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ShayBult's avatar

Here's another reason wiping out student debt is a bad idea: it does nothing to address the core problem (or at least what many people argue is the core problem): the rapidly increasing cost of college. Further subsidizing something does not seem like a good way to bring down its cost.

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Mari, the Happy Wanderer's avatar

I am posting about this issue tomorrow in my Happy Wanderer Substack. I am on the left, but I oppose canceling student debt and think it should instead be treated like all other forms of debt: borrowers should be allowed to discharge student debt in bankruptcy. This simple change would remove the perverse incentives on banks and universities. Currently, banks face no risk of default, so they’re incentivized to hand out loans without doing due diligence. Similarly, universities get all the tuition money up front, so they are incentivized to keep raising tuition rather than finding sensible ways to economize.

Giving student borrowers access to bankruptcy would put some of the risk of student debt where it belongs--on the banks and the universities--and help to end rising tuition and credential inflation.

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