Originally Posted by
AdamAlias
It had occurred to me that an early-20s college graduate with a high amount of student loans and a good credit rating might try something similar, transforming non-dischargeable student loan debt into unsecured consumer debt, and then declaring bankruptcy, which would be off their credit history by the time they turn 30.
I would assume it would count as fraud, though, but IANAL, so I honestly have no idea.
In terms of why it's a terrible idea, it's basically stealing.
I actually DO more or less do this: I'm floating all this cash every month, why am I paying 6.8% on my unsubsidized Staffords? It's the Mango/Netspend/Momentum/PP arbitrage in reverse.
Of course I pay off my credit cards every month, but my point is if something happened that made me declare bankruptcy, I'll have converted my student loans into unprotected debt.