Student loans should be dischargeable in bankruptcy

Even Going Bankrupt Doesn't Eliminate Student Loan Debt

Even Going Bankrupt Doesn't Eliminate Student Loan Debt

Moneybox
A blog about business and economics.
Aug. 22 2012 4:01 PM

Student Loans Should Be Dischargeable In Bankruptcy

Moe Tkacic has a great column on the weird history whereby your student loans can't be eliminated in bankruptcy, even though the whole point of bankruptcy is to eliminate debt. This obviously becomes a huge problem for people unfortunate enough to graduate into the middle of a bad labor market.

Now back before the economic crisis, the thing you would most commonly hear about why this is a good idea is that it makes the loans cheaper to get. And that makes sense—less risk for the lender, easier lending. Post-crisis, however, this looks more like a bug than a feature to me. It would be a really good thing if lenders got a little bit more skeptical about handing out student loans. Schools would need to try harder to demonstrate that they're providing real value to students, and would have to do so to an audience of lenders that's a bit more skeptical and sophisticated than your average 18 year-old.