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Comment by didgetmaster | Hacker News Reader

Money is fungible. Forgiving someone of a $10K or $20K loan is the exact same thing as sending them a check for the same amount. At least some of them will go out and buy a car, boat, RV, or something else that has the same payment as their student loan and feel (rightly) like the government just bought them a new toy. You can pretend that it won't have any effect on inflation, but it will.

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It’s not exactly the same thing because of interest. Give someone $10k in cash and they can choose to buy the toys and not pay down their existing debt, so they’ll still be paying $500 a year in interest (assuming a 5% rate).

But if you give the $10k to the lender instead, the person now has $500 more to spend every year in addition to having increased their net worth by $10k.

A good example about why interest (usury) is evil.

> Forgiving someone of a $10K or $20K loan is the exact same thing as sending them a check for the same amount.

False. The government isn't holding the note for student loans: banks are. Paying off these student loans goes to a bank's balance sheet whereas checks sent to people get spent on any number of consumer goods (or invested into Wall Street Bets stonks if that's your thing).

It does indeed go to a bank's balance sheet, and it also eliminates a monthly source of income expenditure from a household.

If the interest amount is more than 0%, it may give more income over the course of the loan term for the person with debt than it wipes out at the bank.

The money someone was spending on the loan and interest may very well go to any number of consumer goods, investments, or other items, though.

That's sort of the point of the whole exercise though.

If you take issue with that, then by the same logic you could also argue that any attempt to help a person pay off debt is encouraging frivolous spending - after all, once the debt is repaid, the person has additional income available which they can spend on things.

> it also eliminates a monthly source of income expenditure from a household

> The money someone was spending on the loan and interest may ...

Not in this case. Federal student loan payments have been paused for over 2 years now, people have not been making monthly payments for these loans.

Which, for the past year or so, has been a completely insane policy. The economy is fine other than inflation and the pause is only causing more of it.

> False. The government isn't holding the note for student loans: banks are.

Huh? I thought private student loads were pretty rare nowadays, and most loans are now through the federal government.

Also, according to https://finance.yahoo.com/news/student-loans-not-eligible-fo..., this loan forgiveness doesn't apply to private student loans:

> Private student loans, by definition, are private and are not eligible to be forgiven. These are loans the borrower owes to student loan providers and not the federal government. Mr. Biden's announcement won't change how these are repaid and borrowers should expect to continue to repay them as they have to date.

Imagine your car payment is $600/month. The govt pays off your car, you have an extra $600 per month in the bank to spend on other things or to save.

Why isn't the government paying off my car, then?

Because your car loan was approved based on your credit history.

A student loan was approved on a gamble.

Now the lenders are trying to find a way to guarantee their returns by making everyone else pay.

The precedent has been established with student loans: why not car loans? Why not mortgages? Why not vacations or clothes or food.... or MEDICAL costs?

All of those debts are dischargeable in bankruptcy, those loans were written based on the credit history of the borrower (excl. medical), and some of those loans (mortgages and car loans) are secured with collateral that can be repossessed and liquidated.

None of those things are true for student loans.

Student loans can be discharged in bankruptcy:

https://www.investopedia.com/how-to-file-student-loan-bankru...

> Student loans can be discharged in bankruptcy:

Mostly false. I prepped and processed bankruptcies for two years and I only came across one instance where a student load was dischargable under chapter 7. IIRC, under a Chapter 13, they can be consolidated as an unsecured debt. I only did a few Chapter 13s so I'd have to go back and reread that part.

Then let us collectively agree to revisit and improve those bankruptcy laws, thereby improving our society going forward. Instead, we said that's too hard and skipped over the legislature in a one-time hack.

No it’s not. That’s only true if they already had the money and were going to pay. A lot of people just can’t pay their student loans so this would just have the effect of taking the pressure off them, not enable them to go out and spend money.

It's a mix of both. Some people will have some money they'd be paying towards loans -- even if perhaps not enough to cover their monthly payments -- and that money will become liquid.

With which money exactly? Not the money the government just "handed" to them, that went straight to the debt repayment.

Possibly some would do with income they had already set aside for repayment - if the person in question had enough regular income to have had no problems repaying before, and if they nevertheless fall under the required criteria:

> Following more than a year of internal debate, the president said Wednesday that he will cancel $10,000 in federal student loan debt for borrowers making under $125,000 a year or couples making less than $250,000 a year. In addition, those who receive federal Pell Grants and make less than $125,000 a year would be eligible for total forgiveness of $20,000, Mr. Biden said.

The amount of people falling into that particular bucket seems rather small to me, compared to the amount of people who this will be a genuine help.

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