Hobbit@Law

Looking carefully at that which is unseen.

Daily Archives: October 20, 2011

OTB: Fixing the economy

Or at least patching it up a bit, by getting more money flowing into the commercial economy from individuals, with six simple words:

“Student loans are dischargeable in bankruptcy.”

Now, clearly, contracts are fairly sacred to libertarians, so suggesting that a contract for a repayment on a loan be voidable as a matter of law may seem, at first blush, to be anathema. However, most student loans are nothing more than unsecured debts and perhaps making them dischargeable in bankruptcy (again, they were before) would make creditors a bit more chary in regard to lending some kid $100,000 to get a degree in underwater basket weaving. This is not to say that colleges couldn’t continue to offer such degrees, but the market would likely be relatively slim, and schools would need to begin offering more substantive courses in order to attract students who could pay. Or cut their costs such that part time pay-as-you-go would-be aquatic basket weavers can still obtain their life’s ambition.

Furthermore, if schools begin offering degrees in math, science, engineering, and so on, lenders are still going to need to look at just how likely a borrower is to obtain employment (and thus repay the loan) based on his likelihood of being hired after. If Downstate U.’s engineering program graduates are unable to assemble an Airfix model without close supervision, lenders aren’t going to be willing to advance much to a student who is paying for the arguably worthless degree from that institution.

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