Hacker News new | ask | show | jobs
by leoedin 2857 days ago
What's to stop people defaulting on other unsecured loans, like credit cards? Some people do, but most people don't. Why? Because defaulting on a loan means a bad credit score and suddenly modern society becomes hard - no mortgage, no car loan, no more credit cards etc.
3 comments
volkl48 2857 days ago
The difference is that other unsecure loans are only given out with some degree of expectation/evidence that the person will be able to repay them. A person with $10k/yr income does not get a $40k credit limit.

On the other hand, college loans are given out with zero consideration of that. You're just as eligible to take out tons of loans as a poor person majoring in underwater basket weaving as you are are getting a CS degree from Stanford. Even though those have very different probabilities of being able to repay them.

link
prostoalex 2853 days ago
To default on a credit card you have to qualify for a credit card. Which generally requires some history with a bank that for youngsters involves a secured credit card to build credit - e.g. a credit card with $500 monthly limit paired with a $500 savings account that allows no withdrawals.

What happens when a lender decides you're unqualified for a student loan?

link
mrep 2856 days ago
The main difference is a bank can repossess your house/car/possessions for normal loans thus making back some of the money they leant you (and you losing all of the stuff you bought with that debt). They cannot repossess any bit of the money spent on your education. This is why the federal government steps in because they legally can repossess some of your education by extracting it out of your future earnings.
link
chriswarbo 2856 days ago
You're describing the difference between unsecured and secured loans. The parent explicitly stated that they were talking about unsecured loans (where there's no tangible thing to repossess).
link
mrep 2856 days ago
Oh wow, reading more into it, some credit cards are actually unsecured (but some aren't [0]). However, credit card companies can still sue you even if it is an unsecured loan and then repossess some of your stuff depending on the state [1].

[0]: https://www.nerdwallet.com/blog/credit-cards/credit-card-bil...

[1]: http://www.natlbankruptcy.com/credit-card-lawsuits/

link