, science, and business.”
Absolutely not! Banks wouldn’t mind lending to them, especially those with good grades. Those graduates would have no problem repaying their loans.
Why should they repay them if they can do away with them entirely through bankruptcy? And if nobody is paying back student loans then why would any bank or university offer one?
By your logic, nobody would have personal loans, or credit card debt, since “it could all be discharged in bankruptcy”.
Bankruptcy is not as easy as you think. You have to convince a judge that your debts relative to your income make them impossible to pay.
Don’t pay your child support or taxes, and they garnish your wages.
And of course, no matter how bad a candidate for the school, the school would be required to lend money to anyone.
Yup, there wouldn’t be a school left that was solvent within about 6-8 yrs.
Exactly !!
Anything else would be racist !
You can't absolve yourself from responsibility for child support and taxes through bankruptcy. With Schlichter's plan you can get rid of student loans through that process. What student who is not a complete idiot would not take advantage of that?
Usually you're talking about much lower amounts and in a lot of cases it is discharged through bankruptcy. And with student loans you're talking about a whole lot more, especially it the other aspects of Schilcter's plan are carried out. If I'm a graduate just starting out with a new M.D. and $250,000 in student loans why would I not declare bankruptcy and get rid of it?
Bankruptcy is not as easy as you think. You have to convince a judge that your debts relative to your income make them impossible to pay.
And bankruptcy lawyers would fall all over themselves to help you through the process.
Schlicter's plan does away with universities completely. If he has his way then what happens next? Where will doctors and engineers and scientists and financial people come from?
Ok, so make it harder to get out of student loans through bankruptcy. Allow garnishment, etc.
But if the student just cannot pay, then the college should be on the hook ahead of taxpayers.
And it doesn’t need to be all students. Say only 15% skip out on their student loans by declaring bankruptcy. That will still make student loans so risky that no lender would want to be involved with them. Or make student loans so expensive that no student could afford them. Either way there will be no loans from universities or any other source.
Which is pretty much the current system.
And besides, that is not what Schlichter is suggesting. He is advocating getting rid of the whole responsibility through bankruptcy. That would kill student loans completely.
But if the student just cannot pay, then the college should be on the hook ahead of taxpayers.
Then why should colleges assume the risk?
But if all of Schlichter's suggestions were adopted there would be no universities to begin with so no student loans to worry about.
Then colleges can either go out of business, or streamline themselves so tuition is more affordable, or adopt other cost saving measures.
The student loan debt overhang is currently over $1.6 trillion.
https://www.forbes.com/sites/zackfriedman/2020/02/03/student-loan-debt-statistics/
I would rather a bunch of colleges go under, than have taxpayers be forced to pay it.
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