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 If you took out a student loan to get a degree, and then later declared bankruptcy, the court could require you to no longer represent yourself as having a the degree as a condition of having your debt discharged.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.)