Why should student debt be non-dischargeable?

I had not realized this until recently, but the 2005 Bankruptcy Act actually made all student loan debt (including from for-profit institutions) non-dischargeable.  The term is not immediately clear, necessarily, but it means that no matter what sort of bankruptcy you go into, you can’t get rid of your student debt.   I would note that while for the most part our tax policy heavily encourages capital formation, it’s weird to have policies that encourage human capital formation and then punishes the people who actually took the risk to invest in it (ie, the students) while protecting creditors from any risk of principal loss.

This seems messed up.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: