Comment by Analemma_
14 hours ago
And making it un-dischargeable in bankruptcy so people are either in perpetual debt bondage or the taxpayer picks up the tab for the inflated costs takes it from gross to downright criminal.
I'd be a lot more OK with student loan jubilees if universities had to pay the remaining principal on any forgiven loans. They'd immediately get their costs under control and be a lot more careful about degree programs which don't have any earning potential.
I don’t disagree with your general point, but for clarity, student loans are non-dischargeable because they have been federally guaranteed since 1965. Meaning that if the borrower defaulted, taxpayers would be on the hook. And the reason for the federal guarantees was that students are bad credit risks. So without the guarantees, banks wouldn’t lend to students, especially disadvantaged ones.
It almost sounds like student loans should be harder to get. Giving a student a loan seems like a bad bet. All the parties that know how to do a proper risk analysis aren't willing to take that on. So this hot potato gets passed around. Eventually it ends up back on the prospective student, who is least equipped to make a rational financial decision.
Kind of makes the whole thing sound like a scam from that perspective.
The reason for the federal guarantees was because voters wanted lower taxes, or otherwise did not want to redistribute wealth to students.
It’s a common way to scam today’s young and future taxpayers. See also underfunded pensions and other post employment benefits for government employees and taxpayer guaranteed 30 year fixed rate mortgages with no prepayment penalty.
Instead of helping someone, society lends them money and lets future taxpayers deal with the mess. That is how you win elections in aging societies.