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by TechBro8615
1877 days ago
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> calling these ISAs non-dischargable would lower the risk to the investor, which would make those ISAs worth significantly more I wonder how true this is. Declaring bankruptcy comes at a huge cost. It's not something people do lightly. Most people, if they have the money to pay back the loan, would probably do so. Once they're in that position (presumably with a stable job), they have little incentive to declare bankruptcy. |
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But that goes hand-in-hand with the aligned outcomes; it's best for Lambda if these people get good jobs afterwards, because they're more likely to pay the ISA in full.
If they don't, they're less likely, the risk is higher, and the ISA is worth less (to the investor).
The potential for bankrupcy is also a risk, which lowers the yield. Removing the risk of bankrupcy heightens it.
We could argue about the magnitute of these risks all day; I'm sure people significantly better at math than I am have done a lot of work here.