[onlyrealcuzzo]

If you let students default on debt - most of the problems get solved.

Creditors are going to make risk-free high-interest loans. As long as the loans are available - students will take them to get their underwater basket weaving degrees.

If students could default on debt - then there wouldn't be an endless supply of creditors willing to lend them money to get degrees they know won't pay enough money to pay them back.

[TimPC]

This doesn't work though because even the attractive degrees can declare bankruptcy based on having greater liabilities than assets immediately after finishing their degree. Allowing students to default on student loan debt without requiring a minimum time period to do so basically means no one can safely provide loans for any degrees regardless of income potential.

[onlyrealcuzzo]

Sure - if you want to exchange your ability to get any financing for 7 years for ~$100k.

Additionally, IIUC, you can't just declare bankruptcy because you feel like it.

But maybe my understanding is incorrect.

[TimPC]

Some people have far more than $100k in debt, so the tradeoff might be far more attractive.

If you're finishing undergrad at 22, your bankruptcy won't harm you for buying a house at 29-30 which is kind of when you want to buy a house anyways since saving up 25% takes a good amount of time. It seems like a very worthwhile trade to declare bankruptcy.

As for being allowed to declare, the time to do it is before you have a job. At this point you have debt higher than assets and no income so the case for bankruptcy is extremely clear.

[onlyrealcuzzo]

> Some people have far more than $100k in debt, so the tradeoff might be far more attractive.

That would be the lender's problem for lending far more than anyone reasonably needs to be lent to obtain a degree. They'd have to price the loan accordingly.

> It seems like a very worthwhile trade to declare bankruptcy.

You don't get to just declare bankruptcy on a whim because the outcome is favorable to you.

[TimPC]

> You don’t get to just declare bankruptcy on a whim because the outcome is favourable to you.

I’ve addressed this in the above by mentioning when you do it. You have assets < debt and no job therefore no income. No court is going to reject this bankruptcy because you are actually underwater and will in theory take infinite time to repay the amount you owe.

[SoftTalker]

Yeah bankruptcy is a legal process. Judges and probably lawyers are involved. It's not "free" and (my supposition) if you have legitimate near-term future prospects for income the judge may not grant it and tell you to get a job and pay what you owe.