It may produce some desired affect in the short term, but in time creates a massive liability for everyone, not just those who took out the debt.
It's completely unfair that mine went away and people that are upside down and have been "playing the game" are still in the slog, but it by a wide margin the most fortuitous thing that has ever happened to me.
https://www.forbes.com/sites/zackfriedman/2017/07/18/5-billi...
Or could a bunch of former students band together and do this in a cooperative type corporation? Buy defaulted student debt, then forgive it?
You know, a distributed ledger of defaulted US student debt might actually be a useful use for a blockchain.
(I say this as a NZer whose student debt was held by the govt. and had capped fees etc.)
And a %5 tax increase sounds like a pretty good deal. For most people it's going to be $25-$50k total, and you have no bill due when your unemployed.
If I could just cut out student loan payments the money would go towards paying down any outstanding debt or towards buying a house/condo which would help me not need support in retirement. The tax advantaged retirement funds are nice but many people with student loan debt it's like telling them they have won't have to pay taxes on any yachts they buy. Technically nice, but practically useless
Also, many (most?) student debts are less than $25k, and unpayable huge debts should never have been approved in the first place. The latter clause is the whole point of this anyway.
Why don't we just do that for everyone, and make higher education free. This works for the absolute majority of students. Provide an opt-out for the few that can pony up the cash up front.
One of the reasons I'm happy to be European. Education is free in most countries. It makes no sense to burden young people with a load of debt when starting out.
According to https://nces.ed.gov/fastfacts/display.asp?id=75, in the 2014–2015 school year U.S. colleges & universities spent $536 billion; the 2014 defense budget was $526.6 billion[0]. We could spend our entire defense budget and still not cover our higher education bill.
[0] http://comptroller.defense.gov/Portals/45/Documents/defbudge...
I'm not sure this is the best number to use. This is what is currently spent, it is not how much we would need to provide a free higher level education option. The entire department of education budget is 70 billion [0]. Using Pennsylvania as a baseline, they have approximately 185 million planned for public education[1]. Let's round that to 200mil and multiply it by 50. This gives us a ballpark spending of 100 billion at the state level. So let's approximate 170 billion spent on K-12 and higher education last year.
We were able to fund our entire K-12 system and give money to public universities for under half that 536 billion figure. So yes, we may not be able to cover our current higher education bill with the defense budget. However, what we are currently doing is not the best or cheapest system. Someone could definitely come up with a free higher education proposal for half of that 536 billion figure. The system needs reformed badly. Everyone knows the costs of higher education are out of control. Using it as the baseline isn't fair IMO.
[0] https://www2.ed.gov/about/overview/budget/index.html [1] https://www.governor.pa.gov/governor-wolf-reaffirm-commitmen...
Europe can afford free education because it isn’t American-style education.
That's something that a large percentage of people do anyway. What a strange and poorly-thought-out suggestion.
What good could possibly come from intentionally banning someone from saving for retirement?
I guess that system is possible because all loans are provided by the Student Loans Company which is ran by the government - and tuition is capped at 10k/year, so it doesn't matter what or where you study - the cost is exactly the same.
Also worth noting that loans can still be sold off by the SLC (though remain managed by the SLC, so probably makes little if any difference to the individual), and government ownership hasn't completely stopped the use of questionable tactics (e.g. debt collection letters purporting to be from "Smith Lawson & Company").
>The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
[1] https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancell...
> If you file bankruptcy in Canada a federally guaranteed student loan is only automatically discharged if the date of your bankruptcy is more than seven years from when you ceased to be a student. This rule was created to prevent student from incurring huge student loans, and then graduating and immediately going bankruptcy.
[1] https://bankruptcy-canada.com/bankruptcy-blog/bankruptcy-can...
And if, like now, the government backed the loans and they were dischargeable, it would create a death spiral of companies encouraging loans to no end with tons of students accepting them, knowing that they can just file bankruptcy right after graduating.
There's an even better side effect of this. There is no real and inherent reason that university prices have skyrocketed out of control. It's mostly a consequence of government removing all economic concerns for students. That of course sounds nice, but they also simultaneously removed all economic concerns from universities who can, and do, charge arbitrarily large sums and justify it by increasingly reckless spending. This a recurring problem when messing with the market - we create unforeseen problems, though in this case this should have been very foreseeable!
By returning to market forces universities would be obligated to themselves also take economic matters into consideration with their decisions. Too high of tuition and fees are unlikely to get paid off, thus unlikely to produce much in the way of loans, and thus generally not economically viable. Similarly there would be less of an incentive to grow programs that do not substantially improve the ability of students to create a comfortable life for themselves.
Basically we would start on a path back towards the world some baby boomers seem to think we still live in where somebody with a bit of hard work could put themselves through college with a part time job graduating not only debt free but with a enough of a nest egg put aside to have a nice down payment for their first place.
Because it's debt to get a degree. I don't agree necessarily but the idea is that students would get large loans, go to schools, get a degree, then declare bankruptcy.
I think the GP comments makes a good point that large loans would be harder to get if all of the sudden they knew bankruptcy option is going to considered after graduation.