Going forward, all future loans should be dis-chargeable in bankruptcy, like they used to be. That will mean the amounts a student can get will be much lower. That's hardly a bad thing.
The reason why you can take out very high student loans is because plenty of capable students aren't born in to money. What you're proposing is further increasing wealth divides.
Actually, let's elaborate further on this. I said it didn't use to be this way, and...I was right. I even remembered the year it changed (2005), though I guess it's been a gradual degradation over four decades:
Its kind of strange that credit cards are dischargeable when private student loans arent, said Mark Kantrowitz, publisher of the financial aid websites, Fastweb.com and FinAid.org. They should be treated the same.
They used to be. Before 1976, all education loans were dischargeable in bankruptcy. That year, the bankruptcy code was altered so loans made by the government or a non-profit college or university could not be discharged during the first five years of repayment. They could, however, be discharged if they had been in repayment for five years or if the borrower experienced undue hardship. Then, the Bankruptcy Amendments and Federal Judgeship Act of 1984 made it so all private student loans were excepted from discharge too.
Two decades of further tweaks to the bankruptcy code ensued until 2005, when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which made it so that no student loan federal or private could be discharged in bankruptcy unless the borrower can prove repaying the loan would cause undue hardship, a condition that is incredibly difficult to demonstrate unless the person has a severe disability. That essentially lumps student loan debt in with child support and criminal fines other types of debt that cant be discharged.
The Bankruptcy Abuse Prevention and Consumer Protection Act was enacted in 2005 to include private student loans as one of the 10 debts that can't be forgiven.
Robert Siegel talks with Stephen Burd, senior research fellow in the Education Policy Program at the New America Foundation, who says federal loans had long been included in this list, but private loans were included in 2005 because lenders had been reluctant to take on the risk of student loans.
Now that lenders have no risk, Burd says, student loans have become a very lucrative business.
The only reason huge loan amounts are given out w/o the usual requirements to qualify for said loans is because the law has been bastardized to make it debt that can't be escaped. Fueled by that limitless influx of money, colleges have been able to skyrocket their prices and still have plenty of buyers, who now need ever larger loans, and the cycle goes on.