[codexb]

Ok, but forgiving student loans doesn't do that. It signals to borrowers that they don't have to repay high loans if their career can't support it. It tells borrowers that they can make risky loans without a chance of default. It tells universities that they can keep charging exorbitant tuitions because kids can still get loans to pay them.

The solution is to allow judges the discretion to default them in bankruptcy after X number of years after graduation. Lenders need to accept the risk. With no risk, they can loan as much as they want and have guaranteed repayment. This drives tuition higher and higher.

[Aurornis]

I’m always surprised that student loan forgiveness appeals to anyone who should otherwise be able to think about all of the bad second order effects.

The more we inject money into the education system, the higher prices go. Setting a precedent that the government will just pay off your loans if you don’t pay them off only encourages more people to take out loans without thinking about paying them back.

There are so many things wrong with this idea that I can’t believe it continues to be popular. The only thing I can think of is that it’s a litmus test for who can and cannot consider second order effects of economic decisions, or who believes money can spent en masse without altering the system.

[amluto]

If this were done in a less ridiculous manner, it might actually have the desired effect. Make student loans dischargable in bankruptcy (just like any other loan) and don’t give them government backing. Then private lenders could decide how much money to lend out, and the answer might well be “not very much.”

[TimorousBestie]

What are the second-order effects of a subclass of citizens permanently encumbered by debt that (with rare exceptions) cannot be discharged through bankruptcy?

Perhaps your analysis of second-order effects is not thorough and complete? Have you really considered all of them?

[zbentley]

Maybe, but that precedent has been set before for other types of loans, and in a limited way for student loans, and the sky didn’t fall. The upward price pressure on university prices is far more influenced by other factors (which should be fixed!). Loan forgiveness probably is a drop in the bucket, I suspect.

[cj]

Allowing student debt to be canceled during bankruptcy would be a good first step (possibly even better than canceling student debt across the board).

To your point, making it easy to cancel debt teaches borrowers that debt isn’t a serious thing.

Requiring someone go through bankruptcy (and all of the associated negatives on your credit score, etc) seems like a good tradeoff. Allows you to get out from under the debt (the entire purpose of bankruptcy in the first place..) while not letting everyone pretend the debt never existed (need to live with the impact of bankruptcy on your ability to borrow in the future)

I don’t know why we don’t hear more people lobbying for this. I guess it’s because the sound bite isn’t as sexy.

[AnthonyMouse]

Bankruptcy affects your credit score for 7-10 years. Someone who graduates from college in their early 20s with six figures in debt could file for bankruptcy immediately and have it be off their credit history by the time they've saved up a down payment and want to get a mortgage.

There is also the obvious drawback that if more people can discharge the debt, the interest rate goes up, and then everyone else has to pay for the people who took out loans they didn't pay back.

[SpicyLemonZest]

People who start lobbying for it quickly discover that 87% of people who petition for their student debt to be cancelled in bankruptcy get it (https://www.cnbc.com/2025/12/29/bankruptcy-student-loan-borr...). I support removing the special treatment entirely, but ultimately most student debt holders don’t go bankrupt.

[drakythe]

That's why it should be a one time event in conjunction with reworking the whole system.

Why can I, as an 18 year old, sign for a loan that _cannot_ be forgiven, graduate into a crashed economy, and still be held accountable for choices that impact me when I only had a small part in them? The system needs reformed, and we need to do something for the people still on the hook of the old system (and I say this as someone who has paid off all my student loans).

[scottyah]

Same reason you can sign up for war, or ride a bike without a helmet (in some places). The world is a dangerous place and the less legislation we have blocking people from making decisions, the more likely they are to be capable of making their own. In 2009 when I graduated, it was common knowledge that any private colleges or abnormal degrees were an oddity only for rich people to buy a piece of paper for their more disappointing kids. I don't know what changed (or if it was just localized), but whoever convinced you to go for the scam is at fault here in your circumstance- not the "system" for allowing other people to benefit.

It's a bunch of able-bodied people who took the elevator instead of stairs thinking it was a shortcut, but the effort put in was the whole point. Anyone who told you otherwise is to blame. Punishing people who took the stairs sends a clear message to everyone else deciding which way to go.

[AnthonyMouse]

> Why can I, as an 18 year old, sign for a loan that _cannot_ be forgiven, graduate into a crashed economy, and still be held accountable for choices that impact me when I only had a small part in them?

Because you took the money promising to pay it back, spent it on something you wanted, and now it's gone and someone has to pay the money you spent.

It's like saying why can I, as an 18 year old, purposely drive a car into someone else's house, cause six figures in costs, and then be expected to be on the hook for that because auto liability insurance doesn't cover intentional acts? You're the one who chose to do that.

The price of tuition and the expectation that you pay back the money are not secrets kept from you until after you've already signed, or if they somehow are then maybe fix that.

[chasd00]

As a parent of a 16 and almost 14 year old i'm effectively home schooling personal finance with them. My wife and I got none from our parents and were preyed upon constantly. I think I was 45 when i finally got my student loans paid off. My wife did many years in a dangerous, low-performing, HS as a teacher to get hers forgiven. Sending an 18 year old off to college without a solid understanding of finance is like throwing an 18 year old in the ocean while bleeding profusely and tasking them with swimming to shore, maybe a couple make it but the sharks will get the rest.

[WalterBright]

Why should other people be on the hook for your decisions?

[downrightmike]

Student loans currently carry no risk. They can't be discharged. Interest is the payment to the lender to accept risk. There is no risk in the current state of student loans. Therefore they should never-ever charge interest.

Also schools need to be reigned in, if GA et al can pay each student athlete $40,000 a month, they MUST be held accountable for burdening the students and the state with unscrupulous debt.

[chasd00]

> Student loans currently carry no risk. They can't be discharged. Interest is the payment to the lender to accept risk.

you make a good point, if there's no risk there should be no interest. Or at worst, the interest rate should track COLA adjustments to social security. Some basic adjustment relative to inflation so the lender gets back what they lent out.

Now that schools can pay their athletes I hope the rest of the student body take notice and start asking questions about school funds allocation. It should make it plain as day to the average student that their school has plenty of cash and choses to force them into debt.

[zeroonetwothree]

Around 6% of student loans are defaulted on. Some of those end up never being repaid while others are delayed substantially.

Also interest is payment for the combination of losing use of money + risk + inflation.

[Ekaros]

They should charge rate. But rate should be similar to say interbank rate. Maybe plus something like 0.5%. This is how standard loaning often operates. You have risk free lending so you get loan from somewhere else and then take some margin.

[fwip]

One downside is that money lent for a student loan cannot otherwise be invested. If paid back later with no interest, the money will likely have lost value to inflation in the meantime.

I think I agree with your broader point - just quibbling, here.

[trothamel]

Interest also compensates for the other things that money could be doing. If I didn't loan it to you (or a student), then I would be doing something else with the money, even if just buying a government bond.

[andrewaylett]

Surely the first step is to stop issuing loans in such a way that will cause the next generation of students to suffer the same problems, freeing us up to sort out the problems of previous generations without moral hazard.

The UK had what I think was a really nice set up, although it's now not nearly as palatable. My student loan had an interest rate tied to inflation, and repayment was a fixed amount of my income above a limit, collected via the same mechanisms used for income tax. Any unpaid loan would be written off when I turn 60.

The modern system is similar, but the interest rate has been decoupled from inflation which means that instead of paying back essentially the same value, no matter how slowly you pay it off, it's now definitely better to pay more earlier. Which makes it much more like a regressive "graduate tax" that you only have to pay if you don't earn enough.

[BoxOfRain]

> The UK had what I think was a really nice set up, although it's now not nearly as palatable. My student loan had an interest rate tied to inflation, and repayment was a fixed amount of my income above a limit, collected via the same mechanisms used for income tax.

My problem is that it's presented as a loan but is in effect a tax. I would rather have a graduate tax which was honest on the face of it rather than wilfully misleading students that it's an ordinary loan. The 'loan' framing is harmful in my opinion, because if student loans were regulated like actual loans the government would have much less room to effectively change the deal after the fact.

I also feel a lot of the current social and political toxicity around the student loan system comes from it being effectively a tax which you can get out of by lucking into having rich parents who pay your student fees upfront, it rubs people up the wrong way on class grounds. A graduate tax would avoid this problem as well.

[palmotea]

> The solution is to allow judges the discretion to default them in bankruptcy after X number of years after graduation. Lenders need to accept the risk. With no risk, they can loan as much as they want and have guaranteed repayment. This drives tuition higher and higher.

This. The whole student loan mess is a direct result of their special treatment during bankruptcy.

> It tells universities that they can keep charging exorbitant tuitions because kids can still get loans to pay them.

I wouldn't be opposed to some kind of tuition claw-back from schools, when a student loan goes into default (but only by the government, not private lenders). The universities need more skin in the game to keep tuition under control.

[Braxton1980]

>. It signals to borrowers that they don't have to repay high loans if their career can't support it.

The loan forgiveness wasn't a thing when many students took out the loans.

[rootusrootus]

It would be a signal to future borrowers.

[OsrsNeedsf2P]

Why would I work hard once I found out I was going to be defaulted X years from now?

[mschuster91]

That's not a solution at all, because it will price out way too many students.

The solution is to do what Germany and most of the EU does - pay universities with tax money and do not charge students anything at all (or maybe a few hundred to thousand euros).

[disgruntledphd2]

> The solution is to do what Germany and most of the EU does - pay universities with tax money and do not charge students anything at all (or maybe a few hundred to thousand euros).

This is a totally fine system, but would change US tertiary education massively. Much of the state university increases in tuition since the GFC have been driven by exactly the opposite behaviour (cut state funding, make it up in tuition).

[codexb]

Germany and other EU countries that offer free tuition begin segregating students into vocational and university tracks starting around age 10. Only about 30% of students qualify for university. The rest stop school around 15-16 and go into vocational training. These aren't student choices, their dictated by the school system.

The US would never approve of a school system that told parents that their children weren't allowed to go to university and had to go into vocational training.

[wahern]

Most states already have affordable tuition for in-state residents. California is middle of the pack, and CSU tuition is less than $10k/year. (Nationwide, public in-state 4-year tuition ranges from ~$5k/yr to ~$15k/yr.)

For most students at public 4-year universities in the US, room & board costs significantly more than tuition. Even in those EU countries where tuition is free, average student loan debt is often >$20k USD because of this. By way of comparison, average student loan debt in the US is ~$40k USD, and that includes private school and out-of-state student tuition as well as room & board. Note that at least for the US, $40k is the mean; the median debt is <$30k. And these numbers are totals, not per year.

Perhaps one of the best ways to address the college affordability "crisis" would be to build more dormitories. The capital expenses could be publicly funded, and then charge students maintenance costs. But for various reasons, including NIMBY development barriers as well as modern expectations (see, e.g., the vitriol spewed about the windowless UCSB Munger Hall bedrooms), schools have long ago neglected this aspect.

[rootusrootus]

That is what we did in the past, and why my undergrad degree didn't cost me nearly as much as someone would pay to get the same degree today from the same university. We've decimated state funding for public universities.

[WalterBright]

When students have "skin in the game", i.e. they are paying for it, they will work to get their money's worth out of it.

People do not value things they get for free.

[zeroonetwothree]

How many German universities are ranked top 40 globally? How many American?

[thatcat]

so take the money back from the universities in all cases where they negligently misrepresented the future job market of the field of study to the borrowers or what?