More likely we'll see more forms of non-dischargable consumer debt. This is debt which is not discharged when someone declares bankruptcy.
Every time you hear a politician advocating more student loans (rather than more affordable higher ed), one of the reasons they do this is because student loans are non-dischargeable.
Think about someone who is 18 and takes on lots of debt. There would be very little reason not to declare bankruptcy, and just live off of wages for 5-7 years until the bankruptcy is cleared from his/her credit report.
With the housing crisis, most debtors also owned some equity in the house, which was a massive incentive not to foreclose, yet many still did.
But with consumer debt there is no downside. You can just choose not to pay it. The collections industry uses some marginally-illegal tactics to create personal embarrassment, but that's where it ends.
With an auto loan the car can be repossessed, but you can pay your rent using a credit card or buy a new TV every few months and if you fail to pay back the debt nobody is going to force you to give up those items. As with education, once the money has been used nothing the creditor does can take away the item, which is why the debt had to be made non-dischargeable.
I think we can look forward to a new class of non-dischargeable consumer debt which will initially be sold via lower interest rates, but will become the sort of debt that college campus credit card pushers will mainly be slinging.
There is really no political opposition to this anymore, now that both parties are so strongly aligned with the finance industry.
I'd also expect to see the credit report become something somewhat more like a "trust dossier" that would routinely be viewed by employers and other entities we all work with who do not typically view the data, and would include things like TSA precheck status, IRS timely filing information, immigration status, etc.
There's a reason debtors prisons used to exist, which is that the human optimism that can get us through great hardship can also tend to lead many humans to be overly optimistic about their ability to repay debt. It takes a very firm hand to create compliant borrowers. In the US, the older generation views missing a credit card payment as a really big (and embarrassing) deal, but the younger generation does not care as much about this.
The occupy movement was a backlash against the shackles of student debt, but was shut down relatively efficiently. The next iteration has fewer principled objectors but a lot more debt cynics who view consumer debt more as something to be exploited.
Defaulting isn't a big deal even to the banks. They can just price it into the product.
What would be interesting though would be credit offerings, cards for instance, that are not dischargable, but with better terms or interest rates.
My concern though is mandating classes of debt as non dischargable by law, banks wont necessarily pass the savings along to the customer, so the laws should allow certain types of debt to be dischargeable but subject to your agreement with the bank. So you get a non dischargeable card at 2 pts less than the normal one.
True, but the ceiling on the amount that can be loaned to a person is limited by the market-driven interest rate for packages of dischargeable debt.
> not dischargable, but with better terms or interest rates
Yes, I think we'd see aggressive refinancing offers and all sorts of other semi-dark patterns... which would be irrelevant to the 98% who don't declare bankruptcy, but likely quite life-changing to those who do.
There are debt forgiveness programs like PSLF that I expect to become wildly more popular in the future. We're only ever a Presidential election away from dramatic changes to student loan treatment.
And with that the risk of the permanent destruction of the market for student lending in the future, meaning college will go back to being a upper-class game.
If there wasn't so much student-loan money available, would there be more incentives for some colleges to reduce their costs and make their product more affordable.
Right now, colleges provide the service (education) and credential (degree). If independent third parties could provide believable credentials, there would be more incentives to find cheaper ways of delivering the services.
Every time you hear a politician advocating more student loans (rather than more affordable higher ed), one of the reasons they do this is because student loans are non-dischargeable.
Think about someone who is 18 and takes on lots of debt. There would be very little reason not to declare bankruptcy, and just live off of wages for 5-7 years until the bankruptcy is cleared from his/her credit report.
With the housing crisis, most debtors also owned some equity in the house, which was a massive incentive not to foreclose, yet many still did.
But with consumer debt there is no downside. You can just choose not to pay it. The collections industry uses some marginally-illegal tactics to create personal embarrassment, but that's where it ends.
With an auto loan the car can be repossessed, but you can pay your rent using a credit card or buy a new TV every few months and if you fail to pay back the debt nobody is going to force you to give up those items. As with education, once the money has been used nothing the creditor does can take away the item, which is why the debt had to be made non-dischargeable.
I think we can look forward to a new class of non-dischargeable consumer debt which will initially be sold via lower interest rates, but will become the sort of debt that college campus credit card pushers will mainly be slinging.
There is really no political opposition to this anymore, now that both parties are so strongly aligned with the finance industry.
I'd also expect to see the credit report become something somewhat more like a "trust dossier" that would routinely be viewed by employers and other entities we all work with who do not typically view the data, and would include things like TSA precheck status, IRS timely filing information, immigration status, etc.
There's a reason debtors prisons used to exist, which is that the human optimism that can get us through great hardship can also tend to lead many humans to be overly optimistic about their ability to repay debt. It takes a very firm hand to create compliant borrowers. In the US, the older generation views missing a credit card payment as a really big (and embarrassing) deal, but the younger generation does not care as much about this.
The occupy movement was a backlash against the shackles of student debt, but was shut down relatively efficiently. The next iteration has fewer principled objectors but a lot more debt cynics who view consumer debt more as something to be exploited.