re: Fed Chair Powell advocates making student loans dischargable in BK

What is to stop a student from getting loans for 5 years, graduate, and then declare bankruptcy because their liabilities outweigh their assets (because they have no assets because they haven't started working yet)?

There has to be some kind of compromise that doesn't just allow debtors to default without consequence.

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What is to stop a student from getting loans for 5 years, graduate, and then declare bankruptcy because their liabilities outweigh their assets (because they have no assets because they haven't started working yet)?

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Prior to 2005 the rule was you couldn't discharge any loans less than 7 years old. So your hypothetical student would have to wait two years before they could even partially discharge their loans.

yea, but if you file for bankruptcy you are already not going to be able to buy a house, car (without severe interest penalties), you will pay more in rent, have to have deposits down for any utility. I think barring them from potential employment might be a little too far. just my two cents.

obviously that's ideal, but shite happens.


I'm talking about the people who have no other choice, not the scammers. people will always find a way to scam any system.

And student loans will become student grants if the loans can be erased that easily. What is the lender going to do, repossess the student's diploma?

then I guess they just need to forgive them. It's the only solution. what's 1.5 trillion to a 20+ trillion national debt.


think about the economic pluses. you've just freed 44 million people and allowed them to start buying homes and spending money.

Shows how even when the government does something good, the consequences are disastrous.

Inflation has averaged roughly 3% for 30 years and yet tuition has skyrocketed past the inflation rate. In theory the school I went to could be double what it was when I went. That would be close to the inflation rate since I left. Instead, it is 4X what my parents paid. No wonder they have been able to double the number of buildings while maintaining the same size class.

Without the government backing of loans and inability to dismiss the loans, Colleges have been able to jack prices to ridiculous levels that most students will never be able to pay off.

I'm not remotely for students being able to dismiss loans, but it is quite clear the government backed loans was a mistake.

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Fed Chair Powell doesn't understand that if you do this that it will lead to a large number of applicants who will be unable to qualify for a student loan and that the student loan process will only be available to those who have means to repay the debt. In other words this will completely decimate 3/4 of Universities across the US

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Again, this was the law for private loans in 2005. It was the law even for for guaranteed federal loans back in ye olde days of ... 1998. I'm fairly confident college was not an elites-only proposition in 1998.

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You realize some cities & states prohibit using credit reports for hiring purposes, right?

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Which is an enormous problem, in and of itself.

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The Federal government sets all of the rates for student loans, not the bank making the loan. The rates are reset every July 1 for new loans for the next year.

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And therefore... what? Do you think the federal government would sit on its hands and keep interest rates the same? I imagine they would hike rates bigly if something like this passed.