Student loans should be dischargeable in bankruptcy after 10 years post-graduation (and not fully guaranteed past a certain amount, say $10K or $20K) -- hear me out.
The common reason student loans are NOT allowed to be dischargeable is because, in the minute after graduating and without collateral, the student can declare bankruptcy with no effect (the vast majority are not buying a house within the time it would take for their credit to repair).
This has the side effect of blunting market forces. It is the same amount of interest and same approval process to get 200K for medical school as it does for an art degree, despite market forces suggesting that the former are vastly more needed (ok, granted, there's the AMA, but that's another discussion). It doesn't matter to the bank -- after all you can just repay a little bit until you're 70 years old.
Allowing things to be dischargeable 10 years after graduation would reintroduce market forces. You want 200K for medical school (maybe we change the post-graduation length a bit to account for residency / fellowship)? Great! Almost guaranteed well-paying job out the other end.
But 150K for an expensive art school + MFA? You better be prepared to have your credit looked at under a microscope. Application rejected.
What would this mean? This would mean that schools would actually have either a) provide more value to the individual, b) charge less or c) accept much smaller classes. It would mean they would probably have to focus most of their energy on education + job placement rather than funding more school athletics and building a fancier dorm.
The common reason student loans are NOT allowed to be dischargeable is because, in the minute after graduating and without collateral, the student can declare bankruptcy with no effect (the vast majority are not buying a house within the time it would take for their credit to repair).
This has the side effect of blunting market forces. It is the same amount of interest and same approval process to get 200K for medical school as it does for an art degree, despite market forces suggesting that the former are vastly more needed (ok, granted, there's the AMA, but that's another discussion). It doesn't matter to the bank -- after all you can just repay a little bit until you're 70 years old.
Allowing things to be dischargeable 10 years after graduation would reintroduce market forces. You want 200K for medical school (maybe we change the post-graduation length a bit to account for residency / fellowship)? Great! Almost guaranteed well-paying job out the other end.
But 150K for an expensive art school + MFA? You better be prepared to have your credit looked at under a microscope. Application rejected.
What would this mean? This would mean that schools would actually have either a) provide more value to the individual, b) charge less or c) accept much smaller classes. It would mean they would probably have to focus most of their energy on education + job placement rather than funding more school athletics and building a fancier dorm.