Bankruptcy Or Not, Student Loan Debt Will NOT Be Repaid

by Kurt O'Keefe 

It is just a fact that the over one trillion (uh,  yeah, not billion, not hundreds of billions, trillion) dollars of student debt now outstanding in our fair land will not be repaid.

Because the graduates will not generate sufficient income to pay it back.

The jobs they were told were out there for them are not there.  Of course, that big increase in degree programs colleague Chip Parker wrote about is one of the symptoms.

Another one is unjustified tuition increases by colleges, who already have enough money, but know their customers can get more student loan money to buy their product.  Which they do, mostly because they do not understand what paying it back means to their lives.

I take issue Mr. Parker's statement that student loans, like mortgages are a necessary evil.

We will save that debate for another time.

The problem on the table is what to do about the debt that is already out there.  It isnot currently dischargeable under bankruptcy law, unless the debtor can prove it would be an undue hardship to have to repay it.  Very little student loan debt is resolved by this method.

What if this debt cannot be discharged in bankruptcy?

We will have thousands of students shackled into debt.

(image credit: dreamstime)

So, who should take the hit?  What about the banks that lent the money?  Oh, sorry, I forgot.  This is America.  The banks NEVER take a hit.  Most of this debt was guaranteed by, or to, the government anyway.

The universities?

Should they be required to pay all or some of the debt their graduates cannot pay?

Nearly seventy universities in the U.S. have endowments of over a billion dollars.  They are the ones who are supposed to be making the students job worthy.  Big paying job worthy.

Boy, I love this idea.  As you can tell from Chip's post, being that faculty number and salary have not increased during the last decades of tuition inflation, funded by easily obtained student loans, where did the money go?

"If the professors are not getting this booty, it must mean the administrators are. "

Still, very difficult to work out the details on this one.  Probably would require a whole new bureaucracy.

So what are we left with?

The students?

Calls to return bankruptcy laws to the days when student loans were dischargeableare increasing, even law professor Glen Reynolds, considered a conservative (actually, libertarian) blogger (Instapundit) has joined the chorus.  Glen has long written about the unsustainability of the student loan bubble.

Something will change.  We just have to work out what it will be.

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