Repossessing Degrees

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Sev­eral months ago I ar­gued that we should al­low stu­dent loans to be discharged through bankruptcy. Yes­ter­day I re­al­ized an­other way to mod­ify stu­dent loans to be more com­pat­i­ble with bankruptcy: al­low lenders to effec­tively re­pos­sess de­grees. This could make hav­ing stu­dent loans not sur­vive bankruptcy more poli­ti­cally prac­ti­cal.

Some­times peo­ple bring up the idea of re­pos­sess­ing de­grees as a way of illus­trat­ing the ab­sur­dity of stu­dent loans, but it’s ac­tu­ally pretty rea­son­able. A large ma­jor­ity of the benefit of get­ting a de­gree comes from hav­ing the cre­den­tial as op­posed to hav­ing learned skills: em­ploy­ers use “do they have a col­lege de­gree” as a filter. If you took out a stu­dent loan to get a de­gree, and then later de­clared bankruptcy, the court could re­quire you to no longer rep­re­sent your­self as hav­ing a the de­gree as a con­di­tion of hav­ing your debt discharged.

I think the goal is that some­one with a re­pos­sessed de­gree should look the same as some­one who com­pleted part of the de­gree but dropped out be­fore finish­ing. Col­leges would need to be part of this as well; one way for this to work is if as a con­di­tion of con­tinued par­ti­ci­pa­tion in the stu­dent loan sys­tem col­leges would need to agree to re­voke de­grees if asked to do so by the bankruptcy court.

One way this could work poorly would be if peo­ple would just ig­nore the law and tell em­ploy­ers in per­son that they have a re­voked de­gree? I think they mostly wouldn’t: de­grees are of­ten used at an early stage of hiring screen­ing, where if you don’t have a de­gree you don’t even get to the stage of be­ing able to talk to an in­ter­viewer and ex­plain the situ­a­tion. Ad­di­tion­ally, some­one who de­cides to claim they went to Har­vard af­ter hav­ing their de­gree re­pos­sessed looks just like some­one who’s ly­ing about hav­ing gone to col­lege, or who dropped out.

This would prob­a­bly need to be com­bined with some sort of wait­ing pe­riod, some­thing like five years, to avoid the case where some­one de­clares bankruptcy be­fore finish­ing their de­gree when there’s noth­ing to re­pos­sess, and then com­pletes their de­gree later.

Im­ple­ment­ing this in a way com­pat­i­ble with the first amend­ment seems tricky but doable. In a stan­dard non-dis­clo­sure agree­ment you trade your right to share some in­for­ma­tion for some­thing else you value more. That’s what we’re talk­ing about here, so it seems like we’re ok? But I’m just spec­u­lat­ing.

This does change some of the in­cen­tives around ed­u­ca­tion and hiring: stu­dents might try to learn valuable skills, and em­ploy­ers might try to eval­u­ate peo­ple based on what they know and can do. But this would be a great out­come!

(Note that this is not com­pat­i­ble with my pro­posal that we pro­hibit em­ploy­ers from con­sid­er­ing de­grees en­tirely, and is a much less rad­i­cal al­ter­na­tive.)

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