It's crazy to cancel student loans and still keep issuing the exact same loans. If we believe the loans are unjust then the government should stop handing them out as the very first step.
I'm not opposed to student loan forgiveness, but I don't think it's nearly as popular as many progressives would like to believe as a standalone proposal. Come up with some qualifications and limitations for reimbursing past loan payments, as well as a systemic fix for the future, and I'd be all for it.
All that being said, is it still wise to forgive student loans at this particular time? Originally, the pitch was that it would help act as a stimulus during the pandemic downturn. Now that we're dealing with the opposite situation, I don't see the rush. Maybe a bill could be passed that had a delayed or gradual effect.
Could the current administration please direct attention to Social Security now? That one is going to be huge. Shortly.
Institutions get designed around their mandate. If you're trying to run a school system you wouldn't invent a court. If you were trying to deal with violations of law you wouldn't create a school board.
The federal government's mandate was to manage issues that arise between states and each other, between states and other countries and to a lesser extent, to prevent the states from violating the rights of their inhabitants and its architecture reflects that mandate. Over the years the federal government has expanded in scope far beyond the types of issues it was designed with the intent of managing. Expecting that system to provide decisive action on issues that are outside of what the system was designed for is unrealistic.
“Simple, clear purpose and principles give rise to complex and intelligent behavior. Complex rules and regulations give rise to simple and stupid behavior.”
– Dee Hock
The hubris of creating complex rules to outsmart a problem leads to the creation of yet more complex rules to solve its own shortcomings.
See defined benefit pensions, higher education loans, military benefits, 401k/employer health plan tax benefits. All of these things could have middlemen removed, but they remain to obfuscate costs and who is getting how much of the benefit.
This would give an opportunity for hard decisions to be made, but it’d also discourage anyone new from running in the years up to it. It’d be interesting to see what would happen.
or a revolution
A wise man once told me "The first thing you should do when you find yourself in a hole is stop digging". This is my standard response to the student loan crisis and many others.
Student loans can't be discharged through bankruptcy unless the borrower is permanently disabled. It's entirely possible to end up in default on a loan for a degree you never obtained, paying a loan your entire life, without ever decreasing the principal. Unsurprisingly, this rubs people the wrong way.
Now, the university will stop offering loans for worthless degrees, and they will only give you a loan for things they think you can actually succeed in, ensuring that there is huge incentive for everyone to ensure the student succeeds if they end up needing a loan.
Private cash payments can still be made to take whatever underwater basket weaving major you like, but you can’t go into debt for a degree that will bind you for the rest of your life.
The first is that if the college bears risks for financed students, the first seats will always go to people who can afford to not use financing. It'd be like the legacy system, but out in the open and encouraged by regulation.
The second is that it will likely make it harder to climb the social ladder. I'm too sleep-deprived today to find sources, but I would imagine that students that can afford to not work while in school tend to do better. Likewise, I would bet that wealthier students tend to do better by nature of connections. If your dad/mom is an engineer, and you want to be an engineer, you've already got connections.
It also pushes people towards the military, if the GI Bill is the only way for normal people from poor families to afford college. It's a little dark that wealthy families can pay their children's way, but poor families have to risk them dying to do the same thing.
I like the basis of the idea, I just think it needs a bit more nuance to prevent wealth inequality getting worse than it already is.
Then why is the discussion around a debt jubilee rather than reforming the bankruptcy rules for student loans?
I was pointing out that we already have a legal and moral framework for discharging debts that can't be repaid.
- Interest rates have gone up
- Cost of schools have risen
- The government holds most student debt
- It is still usually a good deal to get an education, but the deal is rapidly becoming less of one (the value of the deal is even changing for people in the middle of education or even graduated)
- The clauses on the debt are getting stronger, being almost impossible to cancel the debt and leading to people never being able to pay off their loans.
- The loans are predatory and becoming more so (when I took mine out a decade ago I had the option to pick "fixed rate" or "variable" but that wasn't actually fixed _interest_ rate)
- Schools are promising scholarships and then not giving them (my school would constantly schedule me for meeting with the financial aid office, a requirement, the week after the deadline and wouldn't schedule me before)
- We're better understanding the major impact on our economy when a generation that is in their prime earnings age is still not consuming and instead paying off debt.
- An educated population results in a happy and effective civilization (especially if one of your main exports is technology)
I think there's a lot of good reasons that people are pissed off. Our generations specifically was told "go to college and you'll get a good job and have a stress free life." But we quickly found that going to college doesn't lead to a good job and we can't get the same things our parents did. Jobs are harder to get, they don't pay as much, and housing is insanely priced. So basically people are pissed about a lot of stuff and a whole messed up system, and most young people are either: in college, avoided it because cost, or recently graduated. Considering that, it is unsurprising that it is a major focus.
Also I should add, some bailouts work. Pretty much what people are saying here is "this has gotten out of hand. You need to bail us out so we can effectively participate in society."
The problem comes down to a simple one and I'll put it in the form of a question (this question generalizes to a lot of other areas too btw):
Is a deal/agreement fair when one side has an elite team of lawyers and psychologists and the other team has a high school degree?
I honestly think this is a question a lot of us, especially working for big tech companies, need to internalize and address. I'm not sure there are any easy answers either, because whichever side you fall on (I'm assuming people will say "{yes,no}, but..." instead of a strict black and white answer) there are nuances that are going to play major roles and tip the scales. I'll hint at my personal answer by saying I agree with Blackstone.
As to the question of "bail us out so we can participate in society" I think that is a little different. I think the problem is that the structure has rapidly changed and become out of hand. Incentives were misaligned. We tried to create a system where everyone could get the means to attend college but that incentivized an environment that creates predatory lending and increased financial obligations (upwards of 1k% increases). There's clearly something wrong with the system. I think many people claim to have the answers but I'm sure these are all far too naive. Something this complicated isn't going to have trivial solutions.
It seems our age of majority is already an arbitrary measure.
Unless students are educated in financial literacy and professional life as part of the curriculum, I'm not sure we can expect them to be making competent, experience-based decisions on the cost benefit of education on a 20+ year timescale.
And that's not to mention that many loan providers use predatory tactics, including the companies that administer federal loans.
> I'm curious to know how these loans became such a political issue. It's unusual to take out a loan and then complain about having to repay it.
Saddling _teenagers_ with such debt is problematic in many ways. For many of my peers they were not ready/cut out for college but still had the debt + schooling jammed down their throats because "it's what you're suppose to do."
Then, there's the cost to quality situation... I got nailed with this one - accredited private college with little oversight with a _horrible_ program for my area of study. We're talking two professors for the entire subject, and most of the courses they had advertised in their catalog hadn't been offered in over _seven_ years. Lots of people's time at school was just jumping through hoops for an "education" with very little value to their eventual career.
Cost has gone through the roof - administrative costs for colleges have skyrocketed. I've worked in marketing for schools - they're businesses before they're educational facilities. They're profit seeking through tuition, grants, donations, etc. Don't even get me started on sports...
> We don't typically reward people for digging themselves into a hole by bailing them out.
They were put through an incredibly profit-seeking system that operates in it's own self interest to get as much tuition as possible. Just like the healthcare industry, we've let administrative costs and middlemen drive the price of an education up while whittling the quality of it down.
100% they were not the only ones digging the hole that they find themselves in. Additionally, I have a hard time nailing 17-18 year olds to the cross for poor decisions in regards to their "digging" activities.
> Unless they're large corporations. We bail them out in certain cases. But I don't think that's a popular idea either.
And, just saying - yes this happens!! We consistently cut breaks to the interests of capital (large corporations, the rich w/taxes). Regardless of how any of us feel about it, this will continue to happen. So if our corporate benefactors are getting help, why can't a citizen with/seeking an education get some help too?
So perhaps the solution involves some combination of 1) raising the age at which someone is considered an adult until it does not end with "teen", and 2) not giving loans to people with no plausible way to repay it, and/or 3) requiring a cosigner who is both older and better funded.
Maybe we take away blanket guarantees for student loans, make them dischargeable in bankruptcy, make the interest rate and borrowing limit based on plausible future income, things like that.
Cost.
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The joke of a school I went to now costs upward of $38k/yr base (not sure what room/food on top of that is). Hell state schools are upwards of $20k a year even with financial aid...
Maybe higher education shouldn't be this expensive across the board so people wouldn't be saddled with crippling high-risk debt while they're arguably still children.
I can tell you whatever the %#%$ I got was NOT worth anywhere near that in tuition... gen-eds were effectively highschool 2.0, and I was learning more in-industry than I was in the classroom at the time for my main area of study.
To think people are getting charged $38k+/yr for that just pisses me off. Even if it was an objectively good education + program - it's still too expensive.
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Also one more thing I want to address in your response: what about economically disenfranchised peoples? If we implement the ideals you lay out I can easily see that being a huge barrier. I personally believe these folks should have access to higher education too - which is why I strongly support things like financial aid, grants, scholarships, etc.
If we make it into a more traditional loan I think it would potentially discriminate against students who come from less-than-ideal backgrounds.
Do some people make bad decisions about degree choice? - Yes
Do some people drop out of school because it's too hard or because of other circumstances (unexpected baby, financial hardship, etc) - Yes
Do those people who either have made bad decisions, had less fortunate circumstances than others, or a combination of both deserve to live under a mountain of debt for the rest of their life? - No
One other thing people don't consider is that Most 18 year olds don't have a good grasp on money or what they want to do in general and in my hometown (poor county in WV) there was a TON of pressure to go to college if you didn't know what you want to do. Kids don't know better to not get into debt for a degree because everyone tells them not to worry about it. There is a serious problem with financial education in the US.
You can help out people who made a bad decision or had bad luck without being so uptight about how everything has to be complete "fair". The world isn't fair from the time we're born till the time we die.
I wouldn't agree that having a "worthless" degree is some sisyphian burden, my SO went into college and has two trash degrees, but also had all of the prerequisite credits to trivially segue into a meaningful career and a masters. Her loans are paid.
I, on the other hand, am in the middle of my post-secondary after toiling 5 prime years away to avoid debt. The proposition that I could've foregone that sacrifice and been toting around a degree and work experience without full time work throughout school, free of charge - is infuriating.
And this is discounting a thousandfold other paths. What about the blue collar parents that clawed their way up to the middle class, ultimately paying their kid's way through school at a relatively great expense? Or the single father who took out a second mortgage to put his daughter through school? Or an infinity of other possibilities that can't be written into a survey?
The system needs fixed first.
I was smart and sacrificed a little by going to community college so I wouldn’t have debt. I was also smart enough to get a degree in stem where jobs are actually available and in demand.
Why should I have to foot the bill for someone who just partied and got a useless degree? I did everything in my power to avoid student loans because I knew they where insane, I shouldn’t have to pay for others student loans because they didn’t think about any of this.
> Why should I have to foot the bill for someone who just partied and got a useless degree?
Because you're a human being and recognise that while here you made no mistakes and had no bad luck, perhaps someone could have done that or had that. It's called decency, and you have it not because it benefits you. You have it because it benefits everyone.
Student loan forgiveness is both unfair and regressive.
> One other thing people don't consider is that Most 18 year olds don't have a good grasp on money or what they want to do in general and in my hometown (poor county in WV) there was a TON of pressure to go to college if you didn't know what you want to do. Kids don't know better to not get into debt for a degree because everyone tells them not to worry about it. There is a serious problem with financial education in the US.
Agreed. I grew up working class in the midwest. The working class kids who went to college generally did fine because we worked and didn't live like we were earning 6 figures. The upper- and upper-middle-class kids were the ones who were getting Starbucks every day, living in dorms, paying for meal plans, going out to eat every other night, working fewer than 8 hours/week, skipping class, majoring in fine arts, etc and financing it all on debt (my wife is in the latter group and she has considerable loan debt that we're currently investing).
Student loan forgiveness will surely help some lower-class people, but by and large it's welfare for the middle and upper classes. It's regressive. https://knowledge.wharton.upenn.edu/article/how-student-loan...
Why does this logic only apply to people who made bad decisions and had less fortunate circumstances or a combination of both only apply to people who did so in the context of taking out student loans? If making bad decisions and having less fortunate circumstances is grounds for student loan forgiveness, why isn't it grounds for credit card debt forgiveness? Or home or auto loan forgiveness?
They tell high school students...people who are legally still children that the most important thing is to go to college. They tell them if they can't afford it, they can just get loans.
And now people are surprised and blame the kids when they do as their teachers told them and rack up 5 or sometimes even 6 figures of student loan debt before they're even old enough to drink.
Fucking stop and pause for a moment and really consider that. Counselors, teachers, and all other high school staff pushing kids to go to college, and then when they do, people come along and tell them it was a bad decision? What?
Bad credit card debt won’t be an anchor around your neck financially until you die. Neither will a bad home loan. Neither will a bad auto loan.
But bad student will likely be with you until death.
There should be a situation where a lender refuses to give a prospective student $125k towards an education that would never result in repayment due to the available jobs from that type of education.
Sure some student loans are going to get discharged and the lender will take a loss (just like with mortgages). But lenders with good enough actuaries are going to price their loans so that they make more than they lose and ideally the worse lenders will go out of business.
They only give it to you if you have a downpayment, proof of income, and they can reclaim the asset if you default on payments.
None of those aspects apply to student loans. What's going to happen is loans will require cosigners and poorer students will be cut off from access to higher education unless they can get scholarships.
Proof of income would require them to have a job which I think a lot of students do (albeit work-study pays less than tuition costs). But is it really too much to ask a loan issuer to do the math on if a student can reliable pay the loan back?
Reclaiming an asset is harder though but its an unsecured loan so by definition there isn't any asset to reclaim.
-- > What's going to happen is loans will require cosigners and poorer students will be cut off from access to higher education unless they can get scholarships.
If the goal is for everybody (or more people) to get an education then it should just be subsidized in a normal fashion. No need to trap people in decades+ of debt. That said, I would suspect you'd see more people getting bachelor degrees subsidized by their jobs instead of just the masters. Which is what the article is really about, a bunch of government employees are having their DOE loans forgiven as the former students have met their end of the agreement.
(trying to understand) How is it any different right now? Students likely to default right now are poor, and may not even be in a position to pay the debt. But the debt still stays active.
One thing I can think of is that the schools should be the lenders themselves. The interest rate should be capped off and the debt should be dischargeable in bankruptcies. This will lead them to deny loans for unemployable degrees.
Student loans are unsecured.
i'm not suggesting terminating the federal loan program either. just make it possible to default to get out of these situations to ensure they are not predatory.
What other loans should the government be forgiving for people's poor decisions? Should the government have paid off all mortgages in 2008? I'd say people that bought in the years or months leading up to the housing crash didn't make particularly bad decisions either, yet I personally know a few different families that never recovered.
Some people drop out, and I agree that those people should have a way to lessen the burden of student debt, but I don't know that people who choose degrees with low financial value should get a free pass more so than people that take on any other particular debt.
...Except for College loans, which are expressly excluded.
Tremendously bad change in circumstances is also enough to push someone into bankruptcy.
Yes. Make loans dischargeable in bankruptcy. I support that. Or make repayment based on income, which is already is, so the burden is bearable. But just forgiving bad decisions? That's not a precedent I think we need to set, especially not until we do something to fix the underlying problem. Otherwise the next bailout will be 10x as big.
Most of the loans in this specific program were forgiven in exchange for at least 10 years of specific public sector jobs. Those jobs usually come with a reduced compensation in exchange for the loan forgiveness.
I have a few friends who went this route as lawyers because they prefer helping out in the public sector instead of doing corporate lawyering stuff or the other options.
They definitely did not come out financially ahead by going this route, even with the massive loan forgiveness.
If next year all new college students get free tuition I'm not going to be upset that I had to pay.
I'm going to be happy that they don't have my burden.
We as a society need to push the next generation up, not complain that they don't have it as hard as we do.
*Free Tuition = Tuition paid for by our taxes.
I oppose student loan forgiveness because it punishes people who were responsible and rewards people who were irresponsible. Moreover, it disproportionately rewards the upper classes who are more likely to have more debt--it's regressive. If we decide we want to help people who are burdened, let's mail checks based on need (whether their need is a result of student loan debt or not) and those of us who are doing fine can pay those checks with our taxes. Student loan forgiveness is just welfare for the upper classes (me included!).
Fixing the current shit show that is college tuition/loan is a completely different problem from the forgiving of existing loans. AFAIK the 1st one has quasi-unanimous support, while the 2nd one is clearly very debatable.
Conflating the two is unproductive.
Obama's big policy success of 8 years was Romneycare. Who can explain with a straight face why California still doesn't have universal heathcare?
republicans don't want to talk about it because it's free money that works, and democrats don't want to talk about it because there's no reason to expand it
Hell, when I went to community college in the early 90’s it was basically free — $6/credit with a $60 cap.
Since then California changed priorities or something, haven’t lived there for almost 25 years so don’t care what they get up to.
The Democrats tried to govern like they had a large majority, when they had 5 (I think) seats in the House, and a 50/50 Senate. Of course it failed! If you need every single vote, you can only go as far as the least-willing member will let you go.
The Democrats never should have tried to govern that way. They should have been coalition building, trying to find some common ground where they could do some things. Instead, they acted like they could dictate their agenda to Congress. Both Biden and Pelosi should have known better; they have decades of experience in Congress.
Why did they do this? You could argue that they did it because they knew that no Republican would ever cooperate on anything. But if that was the reason, they still should have gone for what they could get through the members they had, not going for the moon.
Or you could suspect that they wanted to blame the Republicans (and maybe the more conservative Democrats) for their lack of progress, as a tactic to win the next election. Well, from all the indications so far, that's not working out for them.
So why did they take the approach they took?
> So why did they take the approach they took?
The Republicans set that precedent (trying to govern like they had a large majority). I don't mean that as a "the other side does it too", just that each side has become increasingly vindictive of the other, making it much more difficult to work together when doing so is necessary to get anything done at all. We will continue to see power swaps with the winning side spinning its wheels while shutting the other side out.
For a number of reasons, no doubt. But partly I blame the efforts to remove pork from legislation. We thought that was a good idea, without realizing that it was the basis of compromise. When each little piece of legislation comes through on its own, there is no incentive to compromise, but just play tribal politics instead.
Is it because it's taken on when you're young and unable to understand the risks? If that's the case, I gambled away a LOT of money when I was 22 on casino credit, and I made the mistake of paying off my markers - I should have waited for the "you made a poor decision when you were young" forgiveness train to arrive.
The same could be said for those parasitic $500 "Student Credit Card" offers we all received when we were young, or the kids who decide to finance that brand new Mustang they can't afford at loan shark rates due to no credit history. Why not forgive it all, if the standard is "they were young and didn't know any better"?
And why stop at youth? It's pretty ageist to assume only the young are financially illiterate. There are plenty of older people who make poorly informed financial decisions. Bail them out too? When all the 5/1 ARMs written at 1.6% a year ago for homebuyers barely on the bubble of serviceability reset, we should definitely forgive them for their idiocy as well.
High school is free, for example, and it's not worthless.
That largely depends on the field you're studying. STEM? Sure. Perhaps not for software engineering, because that these days can be entirely self-taught,if you're a person capable of it.
But everything else? Probably worthless. A gender studies or liberal arts degree is not going to make you money.
And is everything else really 'worthless?' Do we not need lawyers? Social workers? Teachers? Tutors? Librarians? Student debt is a barrier to solving teacher shortages, and not everyone is teaching STEM.
> Liberal arts education (from Latin liberalis "free" and ars "art or principled practice")[1] is the traditional academic program in Western higher education.[2] Liberal arts takes the term art in the sense of a learned skill rather than specifically the fine arts. Liberal arts education can refer to studies in a liberal arts degree program or to a university education more generally. Such a course of study contrasts with those that are principally vocational, professional, or technical.
https://en.wikipedia.org/wiki/Liberal_arts_education
Misusing the term is just participating in anti-intellectual propagandizing.
This loan forgiveness is for a very specific subset of lenders who have been making payments for 10 years but not yet paid of the loans. Eliminating loans all together would not have put them or society in a better position, it would just mean that next semester there would be hardly any new students accepted at any higher education and the entire education sector in the US would be bracing for impact and trying to figure out how on earth they are going to continue while their normal revenue disappears overnight.
If anything would be crazy, that would be it.
The current system is far from perfect but it enables kids to attend college regardless of their parents' wealth. Any replacement system needs to enable that too.
We are talking about 18-year-old kids with no assets and likely no income, who have potentially never had a job, asking to borrow thousands of dollars because they believe (but cannot prove) that they will graduate college several years from now and make enough money to pay it back. Any banker who would give them a loan on normal terms would be an idiot.
The only reason this works is that student loan terms are uniquely different from the terms for other loans. That is what makes the risk acceptable to lenders. Change that, and guess what -- nobody gets loans.
To a politican about the only thing better than a vote buying scheme is perpetual vote buying scheme.
Minor nit: The gov't doesn't give the loans, they underwrite & insure the loans.
Drop that guarantee and the interest rate is going to float to more of a credit card level, which will make them prohibitive for funding tuition, which will put an extreme downward pressure on tuition rates.
Getting the DoE into the student loan market was intentional and is seen as the first step to reworking the entire system. Navient et al are keen to keep the gravy train rolling.