[rayiner]

Okay, I'm imagining it. So what? There is a debate to be had about what sorts of protections we want to provide to debtors. But that's separate and apart from the existence of companies that specialize in debt collection. The latter is simply an example of economic specialization.

The problem everyone has getting their mind around debt collection is that they focus on the after-the-fact situation, instead of the whole picture. If companies cannot collect on debt, they will be less willing to extend credit. When you "help" one person who can't pay their debt, you're hurting several people in the future who won't be extended credit.

Student loans are a good illustration of this. People clamor to make student loans dischargeable in bankruptcy--citing examples of people with hundreds of thousands of dollars in crippling debt. But the median American doesn't have any student debt, and the median debt for people who do is just $30,000. Now as a practical matter, student loan forgiveness would just impact taxpayers, since almost all student debt is owed to the federal government. But if it was a normal debt market, making student loans--which are offered without any security--dischargeable in bankruptcy would cause student loans to dry up for everyone, even the vast majority of people who take on modest, manageable debt.

[roosterdawn]

The problem I have with your argument is that depending on one's viewpoint, this could be a feature and not a bug. Historically, humans have had some conception of reasonable ranges of rates to charge for interest and purchases to underwrite that fall inside the bounds of ethicality, and things outside of that boundary that were deemed unethical and usurious or outright slavery.

Let's take your example of student loans. We can both agree that making student loans dischargeable in bankruptcy and not owed to the government would cause the student loan market to contract. What if you think that this kind of debt, being non-asset backed, is not just unethical but unsustainable inside a functioning free market? What if you think that many institutions have made use of debt inflation to bloat their bureaucracies, facilities and other non-academic investments via a bubble that can and should pop? What if an alternative financial product should exist that forced institutions to put skin in the game towards the permanent economic future of the students that they are ostensibly responsible for and selling a product towards advancing?

I think that we need to remember that debt is primarily a mechanism for moving around value, and that the intrinsic value (liquidity) that it provides is distinctly marginal. We as a society in America should question whether it is a robust long term strategy for the country's economic future to even allow for the option of selling an education with debt-based financing without some kind of a positive outcome guarantee. Otherwise, the incentives are almost guaranteed to result in bad actors exploiting the disenfranchised. Outside of the moral hazard here, the more unavoidable hazard is the market hazard of overleveraging assets whose intrinsic value cannot support the bonds they back, causing an unnecessary macroeconomic financial shock that could be avoided with foresight.

[rayhendricks]

If student loans were suddenly unavailable then universities would have to rein in out of control costs and Maybe get rid of sports and bs admin staff.

The only reason they change that much is due to the ability of loans.

[black_puppydog]

Same goes for books. Your prices for textbooks over there are hilarious. They're priced purely based on just how much you can milk the students, or rather whoever finances them.

[throwaway_USD]

To add on every year the text is usually reprinted/updated for the purposes of trying to kill the used book market and in many cases my professors were the authors of the required texts.

[peterangular]

Yeah and to a captive market too. College textbook sales is one of the most insane rackets I've ever witnessed... "milking the students" is no exaggeration.

[rayhendricks]

I absolutely agree. The whole “college experience” from overpriced textbooks to overpriced dorms is a huge racket. The covid pandemic might really shake things up though if there’s no school starting in the fall though.

[peterangular]

I've advised a couple of people looking to go to school to take a gap-year to hedge risk of the schools having their stuff together.

If there's anything I've noticed about higher education after working in/with it, its that they're constantly behind the curve in just about everything that's not sports/research related.

I would be very scared of having a second-rate experience due to a college (and professors) not being prepared for this to the point I would sit a year out and crank out gen-eds at home in already established online programs.

Take this all with a grain of salt... Maybe I'm paranoid, but I just don't see schools being ready for this and having a solid experience ready for new students by fall unless they've already practiced remote learning/class programs.

[rayhendricks]

When I was a sophomore in my undergrad degree one of the professors was habitually late. As we were only meeting 2-3 times a week I calculated the dollar value of that lateness as a part of our tuition. People were not happy.

Hopefully at the end of all this we realize that community colleges can teach the majority of a 4yr degree and even have labs already set up.

[ashtonkem]

Both statements can be true: eliminating debt collection would massively curtail the availability of credit, and excessive credit availability practically any motive to curtail costs.

[momokoko]

This is not true based on the amount of money originating lenders get when the sell off bad debt. Generally they receive less than 5%(sometimes less than 1%).

To the original lender, 5% of the defaulted debt generally just covers the cost of writing off the debt and maybe a bit more. It does not move the needle at all for loan availability.

[ashtonkem]

That’s true once you get to the point of selling debt off. More effect would be seen if the ability of creditors to pursue debtors earlier in the process was more severely curtailed.

[larrywright]

Correlation isn’t causation, but the dramatic rise in college costs began when student loans became easy to get.

[x86_64Ubuntu]

They became easy to get because lenders knew their loans were non-dischargeable. That completely changes the risk equation and to act like it doesn't is an exercise in bad-faith.

[vonmoltke]

Federal student loans have been non-dischargeable since the 90s, and this problem has been building since then. Federal student loans also make up over 90% of student loan debt, and since 2010 have been issued solely by the Department of Education. Also, not all private loans are non-dischargeable.

No-dischargeable private loans are such a small portion of the problem that they are effectively irrelevant.

[stale2002]

I mean, I guess. If your argument is "I think it would be a good thing for poor students to never receive loans", then you can take that position.

But intentionally trying to ensure that poor people are never given loans is not usually the arguments that I hear, surrounding student debt.

[londons_explore]

Hypothetically, what would the world look like if we made all debts dischargeable by bankruptcy, and bankrupcy a process so simple you could just text a number and be done in 15 minutes?

A bankruptcy would simply automatically put all your assets up for a same-day auction. Any unlisted items would be auctioned as a lump, for anyone willing to research what you actually owned to play 'Storage Wars' with. Anyone could bid on those assets (including your friends buying your stuff to give back to you). All proceeds of auction would be claimable by anyone you owed a debt to in a fully automated manner.

In such a world, any time you woke up in the morning and decided the auction value of your assets was below your debts, you could text the number, re-buy things you really cared about for probably cents on the dollar (nobody wants your dirty laundry), and carry on your day worry free.

[vkou]

We'd have less debt, which is bad for the economy, but good for individuals.

[mokus]

If this is true then that’s a sign that we are measuring the wrong things when we talk about “the economy”. If something is good for the economy but bad for people, then fuck the economy. Find a new way to measure it that better aligned with what is good for people.

It seems quite fitting here that Goodheart’s Law came from an economist.

[vkou]

> If this is true then that’s a sign that we are measuring the wrong things when we talk about “the economy”.

Not necessarily.

Consider savings, for example.

Are high savings good for an individual? Well, yes, of course, they are! But every dollar saved is a dollar not spent. If everyone starts saving as much money as they can, this will damage the economy, lower spending, and will make everyone poorer (it's difficult to save money when your income derives from other people spending it.)

Debt is the opposite of savings in this respect. If you go into debt, and spend, it's good for me, as the person deriving income from your spending. Vice versa, if I go ahead, and spend that money, it will eventually be good for you, as your income is another person's expenses.

Does this mean that we should all max out our credit cards tomorrow? Well, obviously not... Just like we should not all become wealth-hoarding Tolkienesque dragons.

It's not clear where exactly the optimal point on the savings-spending axis lies. It certainly lies on different points for different people, depending on your personal wealth, skills, social class, luck, or your personal value system, etc. Some people benefit a lot from a healthy economy. They obviously want everyone else to spend more. Some people benefit very little from a healthy economy. They obviously want to spend less.

It's not a trivial problem to solve. I personally think there are some kinds of debt that are way worse than other kinds of debt. High-interest debt is problematic. High-burden debt (Like mortgages) is also problematic. Debt that inflates asset prices (Like universal student loans) - also problematic. Medium-low interest, medium burden debt (Like most car payments)? It seems less problematic to me.

[pmiller2]

Then, "the economy" is bad for individuals, and we need to make some changes.

[Ensorceled]

You say all of this as if extending credit to high risk borrowers, who can't financially afford to carry that debt, is a good thing.

[WD-42]

The article states that the majority of cases are for amounts less than $5k. We're not talking about student loans or mortgages here. This is the consumer finance industry. Predatory loans, high interest credit cards (but the perks!) and such. The companies behind these products thrive of keeping people in a cycle of debt. They aren't helping anyone and should probably be regulated out of existence.