It drives me crazy that people don’t see the very simple reason why tuition has risen so much: student loan debt is not dischargable through bankruptcy. Even if the student is run over with a bus the debt can be passed on to family members.
The lenders that give out these loans therefore have essentially no risk and are highly incentivized to give out loans to any and every person that wants one, regardless of their creditworthiness or future earning potential. Universities have responded to this glut of money and demand by raising prices.
The solution is to allow student loans to be discharged through bankruptcy. Banks will respond by properly evaluating the risk of each loan instead of giving them out like candy. This will result in less students going to college, but that’s a fair price to pay to correct this massive distortion in the market.
This will happen eventually, but it takes a massive amount of resources to build a university from scratch, and existing universities risk diluting their brand if they take on too many students.
>Even if the student is run over with a bus the debt can be passed on to family members.
No, debt is never inherited. The cases you are thinking of is where the family members are cosigners on the loan. Nobody's child/sibling/parent/grandparent is ever responsible for a loan they didn't sign.
Student loan debt not being dischargable through bankruptcy is relatively recent; the increase in tuition has been going on for a lot longer than that. Even if the step you advocate is taken, US federal student loan guarantees will continue to have a large effect on tuition rates.
The lenders that give out these loans therefore have essentially no risk and are highly incentivized to give out loans to any and every person that wants one, regardless of their creditworthiness or future earning potential. Universities have responded to this glut of money and demand by raising prices.
The solution is to allow student loans to be discharged through bankruptcy. Banks will respond by properly evaluating the risk of each loan instead of giving them out like candy. This will result in less students going to college, but that’s a fair price to pay to correct this massive distortion in the market.
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