I must say, as someone who made quite a few sacrifices to pay off my school debt, I'll be pretty miffed if less responsible people from my same generation get a break on their loans.
By all means argue for a solution that also helps people who made sacrifice in the past, but people who didn't or couldn't being left to suffer is not a solution.
To be clear - I get you are not saying you don't want to solve this because of that, but unfortunately that sentiment often results in policy actually being set like that.
We should always be asking 'how can we pull everyone up' not 'are they going through what I did'. Even if it ends up not benefiting you directly, we all benefit from a better society.
If we could get past the initial point and start implementing stuff like that, it'd give people more faith that it doesn't just invalidate their effort.
I didn't "suffer", I just fulfilled the obligations I signed up for when I signed up to my loans.
2/ Objectively, what is the likelihood that continuing the status quo crashes the system?
3/ What are the long term consequences from potential solutions? E.g., if current debts are forgiven/cancelled, would lenders refuse to lend for colleges? Would well off people with significant debt take advantage of the system we're protecting, leading to less trust in it, which could cause it's own collapse movement?
The defensible logic is that we don't really know that current student debt will "crash the system", and we definitely don't know what the 2nd and 3rd order consequences would be if any of the solutions were implemented.
2. An economy where a major portion of debtors are unable to discharge their loans (due to the laws presuming student loans as ineligible for discharge), debtors will fall into a cycle of inability to pay debt, inability to qualify for a home, apartment or a vehicle, and potential inability to qualify for a job (credit check) and become increasingly dependent on government programs to stay afloat. This can put a strain on government resources beyond what a simple bankruptcy would do, which is the forced cancellation (discharge) of a debt. Basically, the cost of a bankruptcy (to the economy) is smaller than the cost of an otherwise capable judgment-debtor on welfare/Medicade/SNAP/others.
3. Private student loans, which are effectively no different than unsecured debt, should be presumed dischargeable in bankruptcy. Federal student loans are actually structured quite nicely, except many debtors do not understand the complexities of the multiple forms of loans they carry (perkins, plus, university-managed, subsidized, unsubsidized, private) and rules for one loan type do not necessarily apply to the other.
Colleges would actually benefit from student loan reform, since they could better educate students and parents on standardized loan packages, rather than the large array of loan options available now.
But more directly these people and institutions made a bet, the fact not all bets win is a basic fact of life.
PS: I have negligible student debt at sub inflation interest rates remaining. But, for people with 8+% interest rate loans that interest should very much should be on the table at a minimum.
So of course it's going to crash.
It's like watching a feedback loop in your motor controller, and seeing the numbers start going up, knowing there's too much force in the system to abort it now. It could be an hour before the loud bang comes, but nothing can stop it. If you interrupt it right now, you do less damage right now (still enough to destroy the system of course), but if you let it go, it remains undamaged until it overloads. And you know, you might get really lucky and have the axle melt or something, which avoids the damage. The odds, to put it mildly, don't favor that outcome though.
Technically the better action is to interrupt it, but I've hardly ever seen anyone do that.
For public universities, they were substantially cheaper than private universities due to state subsidies. The tuition has almost doubled over the past 15 years for the few places I checked, but that's only a bit over inflation. Public state universities are still a great deal.
So I think the stats are using a lot of for-profit colleges which skew the numbers up. They are expensive and don't offer a lot. Anyways, I would love to see some actual data and the breakdown of what schools are increasing tuition.
It's about whether rules matter. If people think the rules will be enforced, then we can all make plans based on the rules. If they don't, then all courses of action are on the table. Whatever gets the job done. That's back to rule of the strong.
See: how we treat big banks.
(Not to say we shouldn't have a debt jubilee, but that's what we risk)
See the current trend towards nullifying possession charges for Marijuana. Yes, it sucks for people who got punished under the old rules, and yes, it's not good to say "laws might change and you might 'get away with it'", but sometimes that is better than letting a lot of people suffer.
Despite getting accepted to many top-tier universities (Berkeley, Yale, Rice), I chose to go to an in-state school with a generous scholarship so I could come out of school with very little loans. I sacrificed going to a really great school like Berkeley (and living in California!) so I would save money and not end up in so much debt.
While I fully think that debt is a nondesirable thing to have, and that we do not educate people about debt enough, I don't know if loan forgiveness is the answer. I have personally paid off a close friend's student loans and old medical bills, and guess what? Even after all that she was just as financially irresponsible as before.
As a related situation, I know a few people who come to me asking me for help with rent or medical bills. When I ask them, why don't you have any money, they say it's because their hours were cut, or something else. But when I step back and look at the whole picture, I realize that because they went on an expensive vacation, and went to the bars every other night, and spent lots of money on clothes, that's the real reason they didn't have money. So when they asked me to help pay their rent, they were really asking me to help finance their vacation.
In a similar way, if we (collectively, the taxpayers) pay for the students who can't afford the student loans, we're actually subsidizing whatever the people DID spend their money on, or their choice to go to more expensive schools when less expensive schools are available, perhaps at the cost of those who, like me, chose to save money by going to less expensive schools.
I guess what bothers me is just this sense of entitlement of people that originated from my same social stratum who now argue "the game was rigged" when I never saw evidence of this. (This annoyance of mine BTW does not transfer to disadvantaged folks who did not come from a middle class background... I agree 100% they got a harder lot in life than many of us and are often right to complain.)
And a lot of (all?) places have programs where they'll forgive student loans if one stays a teacher for 10 years -- which, as an aside, always boggled my mind that you have to go into major debt to get a public teaching job that pays peanuts but people happily do it.
Students have an obligation to make sure they are getting a good education for a fair price, and that they can foot the bill.
If they determine the cost is too high, they should not buy from that school. This will eventually fix the problem.
I feel it just sends the wrong message to society if we build these gotchas and loopholes left and right like this to let people make financially bad decisions.
Should we blame those that fall prey to predatory loan practices? Especially at 18, most are not fully equipped to evaluate the debt they are signing up for and its implications.
It seems a better approach would be to look at the root of the problem, which is that easy credit for education has incentivized bad apples to exploit vulnerable people. Just because you were smart enough to not be exploited does not mean others should suffer.
You'll find that in most peace deals, bad people get excused of crimes, but it's necessary for the greater good.
There's certainly a moral hazard, but that's part of the deal - if we do things right, the bad situation won't be repeated.
Your opinion and his are, to me, examples of one of the worst forms of greed: greed with a reasonable excuse. It is rational and I cannot really fault you for feeling that way, but this form of greed makes fixing the problem much harder to solve.
I think there are a lot of issues with the system, not least of which is that it's possible to accrue that much debt without any credit check. But let's not pretend that the system isn't rigged to saddle people with debt.
Thousands of people are filing for bankruptcy every day which – by implication – are getting a break on loans that you would otherwise pay.
The issue is where debtors, who cannot presumably discharge their defaulted student loans in bankruptcy, begin to lose their savings, investments, and ability to stave off financial dependency on the government and become financially dependent on government programs now and into their retirement.
By saying that since you were able to pay your loans in 2018 and therefore most other people should be able to pay is like looking at any bad investment. If you allow people to remain indentured and fall into perpetual dependency on government programs (welfare, SNAP, Medicaid) due to their default or judgment-debtor status, the overall cost of that is projected to be much higher than if they could have been eligible for a partial or full discharge of the debt in 2018.
A bankruptcy prevents a bank from collecting interest. A judgment-debtor on financial assistance from the government is taking far more tax dollars from you than the bank is getting from the tax write-off on the charged-off debt.
Obviously, banks want their money, so they lobby for bankruptcy provisions to keep people indebted. They don't particularly care if the side-effect is the government demanding higher taxes from you to pay for government welfare programs.
The fact is that someone that made poor life decisions is at high risk of doing so again, and their credit rating should permanently reflect this. Otherwise, the loan & bankruptcy system rewards people who go into bankruptcy at the cost of other, more responsible people who are trying to get loans at a reasonable interest rate.
Without this, abuse of the bankruptcy system to "wipe away" student loans would be rampant, and we'd just be kicking the can down the road in a new way again.
Is college only for job training, or is it for something a little different?
I’m not criticizing your viewpoint; as another commenter said, I understand some of the reasons you may hold this view. However, I do not feel that people who majored in, say, English - against their own likely knowledge that it would be difficult to find a job applying the skills they learned directly in search of a job - should suffer because of the debt they incurred. But I also think they should continue to get training in an area that is needed, or work at something for which they are already qualified.
Why shouldn't they face the responsibility for the decisions they made?
That's the crux of the argument, really. Either people are forced to be responsible for their actions or they aren't...doubly so with student loans since they never really go away.
And I'm saying this as someone who got a "worthless" degree (back in the '90s when college was reasonably cheap) and has been in default on one of my loans for well over a decade but has never once asked anyone else to "suffer" over my decision to party, err...pursue a degree without a clear career track. Sure, it would be really, really nice if the good taxpayers subsidized my slacker lifestyle by forgiving my loan but I'm not holding my breath.
Granted, the government has tightened the rules around private student loans and encouraged students to pursue federal-only loans (which offer a ton of benefits compared to private loans), but if you look at the loan practices in 2000-2008, private lenders were effectively fly-by-night and doing everything they could (including questionable advertising) to encourage students to apply for private loans.
I would be OK with slashing interest rates. A loan which has such special status that it can’t even be cleared through bankruptcy should have a remarkably low interest rate.
Something like, every month you make your payment the interest is credited back to the principal. Or perhaps require 6 months of consecutive on-time payments after which interest goes to zero or 1% as long as you keep making regular payments.
Think of it like this: party A defrauds party B (by misrepresenting the value of what they're offering), putting party B into irrecoverable debt in the process. Party A isn't going to give the money back (we can't get humanities professors to return their salaries, not to mention the less visible involved), so party B turns to their side and sees party C standing next to them...
The fraud is between the victim, the perpetraor, and the state. However I don't expect much to happen along those lines because even though what happened was clearly fraud, it's not clear exactly who was responsible or even how a law could be written so that they would have broken any laws. It's like that one scene in the grapes of wrath: when a hundred people each commit a fraction of a crime, you're just about stuck when it comes to holding any of them accountable.
There is no fraud when someone can't pay back their student loans. Bankruptcy isn't fraud. Bankruptcy isn't paid for with interest. Bankruptcy is a right that debtors have when their debt gets out of control due to whatever reasons, and sadly us students do not have that option. Bankruptcy is mostly unavailable to us, and when it is available, it's made unavailable by terms that make absolutely zero sense at all.
If I can't find a job, I have absolutely zero way to attempt to pay back student loans in order to show I made an attempt, which would be one measure needed to qualify me for bankruptcy. If I'm barely making enough to support my basic expenses when I do have a job, I can't be expected to prioritize my student loan over my ability to eat or provide shelter for myself. If the bar for showing an attempt at repayment is as low as sending $5 / month, then what's the point in having that restriction on student loans to begin with.
Why was the ability to file for bankruptcy on student loans ever rescinded in the first place? It absolutely was not because there were more and more people trying to defraud the system, unless you somehow twist logic forcefully enough to fit that demented narrative. It was a means to shore up the predictable deficit that would be caused by the Bush tax cuts. Yes, the bush tax cuts. It was not that long ago that the ability to file for bankruptcy on student loans was stolen from us.
If you live in a red state or purple state, then good fucking luck getting any sympathy from the judges with zero qualifications merely elected to their positions when seeking bankruptcy.
The fraud happened when they signed a bunch of kids up on 200k degree plans, under the false pretenses that it would be worth it. It was clear from the start that many of these degrees could not possibly make back their cost, but in the end a bunch of young people fell prey to the information assymetry. That's the premise of the discussion - because if the student loans had been made in full understanding of the consequences, there would be nothing wrong with what was happening! But it seems reasonable to me that the value of these educations was misrepresented.
Imagine if someone could've paid his loans, but was irresponsible and just risked /lost it all in stocks. Not only can he file a capital loss in his tax form to pay less taxes like Trump has done, and now he gets his loans and debt cleared (also like Trump has done).
If the system aids people like that, why should there be anyone who responsibly avoids debt?
Personally, my loans are almost all paid off and any wiping of student loan debt would barely affect me. I can still see how letting the system continue as it is does nothing but funnel money from the public, and students in particular, into the banks pockets. I don't see why we need to protect the banks from any negative results when they have actively subverted the rules
Well, the assumption here is that the money to "bring them up" can just be materialized out of thin air and doesn't have to be taken from other people, in turn.
"I survived a bad system" is not justification for the perpetuation of that system.
And for the record, I get the feeling you've assumed that I support debt forgiveness. I don't, and the moral hazard involved does bother me. But I won't let that stop me from considering strong arguments in favor of it.
But who was really losing 20 years ago were underemployed administrators. There were much fewer of those cushy non-teaching non-research admin jobs.
Or would you rather a non-society where everyone fends for themselves?
Banks, on the other hand, won't be suffering if reforms are made; they will simply not be able to realize as much interest from the loans they issued.
Is that worth doing? Maybe, but don't pretend it has no impact on the people who did pay off their loans.
Education used to be affordable. It is absolutely not impossible to go back. I’m curious to know how long you think education has been this unaffordable, because it’s a pretty new phenomenon. I’m therefore confused why it’s so hard to imagine a world where education is reasonably-priced.
your are rich, compared to other, not in the absolute, if you have 1 million dollars, and everyone else have one million dollars, you are not rich
one way not to punish those who acted responsibility, is by bumping up their credit score, this way, they can get deals on mortgages etc ..., and those who were bailed out, should get their credit score neither penalized or bumped