Obligatory Magic Johnson Disclaimer:

“This is NOT a political statement – good luck to both the massive loan corporations and those living in poverty due to their student loans… interested to see how both sides fight this out!”

Let’s start with some preliminary facts:

• U.S consumer student loan is over 1.5 trillion and climbing
• The average student loan borrower owes around $38,000
• Student loan debt is NOT cleared when filing for Chapter 7 bankruptcy
• Mortgages, and SECOND mortgages (Home Equity Line Of Credit HELOCs), are able to be cleared from Chapter 7 bankruptcy (the bank just keeps the lien on the home)
• Housing prices continue to rise year over year, building equity into most homes
• I am an grown adult that somehow feels comfortable contextualizing this idea online

My question: Why can’t consumers who are in student loan debt just borrow equity in the form of a HELOC (a bankruptable debt), pay off their student loan debt (a nonbankruptable debt) with the HELOC, then default on the debt?

I understand that there are some barriers of entry when purchasing a home (down payment, credit check, proof of income etc.), BUT I feel like it wouldn’t be impossible to assume that at least 1/3 of the people who have student debt can qualify for a home loan between $100,000-$200,000?

After purchasing a home in this price range, why not just take out a HELOC for “home improvements”, pay off your student loan debts, then use your HELOC to pay down your theoretical student loans. I feel like we could easily cut down on 500 billion of student loan debt with this tactic.

Worst case scenario: You declare bankruptcy, erase your debt, tank your life/credit, and have to pay 39% APR just to buy a 2001 Hyundai Elantra for the rest of your life.

Best case scenario: You drastically refinance your debt structure to a lower interest rate, pay off your HELOC with lower payments, succeed and profit?

Honestly this plays out as airtight logic. I’m sorry if this post starts another housing crisis.