59% of Americans worry student loan forgiveness will make inflation worse
cnbc.com
cnbc.com
Forgiving $10K across the board is dumb and mistargeted. $50K would be better but is still mistargeted. What we really need to do is get the unmanageable >$80K balances down to a manageable <$20K amount. It's the 10% minority of borrowers who are really hurting.
In my opinion we should be talking more about years of debt held rather than amount of debt held. In theory, college is supposed to "pay for itself", but if some people are continuing to hold student loan debt 10 years, 20 years, 30 years after college, then college obviously did not pay for itself in those cases.
Democrats refuse to see the problem (if the residents can't afford it, can the rest of us?) and Republicans just hope that if they don't build "affordable housing" the residents will go to some other town.
One angle is that adding more money makes things more expensive. If the money isn't there then people will do with less or do without. People have long been concerned that student loans contribute to increasing tuition and the evidence is accumulating for that
https://www.newyorkfed.org/medialibrary/media/research/staff...
> No one is looking at this problem objectively...
I know it appears that way. But there are 100s of orgs working every single issue from all sides.
It's very, very challenging for these elites (experts) to get any attention. Death of journalism. Everyone's already overwhelmed. There's a zillion issues to care about.
Consequently, most issue central orgs now focus on direct lobbying.
FWIW, I was a serious activist (2004-2012). Media was a huge time sink. In retrospect, I wish we'd just focused on lobbying.
Paul Houle wrote:
> Democrats refuse to see the [housing] problem...
I have friends working on housing issues. Policy people absolutely understand the shape and scope. And the developers I've spoken with (casually, not policy work) do too and have been clear eyed about the situation.
My local party org does dozens of endorsement interviews every year. Housing has long been a hot issue.
The sad truth is that NIMBY has been the norm.
It's a mistake to think "Democrats" are left-wing, or are as "progressive" as we'd hope. Being "progressive" is usually on just 1 or 2 issues. Like a candidate who has been awesome on LBGTQ issues being utterly opposed to upzoning.
(Further, my town now only elects "Democrats". So all the competitive candidates label themselves "Democrat", which has very low predictive power what their actual positions are.)
More surprising to me: > As of March 2021, 23% of the $1.59 trillion outstanding federal loan balance was held by borrowers who were 50 or older, up from 18% in 2017. (Figure SA-12A
Off the cuff, this group seems like the least important to pay off
A lot of them are graduate students.
> Off the cuff, this group seems like the least important to pay off
Why do you say that?
We're now seeing senior citizens get their Social Security garnished for student loan payments! Do you want to see people with a lifetime of student loan debt?
I can tell you from personal experience that you're very wrong about this.
Also law school.
You can find a person for every situation. How many people on this earth have a nickle up their ass this very instant? Also, incentives matter.
shrug. If you're old and not working anymore and have debts you can sell your shit to pay off the debts. If you don't have shit to sell then you're poor. I do agree that debts shouldn't be able to take your income below a certain livable level, but there's some level between liveable and full social security payments, then sure, let people who lived a life of debt drop to the lower bound. There is basically no upside to subsidizing these folks.
There's quite a lot of benefit to freeing young people from debt at the beginning so that they can build up wealth.
*I'm aware a 50 year old person is often not "old and not working anymore"
The other side of the question is, what's the case for having the arts or academia in our society? Would you rather just abolish any human activity that isn't financially lucrative?
Most college kids going into school have no idea what they're going to be doing in the future. There aren't really standard systems in place to help guide them. Even a basic lifetime ROI analysis by major isn't something you encounter organically through the school system, and whether you're lucky enough to have done that sort of evaluation before choosing a path just totally depends on the circumstances of your upbringing or internet browsing.
Our higher-ed system was inherited from Old World elites, and there's probably a case to be made that it's not as relevant to the modern workforce or society anymore, but that's not a very fair thing to pin on any individual degree or student.
Morally, if we've decided that the humanities have any intrinsic worth at all, it stands to reason that we should be feeding the people who practice the humanities. And unless we want them all to be slave-artists, maybe even pay them a livable wage. Maybe the moral failing here is our lack of funding for the arts, or our lack of appropriate valuation at least. Especially in a create-one, share-unlimited-times digital economy of production.
Economically, what societal value is there in an indentured class of artists not making art? Does society really get more value out of painters flipping burgers while their loan sharks muck around in spreadsheets making more money?
Personally... as a tax-paying dev, I would be happy to pay a little more tax if it means people who chose a different path in life got to eat, sleep under a solid roof, and create beautiful things. I don't want to live in a ruthless, hypercapitalist society where human worth is reduced to dollars and bankers determine our destinies.
By the way, most of the greatest artists throughout history never attended college at all.
However, if you're arguing that art degrees don't produce good artists, that's a separate argument altogether. It's a valid consideration, I think. But that's less of a question of "who should pay for education" and more "what is the value of education". I don't know enough about MFAs to comment on that, but I do know that there are many, many majors that don't produce high-income careers. I don't think that should be their goal or metric, personally. Maybe that's valid for trade schools, but society shouldn't only have tradespeople learning industry skills and nothing else.
That's the underlying concern... it's not a strawman, it's the whole point: that morally or economically, we shouldn't be evaluating human productivity on dollars alone.
The problem with blanket forgiveness is "moral hazard". Meaning if you do a blanket forgiveness now people will continue/increase taking out student loans in the hopes they might be forgiven. Also, just because someone has a lot of student loan debt doesn't mean they're in need. Early career doctors, as an example, will have a ton of debt but are going to be a top earner for the next 20-30 years.
I mean I worked full-time through school, raised a family and still managed to finish my BS in 18 months and MS in 12 more a few years later, mostly because I didn't want to end up in debt.
It seems pretty messed up that I've been strenuously paying back student loans to avoid debt, and then the people that partied hearty during school get their loans forgiven because they make piss poor decisions.
This is a straw man.
I graduated almost 15 years ago, and I am starting to think that anyone who graduated more than a few years ago simply cannot comprehend how bad it is to have to pay for school now. Average annual tuition at all 4-year institutions is just under $29k.[0] Real median HHI for the same year was $65k.[1] As a student you simply cannot work enough to pay for school anymore; it's not physically possible. So loans, grants, scholarships etc are a requirement.
Completely unrelated to the math, the idea that everyone with a high loan balance is there because of "piss poor decisions" is not only insulting, but also idiotic. You need to have a pretty impressive lack of understanding about a half dozen or so topics to truly believe that.
[0] https://www.ontocollege.com/average-college-tuition/ [1] https://fred.stlouisfed.org/series/MEHOINUSA672N
Maybe I do have an impressive lack of understanding of a dozen or so topics, but I grew up as the oldest of over 5 children to a single mother who was a school teacher, I spent most of my school time on free or reduced lunch, and was categorized statistically speaking as likely to end up low achieving. So sure there might be mitigating circumstances for some people, but I don't think that we can completely abscond with the idea of personal responsibility.
Further the reason school costs have continued to rise is because the schools know everyone will get a loan for it because the government pumps a bunch of money into just this one sector through the loans, by forgiving loans you are incentivizing a continuation of school's increasing price because they face no consequences for it and will still receive the money they want.
Finally if you aren't convinced by my account, I have a friend currently finishing his degree, he has spent his entire summer laying concrete in the hot sun for hours a day, busting his but to provide for his family and have enough money to finish his degree, so that is currently happening. To pretend that college can't be afforded without ridiculous loan is hokum.
> So the most important follow-up question to all of this is when did you do it? College costs have risen exponentially faster than just about everything other than healthcare, especially over the last 10-20 years.
The only kind of student debt forgiveness that I'd maybe support is the kind that allowed the debt to be discharged in a bankruptcy, then claw back the money from the school. That would create consequences that would incentivize positive changes. A money giveaway would just be a socialize-the-risk/privatize-the-gains perversion.
Do you have an example? Like buying too much house and getting then getting fired from your job?
I suppose the bankruptcy judge could make a determination of the student debt was a major cause of the bankruptcy, and only clawing back the money in those cases.
> Especially if nothing else about the current climate changes, all that will do is cause costs to rise even faster as the school just increases tuition to compensate.
But wouldn't that quickly spiral out of control for the school? If they just increase tuition, then they'd get more money clawed back down the road (assuming it's an ongoing policy, not a one-time program). I'm thinking they'd mainly have to cut costs, dip into endowments, or do some fundraising to fill the gap.
Insult to injury, ITT didn't actually teach students much. At least with the scammy mortgages, you sort of got a house.
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It seems to me the Biden Admin is doing triage, reviewing the student loans very deliberately, cancelling categories on a case-by-case basis.
I have no dog in this fight and only a shallow understanding of the issue. I expect that Biden Admin continue to cancel and reduce the most egregious loans. And then provide some kind of relief to the remaining borrowers who are most pear shaped.
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Our society and government forgives debts all the time. Bankruptcy and bailouts. Crucial to keeping our economy healthy.
I don't see why individual's debts, like student loans, should be treated any differently.
That's a fairly flawed assumption.
Funny how going to the best school that you're talented enough to get admitted to is considered a bad decision. That's fine though, just don't try to tell me that society is a "meritocracy", as opposed to an aristocracy.
The worst decision I ever made was being born to parents who couldn't afford to pay for an expensive education. I'll always regret that.
When I was 18, I had to pass up the opportunity to go to an Ivy League school. I went to a state school instead. Some people might claim that was the "responsible" choice, but it wasn't even my choice, it was my parents' choice. I don't think I was directly eligible for loans at the time; if I was, I might have taken them.
We should also be talking about the federal government's pullback in funding higher education. Public universities used to be the primary route for people to get a higher education.
We need to be talking about WHY college is so expensive.
I'm not struggling at all, but I have zero incentive to make any payments as long as inflation stays where it is and there are no penalties. But then you look at stories like the person mentioned in the article - six figures of student debt, probably at 2-3x my interest rate, with a master's degree working as a secretary probably making $40k/yr.
I'm so conflicted because on the one hand I'm not going to intentionally make a decision that puts me or my family worse off financially; it'd be silly to expect anyone to do that. But at the same time as someone who had a job in school, did work study, didn't go to grad school, all to keep my loan balance as low as possible at graduation, I struggle not to roll my eyes a bit when I read articles like this about someone getting a master's degree from a private liberal arts college that charges $2k/credit then getting a job as a secretary and complaining they can't make student loan payments. I mean.. that seems obvious.
I don't have a problem with liberal arts education - I went to a small private liberal arts college - and I don't think there's necessarily a problem with getting a degree in something that doesn't have a direct track to industry and a six figure job. But it's hard to square all that with even the slightest bit of "maybe think about what jobs you can get after school with whatever you want to study, and change your plans for what school you go to, whether you do work study, etc. accordingly."
What if the answer is "college professor"?
We can't have college at all without college professors, and it's a very long, treacherous road from undergrad to grad school to tenure track to tenure. Many people, perhaps most, get lost along the way. Yet society needs kids to keep trying, or we have nobody at the end.
And we have too many people going to college anyway. Many of them would be happier and better off in the long run if they attended trade school or joined an apprentice program or enlisted in the military. College is an excellent choice for some people, but it shouldn't be the default option.
The problem is universities are for-profit factories motivated by monetary extraction to squeeze their customers for every dime they don't have in the future.
Until students stop paying insane amounts of money they don't have like a credit card and HR departments don't absolutely "require" a college degree for decent jobs, universities will keep finding ways of spending money on lavish buildings ever year or two and keep raising the prices.
We need to stop thinking of it as such. It's a prerequisite for the vast majority of jobs. Which makes it a vital public good that should be run as a utility. We should be running a public university system with the goal and assumption that everyone has a seat at their local university - covered by their tax dollars.
Most people don't belong in college in the first place. It's just a waste of their time, and a waste of resources. I'm certainly not willing to pay higher taxes so that students can goof around and party for 4 years. What we really need is expanded access to trade schools and apprentice programs.
You'd see a huge spike in demand for various things as people would have more money to spend. That said I know a lot of people who were railroaded into college as 17 year old children before they even knew how credit cards worked, got a useless degree because they had no direction, and by the time they wised up were up to their eyeballs in debt and unable to get a well-paying job to pay it down.
I'm hesitant to pile even more inflation on top of what we have already, but if I could wave a magic wand I'd want to forgive a lot of those debts as matter of justice. They were mostly kids who were given false promises by every person and every institution they ever trusted up to 17 years old, and then told to make a decision based on said information that ended up saddling them with a lifetime of irrevocable debt. Society at large should take responsibility for that misguidance.
I thought European universities were bloated, but they look like lean running operations compared to American ones: high quality food, parks, gardens, recreational facilities, sports facilities including personal trainers, courts, etc. It's more like a vacation resort and I think students often end up treating it like one.
Back in my day, the food at the university cafeteria was pig slop and we liked it!
As someone who paid off student loans four years ago, I can tell you that this (at least for my family) wasn't the case. When you have more money, you find new ways to spend it (and enjoy doing so).
That pretty much sums it up. Why should taxpayers (especially blue collar taxpayers, who did not go to college) have to fund a bachelor's and a master's for people that don't choose paths that would likely lead to salaries that can repay?
This is madness. Of course giving away money will lead to more inflation. Covid checks were used for the meme stock bonfire. Giving money to people who can't handle money will not result in anything good.
I mean, you can look it up. Over 90% of student loan debt is now held directly by the federal government (rather than merely being guaranteed by it, as was the case in the past).
The banks don't hold this debt, the federal government does. That's why the federal government can forgive it. That's why the federal government has been able to suspend payments for 2 years. The government can't forgive debt held by someone else.
Source: https://www.investopedia.com/articles/personal-finance/08121...
"The outstanding federal loan balance is $1.620 trillion and accounts for 92.7% of all student loan debt." https://educationdata.org/student-loan-debt-statistics
So yes, banks do hold some student loan debt, but most of it is held by the federal government.
If any other institution ventured to forgive such massive amounts owed, they would be forced to compensate with their budgets, but they don't have monopolies on violence.
The "requirement" of "more $$ education always = good" lowered academic standards, increased costs to individual workers, and made university endowments extremely rich.
Edit:
https://www.businessinsider.com/how-you-get-to-1-million-in-...
https://www.businessinsider.com/debt-vs-cost-vs-salary-medic...
If not, why would we want to reward large amounts of debt? Isn't that a recipe for disaster in a country where the average citizen already has ~6,000 dollars of credit card debt?
That's not to say that student loan forgiveness across the board is necessarily a good idea, but inflation worries is not what we should be considering when discussing this topic.
i.e. "we want people to suffer crippling debt because we are worried about bananas costing 10 cents more"
https://news.gallup.com/opinion/polling-matters/393584/ameri...
https://morningconsult.com/2022/05/18/power-to-control-infla...
Student loan debt at this scale should’ve never existed. It’s a policy failure (but so is a lot of US policy, so ¯\_(ツ)_/¯)
Meanwhile student loan is past decision. As well as paying it back or not. Some people may have lived on noodles to pay it back asap while others took the easy route. Maybe all payments shall be returned too?
Of course, US high education costs are stupid. There needs to be more incentive to guide people towards degrees that will pay for themselves too.
> Some people may have lived on noodles to pay it back asap while others took the easy route.
Indeed, life isn’t fair, and why policy shouldn’t inflict suffering “because it was hard for me.” (broad strokes) That’s not just silly, it’s toxic when expressed as policy.
Some people might think that life isn't fair, thus law shall not be fair either. But other people think that law shall make the world more fair. In today's world, frequently former group ends up :surprised pikachu: when later group ain't happy.
Personally, it's toxic if a law promotes irresponsible behaviour. Choose whatever crappy degree, never mind paying back the student loan... Society will bail you out! Same „too big to fail“ BS, just targeting a different audience.
If you forgive student loans, then those people who went on debt with abandon in expensive universities, expensive cities, and intentionally took out loans more than they can afford, you are giving these people who made bad decisions advantage over people who didn't.
America is about personal responsibility, at least that's my view as an immigrant, that's why I came here.
If you want to make things fair, then just give everyone $80k. Went to college or not. Of course that would destroy the economy.
I care less about being called names like deplorable or NIMBY. It's not like it would change my mind.
While I agree with you, to an extent, you cannot ignore than many young people were pressured into going to college, and going to a 'good school' by the authority figures in their life at the time (be it parents or school counselors).
they were sold the lie that college would pay for itself, and for many it has not.
I got lucky, personally, and don't have much in the way of college debt due to scholarships and such, but my degree is still just a very expensive piece of paper since I have done absolutely nothing with it.
Now I earn more than $250k/yr.
You can get into college without spending insane amount of money. You can also choose a more marketable major.
I show my income only to state that people should major in a more marketable major.
When I was young, drunk, and impressionable, a pit boss pressured me to apply for casino credit and get hosted in Vegas.
Of course, I took out my entire line in markers and lost it all.
If being young is a valid excuse to discharge the consequences of stupid choices, this is great news. I'll be awaiting my check.
Any of you who signed up for those $1000 unsecured "student credit card" offers should be lining up for the gravy train, as well.
Looking forward to teaching my kids that financial responsibility is only for old people, to rack up as much unserviceable debt as humanly possible while they're in whatever government standard age bracket is defined as "young", get it all forgiven, and then start acting like a responsible human being. There's no moral hazard in this line of reasoning whatsoever.
It's not as simple as you lay it out to be.
https://thelastpsychiatrist.com/2012/11/hipsters_on_food_sta... https://thelastpsychiatrist.com/2012/11/hipsters_on_food_sta... https://thelastpsychiatrist.com/2012/12/product_review_panas...
So let's try that first. Eliminate the predatory interest and fees first and see how that works out.
A sudden reduction of debt might contribute to people spending more for the same goods they already buy, or it might lead to more savings and investment as people are able to escape living paycheck to paycheck and start entering stock markets. It might mean they are able to buy goods and services they couldn't before, but those goods might have ample supply.
It's just not as simple as, X therefore inflation.
And that didn't cause any worrisome inflation.
Forgive these kids loans, who were just trying to go to college to learn and gain job skills to compete in the world and are now debt slaves.
Nah. Those kids spent 4 years partying and treating adult life like an extension of high school with no consequences and free rent. I graduated highschool in ‘08, and I can clearly remember wondering how in the hell all of my friends on social media were living the lives they were, as I scraped by working minimum wage jobs in the depths of the recession.
I’m all for forgiving things like nurses and teachers who meet some public service requirements, but the people who spent $100k they didn’t have on a Communication degree can cry me a river.
Trapping students into non-bankruptable student loans is pure debt slavery.
https://www.whitehouse.gov/cea/written-materials/2021/07/06/...
So not sure how you're deducing there was no inflation. The deflationary spiral happened AFTER the bank bailout.
More like the 9th or 10th, but nonetheless I see what you're talking about with the summer 2008 oil spike. The problem with this analysis is that a deflationary spiral is really more about price jerk than inflation itself. In other words, the rate at which inflation is changing is the bigger concern than the inflation rate itself.
> So not sure how you're deducing there was no inflation.
This is a strawman you've entirely made up, so I won't respond to this portion.
> More like the 9th or 10th
I think you just did.
there's a reason traditional societies had jubilees
These are federal loans. The interest rate on these are currently mid-single digits (not accounting for 0% since March 2020). They've been low single digits for the past decade.
This is not usury.
From something special and extraordinary, university education became mundane, expected, requirement. Something you just have to do. Never mind if it's going to give you anything.
In all seriousness. How many graduates do you think society needs? Do we really need people to spend 4 years in school, just so they can sit behind desk and fill forms all day? I'm sorry I don't think we do. And this isn't a take from US btw, this is from Europe. And yes, I am mostly talking about liberal arts.
At this point, the only thing the system works as is a buffer to keep youth from workforce.