[CalChris]

None is necessary since they are both Federally guaranteed and they can’t be discharged by bankruptcy (which is the epitome of stupidity). Indeed, that ‘bargain’ is why Brown is doing this thing.

No collateral is necessary for student debt since they can come after anything you or your cosigners have.

Someone will have to explain to me what is special about this debt that it gets this special treatment.

[chimeracoder]

> None is necessary since they are both Federally guaranteed and they can’t be discharged by bankruptcy (which is the epitome of stupidity). Indeed, that ‘bargain’ is why Brown is doing this thing.

Just because they can't be discharged in bankruptcy doesn't they're actually repaid. Student loans can and do default - an average rate of 15% a few years ago, though some schools have students that default at more than twice that rate.

External guarantees on loans (in this case federal guarantees) doesn't address the same issue that collateral is typical used for: namely, it doesn't solve the moral hazard problem.

(It's not that Brown has solved the moral hazard problem itself; it's that Brown's able to take on that risk themselves, because it's an incredibly selective, incredibly competitive, and fairly small[0] school).

[0] We're talking specifically about undergraduates

[CalChris]

> Just because they can't be discharged in bankruptcy doesn't they're actually repaid.

Exactly. So instead that’s an albatross to be hung around a young person’s neck for all of eternity. Bankruptcy would share the burden between lender and borrower.

What we have now is a system where loans are Federally guaranteed and then not dischargeable through bankruptcy. That leads to $100k cooking schools that promise to turn you into a pro-chef, just sign here, here and here and you can even get a Federally guaranteed loan, sign here.