The Student Loan Giveaway Is Much Bigger Than You Think
marginalrevolution.com
marginalrevolution.com
Colleges have put millions of Americans in indentured servitude and the US government has responded by giving then an even bigger subsidy.
The US Government is the problem - by creating loans 18-year olds can't default on - when hardly any of them understand the consequences.
If colleges don't offer ever juicier amenities, the students will take their debt elsewhere to get a better offering.
Colleges are simply competing for students.
The amount of debt they can get - and therefore the amount of school they can "afford" is the problem.
It is literally risk free money so they're going to inflate the price so that they get the most for least investment and least risk.
We build bankruptcy into debt systems not just to give people relief, but also to take the risk off of people and put them on lenders with actuarial resources.
Then they pay someone else to service the loan after origination.
The (edit: one) meaning of "loan servicing" used to be only (edit: not only) paying - not (edit: also) collecting payments.
https://ahdictionary.com/word/search.html?q=service
3. To make interest payments on (a debt).
IIUC, "service payment" comes from the fact that you are paying for a service - someone is providing you with debt as a service... The debt servicer.
I was aware of "servicing a loan" as "paying the interests". But I've found that the "administrative" meaning also goes back many decades.
Someone should open a ticket.
Without the ability to default - the loans made the situation worse.
Some of that might be undone by forgiveness.
[1] https://studentloanhero.com/featured/student-debt-demographi...
It's almost as if you shouldn't be able to take on near unlimited non-default-able debt for something that is nearly worthless.
These people were put into a debt trap at 18, not saved by the government.
It's also interesting that finance is left out of most high school curriculum right before people are signing up for the second (and increasingly the first) most expensive purchase of their lives.
> The amount of debt they can get - and therefore the amount of school they can "afford" is the problem.
Yeah like, this is another form of a subsidy to colleges.
Imagine if the US government would let you easily get a $200k loan to buy a car.
Or have Fannie and Feddie artificially lower interest rates with a government bailout guarantee so you can get the same house... but pay 50% more for it (total, not monthly payment).
But you can default on them.
https://www.consumerfinance.gov/about-us/blog/busting-myths-...
"For too long, a myth has persisted that student loans are not dischargeable in bankruptcy. The myth is not true because, in fact, student loans can be discharged bankruptcy. We have seen the Department of Education take important steps to ensure that bankruptcy relief is available to federal student loan borrowers. "
* Loan forgiveness creates perverse incentives
* If we can afford to forgive/bail-out X, then we can do student loans
* This punishes everyone who was responsible with their loans
* This is a huge relief to everyone with student loans
* Why should everyone else have to pay for your bad choices
* College should be free anyways, this is that, with extra stepsIt is almost as if there's some motivation other than to allow children of poor families to obtain a college education.
As for the college should be free anyways like it is in Europe, then perhaps we should administer universities like they do in Europe. Only a few select students are allowed to go and they don't provide training leagues for professional sports teams.
I had no idea until just now that it was free. TIL
Terminology is not the same, however.
When I was twenty years old I enrolled at the University of Bern for Computer Science. For that I had to go to preparatory school (Gymnasium) between 15 and 19 years old. It was a harsh school. I learnt the languages French, Latin and English and I had to write essays in German. Then there was geography, math, biology, chemistry, physics, human sciences, programming. Finally there was a round of examinations. 4 hours of math, 4 hours of essay in German, 2 hours of essay in French, oral examinations, etc.
For the university I had to pay about 1000 francs, about 2000 dollars a year for tuition (the conversion rate is somewhat arbitrary because 30 years ago the conversion rate was completely different, so look at this more like a ballpark figure). I was able to pay this myself because I had some odd jobs financing myself. I could live at my parent's the first years then I moved out into an appartment sharing with friends.
This is typical for Europe: students usually are able to finance themselves.
What are you talking about? I went to university in Europe and literally everyone with a high school degree is allowed to go.
Yes the acceptance rates are relatively high, but the fact that they have an acceptance rates for their universities suggests that not everyone who wants to go to university can.
0. https://www.sabonews.org/universities-in-sweden-with-high-ac... 1. https://uscollegeinternational.com/universities-in-denmark-w...
As for training leagues, they still have professional sport teams in Europe right?
turns out i neglected to consider that loan forgiveness could happen without congress. my jerk reaction was fairly negative: not because i had thought critically about loan forgiveness, but because at a certain level i recognized that we just engaged in a very large act of redistribution almost completely outside the democratic process, and it’s hard to move past that mental shock and confront the outcomes objectively and separate from the process.
Imagine this scenario: A loan servicer neglects to adjust the amount a student loan borrower owes based on this action (or views it as illegal and intentionally doesn't adjust it), and bills the old amount.
If the borrower pays the higher amount, they may have standing to reclaim the overpayment under the argument that it was validly canceled. If they are not in the same state as the servicer, diversity jurisdiction might allow this to occur in federal court, and this overpayment is probably sufficiently concrete, particularized, and personal to generate Article III standing.
If the borrower pays the Biden-adjusted lower amount, then debt collection efforts may start and there may be a credit report impact, when with correct servicer implementation of the cancelation no debt would be sent to collections. There are all sorts of opportunities for standing to be created here, such as if a federal or state debt collection statute is violated by the servicer or if the borrower has another financial consequence (like a refused or higher-rate mortgage) from the inaccurately reduced credit score.
If any of this manages to land in state court, standing requirements can constitutionally be weaker anyway depending on the requirements of the state constitution.
So, we'll see, but it can probably be tested in the courts somehow, unless the Administrative Procedure Act rules somehow preempt any other lawsuit at all from using "Biden's action was illegal" as an argument in the service of some other cause of action.
Colleges are going to be looking at this and deciding they can charge whatever they want - no one is ever going to have to pay it back. Whatever limits are in these laws (sorry, rules, this isn't a law), they will charge up to those limits, whatever loopholes there are in these rules, they will find them.
Take a look at how law schools are working the existing loan forgiveness programs. That's going to be every college now. I'm too old to switch careers, and I'm not a psychopath, but this makes me want to completely drop any moral scruples I have and get into the education fraud business. People are going to get filthy, and technically legally, rich.
Unfortunately, employers have decided to favor degrees from research universities in their hiring decisions, which creates an enormous demand for such degrees.
A lot of people want to blame government-backed student loans for the problem, but that's looking at it only from the supply side, not the demand side. If university degrees were no longer advantageous for employment, then the demand would drop off massively.
There's still a general question of whether it's a good idea for the populace of a democracy to receive a university-level liberal arts education. (I would say yes, and it should therefore be subsidized by said democracy.) But I do feel that industry should take a lot more responsibility to subsidize job training. (For instance, [rhetorical question] how much are the big tech companies paying to fund the computer science degrees that they demand for engineers?)
Everybody knows that college degrees are expensive. Especially degrees from prestigious schools. Employers know it. So when employers favor college degrees in hiring, especially degrees from expensive prestigious schools, then employers are effectively discriminating by personal or family wealth. (I suppose a lot of this is "works as designed".)
I find it (morbidly) amusing that many people in STEM say "We need more people studying ethics", yet the people who actually did study and teach ethics are considered to have made a "poor choice" and deserve no sympathy from society.
I would not expect to see allocation of government funded admission slots to top private colleges based [solely] on performance-based assessments, because it’s too much equality and not enough equity.
That’s not to say it wouldn’t be a brilliant idea to let kids earn free slots into college. The last time we did it though, they had to earn those slots in Vietnam.
I like this idea. It seems that university degrees are a dime-a-dozen these days, and are not necessary for most jobs, just a weed-out requirement.
If universities have to cosign, then they'll probably accept less students, be more stringent on kicking them out, and possibly reduce the bloat and rising tuition costs.
If less people get accepted into college, more will probably look at trade schools.
Universities will have to take a more active role in making sure their graduates get jobs, and that the loan payments (tuition cost) is low enough and an attractive enough option to be payable.
It's not about worthiness per se. More than 90% of student loan debt is held by the federal government, and that's why the federal government has the ability to forgive student loan debt. The federal government doesn't have the authority to forgive other debt.
This is being done by executive order because Congress is largely gridlocked, so executive action is pretty much the only action in town (Washington).
But over 5, to 10, 20 years - the payoff is immense.
Education is an investment in the future. It's a rising tide that lifts all boats - or it ought to be.
Instead, we seem to have a networking event for the wealthy; a decades-long spirit-crushing grind for the middle-class, and a dark, dismal carrot for poor people to join the US military.
Over 40 countries around the world offer free post-secondary education. But in the world's wealthiest country, we have the worlds most expensive education and the world's highest "college debt".
It's a sign of how brainwashed we are that this is accepted as normal. Why aren't we moving towards free-as-standard college as a goal?
Instead, we have shrieking hypocrites, apoplectic at the idea that anyone other than a bank or military contractor might get a bailout, mere months after collecting their PPP cheques.
Education should be subsidized anyway, it's in our best interest. Education is an investment in America's and the world's future. Education opens the door to dreams becoming reality, and is the backbone we rely on to make progress as a civilization.
I'm not satisfied with the status quo that any of the politicians are pushing in the states. This is one area where Germany is leaps and bounds ahead of us - they subsidize it almost 100%. Chasing money for the sake of money is stupid and ultimately yields nothing of lasting value.
Talk about "thinking of the children", this is one case where I'd hope we can all agree: the children of today all deserve access to a good education and should be able to ascend as far as they desire in academia. When the rest of us grow old and useless, it's in our own best interest to ensure the kids of today are as capable and intelligent as possible, so they have sufficient resources to care for us. Social security, as it stands, is a terrible and unsustainable plan.
Education is subsidized. The question is whether 17 years of subsidized education are going to get you significantly better results than 13 years of subsidized education, as in enough to justify the costs.
Higher education (college+) is where the big ROI can be obtained. It doesn't take much education to flip burgers or do other jobs that don't require an advanced degree.
- federal government covers 2 years of community college for every citizen
- federal government covers 75% of tuition for in-state college if the states pick up the other 25%.
i’d say both of these are publicly funding higher ed. i assume they were too large to tackle politically in one go. i’d guess we’ll see a more meandering path toward that goal. maybe this takes 30 years. maybe this parallels Obamacare. i wish the incremental changes were less messy, but US politics just isn’t ever that clean.
We'd love to. But the people on the other side of the aisle want to drown our government in a bathtub, so it's really hard to get meaningful improvements made.
I certainly applaud the effort, however I feel like greater education and predatory lending reform could have prevented the need for this in the first place.
Unfortunately, it will never happen. The same people who despise the premise of student loan forgiveness also despise the premise of government interfering with the student loan markets. The only reform they would accept is removing loans altogether, so that only people who can pay full cost out of pocket (the wealthy) can afford education. They certainly don't want education to be cheaper or, heaven forbid, nationalized.
And if anything, populr backlash against this from the right is only going to harden the resolve of those people to resist further reforms.
- gov should not forgive loans but should instead pressure universities to fund tuition via their endowments.
Why not both? If it's admitted that tuition is too high — "pressure universities to fund tuition via their endowments" — then doesn't refusing to forgive loans entail refusing to help the students who suffered from tuition being too high?
from the viewpoint i cite, the students you're referring to were helped -- the loan programs were created with the express intent of helping those very students.
if you claim these student weren't, in fact, helped, then that suggests this loan program is ineffectual. forgiving a loan (on a continuous basis*) has the same effect as increasing the size of these loans from the vantage point of the universities which receive student payments: students are willing to pay $c future servicing costs to attend school; the effective borrowing amount serviceable by $c increases; tuition increases to match (or rather, it in proportion -- roughly 50% per the article).
so, does our current loan program benefit students? if "yes", then i fail to see the inequality: yesterday's students got high tuition cost but high loan benefits; tomorrow's students (in the framework where we focus on reducing tuition, without forgiveness) get discounted tuition but lesser loan benefits (on account of making less use of the federal loan program). if "no", then why would you want to expand the loan program at all?
*it's unclear to what extent a one-time loan forgiveness will increase the amount of leverage universities have in raising tuition. however, the framework you present around fairness suggests that we offer this same loan forgiveness to all future generations of students, so the effect is similar.
> tomorrow's students (in the framework where we focus on reducing tuition, without forgiveness) get discounted tuition but lesser loan benefits (on account of making less use of the federal loan program)
lesser loan benefits... you mean, they don't have to borrow as much???
I think that anyone given a choice would be one of "tomorrow's students". It's not even a tradeoff, with pros and cons. Lower tuition is all pro, no con.
this is true more generally, though. if we're on a path of progress, then life is better for each successive generation. the previous generation should prefer to have been the future generation. so i'm not sure shaping the answer to this "would you prefer to be yesterday's student or tomorrow student" to be a 50/50 is the right way to guide policy, though that could be an interesting philosophical rabbit hole.
> doesn't refusing to forgive loans entail refusing to help the students who suffered from tuition being too high?
i was focusing on this point. we did help these students already -- that's what this federal loan program was trying to do. we invested some resources into creating and operating the program, and it led to some outcome.
so what do we owe each generation? i would propose: we invest similar resources into the educational system during the next generation as we did the previous generation. if we do this right, that investment means better, cheaper education for the next generation. if we lower tuition and (in doing so) lower the loan benefits, that's akin to making a similar investment.
yes, this means the next generation gets more effective "help" than the previous generation. but they don't necessarily get more investment. the costs are the same, but the outcomes are better. that's fair. that's progress.
Did we? I would say that we did a disservice to those students by raising tuition at a rate vastly more than inflation. The result of this disservice is that those students had to borrow more for college.
I don't agree with painting that situation as "helping" them. Helping them would have meant keeping college affordable, rather than letting costs get out of control.
Given that college costs rose, having more loans available is better than nothing. But again, "more loans or nothing" is a false dichotomy.
You can be "helped" and screwed over at the same time. In fact, you might not have needed "help" at all unless you got screwed over first.
> life is better for each successive generation
It's not clear that this actually happened. Successive generations of college students are getting more and more debt for the same amount of education. Inflation is not progress, despite the fact that something (cost) has moved upward.
> It's not clear that this actually happened.
i'll accept that, in the context of higher-ed. so the path forward? break this trend. address the structural issues which are causing higher education to become less affordable to each successive generation. of the (false or real) dichotomy in "why not both [decrease tuition and forgive outstanding loans]", escaping the cycle is the more substantial component.
so, "why not both"? treat the two propositions as perpendicular: reducing tuition benefits many future generations; forgiving loans -- if tuition is really being reduced -- benefits only the one generation.
assume tuition has been reduced. on what grounds should we then decide to forgive outstanding loans? i read you as presenting something of a justice, or outcome-based argument. like, "we should direct resources to the previous generation because they got a raw deal in comparison to the earlier generation and (if things go well) the future generation." if this comes at the expense of the surrounding generations, then i don't take this fore-granted. i take the view that investment between generations (loosely: the middle-aged investing in the youth, and the youth being indebted to that generation as they age) should remain more or less constant. i don't believe that any one generation having a bad outcome makes it right for them to place a debt on the following generation.
so this "debt" claim: if we "forgive" the previous generation's loans, what does that mean for the next generation? it's effectively socializing the debt: moving it off the individuals and onto the country. the country gets less revenue into the future, which means higher deficit and funds need to be raised elsewhere into the future (i.e. taxing future generations more).
then what approaches do we have to right things for the previous generation of graduates without indebting the future generation? we would need a wealth transfer either from (a) the generation who was in power during the tuition increases or (b) an intra-generational transfer strictly within the generation which got a raw deal. (a) is risky because it disrupts retirement details for that older generation. (b) misses the point that the bad tuition policies had widespread effects within this generation that's experienced them. John's federal loan increased Mary's out-of-pocket tuition cost. now you want Mary to compensate John for that? and you want those that didn't even attend school to shoulder this? how is that fair?
who, ultimately, benefited because of the increased tuition costs? where did that money go? much of the increased tuition that John and Mary both paid went into university endowments. if it's right to compensate John for the raw deal he got, the least-bad place to raise those funds is from the university endowments. these endowments are often rationalized as being the funding source for future students -- though in practice this is dubious. so, force these endowments to actually be used to decrease tuition for the future generations. having done that, i'll grant that whatever excess these endowments have beyond what's necessary to fund future generations could fairly be redirected to paying down the loans of previous students.
> Why not both? If it's admitted that tuition is too high — "pressure universities to fund tuition via their endowments" — then doesn't refusing to forgive loans entail refusing to help the students who suffered from tuition being too high?
alright, we can do both. but where the money comes from matters, as does the ordering. intra-generational transfers don't make sense because the harm was widespread. and we can't take more from the future generation to make up for mistakes of the past. if you want both, you have to thread this needle (i hope these endowments are large enough).
apologies for the long comment. you seem engaged in this issue (i appreciate that), so i hope it was worth the time to read.
Not really. I don't think we need a justification to help people who need help. I just think it's wrong and harmful to society for a bunch of people to be saddled with a lifetime of debt. (It's not great for the economy either.) If we care about this issue, then it would be weird to help one group of people but leave out another group of people who have the same problem, college affordability. You ask what's the justification for helping people who are already indebted, but I ask what's the justification for excluding them from help?
I don't think it's particularly useful to think in terms of "generations". In every age group there are people who are rich, people who are poor, and everything in between. The rich kids of every generation have no student loan debt.
> alright, we can do both. but where the money comes from matters
Yes. But this is not a matter of age, it's a matter of wealth. We have progressive taxation, so the people who benefit the most from our system pay the most taxes. Whether that's intra-generational or inter-generational is largely irrelevant. I'm fine with taxing university endowments.
I'm not ok with leaving anyone behind. I don't think we should write off any generation, allowing older people to suffer while only improving the lives of younger people, for the sake of so-called "progress". I'm not talking about "righting past wrongs", for the past can never truly be undone. I'm just talking about making everyone's lives better. After all, discriminating against older people is just discriminating against your future self. Someday you'll be the generation that many people want to write off and ignore.
this is a noble cause. like many, i have causes i'm passionate about, to which i donate my time and money. but it's quite a different thing when i force everyone around me to prioritize my own particular goals. why don't we take this $500B of canceled debt and direct that into supplying mosquito nets to malaria-prone regions of the world instead? obviously, that would help more people, and more significantly, than wiping clean our own debts.
"strawman", i hear you say? it's only a strawman if you deny utilitarianism and admit that our opinions on how to do good in the world are allowed to vary. at which point: why should you get to force me to act toward your good at the expense of my own good -- or vice versa?
there's room in this approach to governmental funding for a social safety net: a thing which is not so much about doing good in the world as ensuring some base level of living which secures the continuation of society in the broadest of form. at which point, this loan issue is only tangentially related: nobody should be forced onto the streets because they can't make their student loan payment. nobody should be forced to choose between feeding their family or paying their loan. i am happy to pay my dues into a system that guarantees these things; but forgiving loans to anyone making < $125,000 is doing way more than this.
i don't want to be what-about-ist, but i do want to illustrate that there are real tradeoffs. i pay taxes equivalent to 3x my living expenses. it's a relatively frugal lifestyle, with roommates, home-cooking and no travel. after 5 years, i'm half-way to being able to own a starter-home in the city i grew up in. you say we have progressive taxation (last year i reached the social security contribution limit for the first time in my life, actually decreasing my effective tax rate), but this is still a nontrivial burden for someone who really hasn't secured his own future yet. over the years i had worked my way up to donating 5% of every paycheck to EA causes. i canceled these recurring donations two months ago as my living expenses and the cost of the home i'm saving for both rose. quite literally: inflation correlated to public/deficit spending led me to cut my own charitable donations.
i want to do good in this world, much as you do. but there's a give-and-take everywhere you look, even if it's diffuse or hard to identify. you can only solve so many social ills via compulsory redistribution until you inadvertently worsen other things. this is why i so heavily favor spending which fixes systemic issues (with the opportunity of benefiting untold generations) over one-time transfers which divert resources from unknowable pursuits toward temporary patches. i looked into my own university (University of Washington), by the way: their endowment is large enough to cover -- by very rough estimate -- about half of tuition in perpetuity; but not enough to refund their graduates.
1. Again with the false dichotomies.
2. The total debt only exists as an abstraction. That money is not directly available. If it was, then the debt would be paid off! In fact many student loan debtors were in default or income-based forbearance before the 2020 pandemic suspension of payments. In 2019, student loan payments were $70 billion per year, which is only 4% of the outstanding debt. https://slate.com/business/2021/03/student-loan-total-annual...
> why should you get to force me to act toward your good at the expense of my own good -- or vice versa?
I feel that you're steering into some grand philosophical debate about the existence of government itself that's not directly relevant and specific to the student loan issue.
Keep in mind that universities themselves have always been heavily subsidized by governments in various ways. Universities as we know them wouldn't exist without the government, and there wouldn't be student loan debt without universities, so in a sense the debt problem is of the government's own creation.
You say you support keeping tuition low, but that involves massive, permanent taxpayer subsidy, of the kind you don't seem to like.
> you say we have progressive taxation (last year i reached the social security contribution limit for the first time in my life, actually decreasing my effective tax rate)
I didn't say that all taxes are progressive. FICA definitely is not, and I'm not a fan of FICA.
> their endowment is large enough to cover -- by very rough estimate -- about half of tuition in perpetuity; but not enough to refund their graduates.
I'm not sure what "refund their graduates" is supposed to mean — full refund of all tuition ever paid by every attendee? — but it sounds like much more than necessary to ameliorate the student debt problem for current debtors.
> Again with the false dichotomies.
i don't know how you dismiss this as a false dichotomy so quickly. i went on to present how i experience this dichotomy in my own life. we do not have limitless resources. therefore whenever we direct resources toward one thing, we are implicitly directing resources away from other pursuits.
if student debt cancellation literally did consume only trivial resources, then yes, this wouldn't be a dichotomy. however on the surface, it's $500B; when you factor in debt that was already in default like 3 years ago, it decreases a bit but still in the 11 figures. if you're an economist with a goal, you can swing the data to present changes in the overall economy in whichever direction you want; the (often unstated) error bounds on those grand predictions are often too massive to be useful.
> In fact many student loan debtors were in default or income-based forbearance before the 2020 pandemic suspension of payments.
what about this related talk around bankruptcy reform? this is far less expenditure, visibly so with just a glance: if somebody is literally unable to pay their debt, then the lost revenue due to canceling it is trivial. whatever forecasting you use to back this up touches far fewer variables/uncertainties than the broad economic forecasting people do around this debt forgiveness program. you just sum the probability that a person in default could recover in the timespan of their loan (for which there are hundreds of thousands of reference points) multiplied by the value of that loan. i could vet their model in an hour.
bankruptcy reform would help the people who have it the absolute worst, and it helps not just this year but every year for as long as such a policy stays in place.
> You say you support keeping tuition low, but that involves massive, permanent taxpayer subsidy, of the kind you don't seem to like.
you're right that i prefer directing subsidies into investments rather than servicing costs. i.e. subsidize developments which will lower the cost of tuition indefinitely, v.s. continuous payments which will never get smaller. examples of this are online/open courseware. the stuff out there today is good enough to replace the instruction portion of the first 2 years of my EE studies: a sizable chunk of overall tuition costs, if we made use of it. it used to be that access to lab equipment was reason enough to pay high tuition as a EE. but if i look at every piece of gear i used during my studies, i could recreate a suitable lab for < $2000 today, all COTS components. in theory, the reduced lab expenditure due to technological improvements should have reduced the actual cost of a EE degree during this time.
i'm not against non-investment subsidies altogether. for example, primary school where it's as much about socializing kids as it is academic, is naturally labor intensive: it's hard to imagine any way out of paying one instructor per every 20 (or 15, or whatever) kids, every year. some amount of this applies to higher-ed, but the floor is lower: there's more room us to decrease the recurring subsidies by shaping them such that they cause an equivalent education to be less expensive each year.
for the university case, tuition has risen in the face of the two deflationary technologies i showed above (which on their own, should have decreased the cost of an equivalent education). and hence it's not obvious that increasing tuition subsidies is a pragmatic approach to addressing the complaints i hear about our educational system. how much of these subsidies serve to encourage universities to scale their academic programs to support more students, v.s. how much serves to encourage universities to build cheaper, but non-beneficial programs (i.e. degrees which are cheap to provide, but don't lead to occupational paths) or even straight to the endowments?
i don't think blindly increasing tuition subsidies is a great way to better our situation. at least, the mood over the last decade is that this hasn't helped. i'm hopeful of income-share agreements. the public perception of higher education at this point is that people expect it to lead to good careers, and students are upset when this hasn't been the case. conditioning the university's revenue upon the quality of the career they enable for a student is one way to encourage this outcome. the federal loan ISA option doesn't actually do this: universities get the same revenue regardless of how better off the student is. make the ISAs an agreement between the student and the university. if it's a 10% ISA, the federal government could offer to cover half of that for the student, effectively lower the burden on the student to 5% of their income. if we're only recovering half of the loan payments today, this is effectively the same cost to the federal government, but better aligned so that the university actually produces good outcomes for the student (these figures are made-up: adjust the numbers as appropriate before doing this in practice).
>> their endowment is large enough to cover -- by very rough estimate -- about half of tuition in perpetuity; but not enough to refund their graduates.
> I'm not sure what "refund their graduates" is supposed to mean — full refund of all tuition ever paid by every attendee? — but it sounds like much more than necessary to ameliorate the student debt problem for current debtors.
the point here is that the endowments aren't large enough to both make higher-ed free to future students and compensate previous students. there's necessarily a trade-off between the two.
Taking any two arbitrarily chosen things in life, such as student loans and mosquito nets, and making us choose is a false dichotomy. We could have both. It's true that we can't have everything, "we do not have limitless resources" as you say, but there's no inherent reason why we couldn't have both of those two arbitrarily chosen things.
Moreover, the amount of resources availabe is also a choice. We could raise taxes (we cut taxes massively a couple years ago). We could reduce or eliminate tax deductions. And of course we could reduce spending in other areas to compensate. To choose one example arbitrarily, the US spends vastly more on military and police than any other country in the world.
> what about this related talk around bankruptcy reform?
Yes, we should allow student loan debt to be discharged in bankruptcy. But that's not a solution to the problem, it's a last resort. Declaring bankruptcy sucks, and can wreck your credit, making you unable to make other important purchases. If declaring bankruptcy were that great, then everyone would just wildly accumulate debt and then write it off. Why wouldn't you?
The purpose of student loan forgiveness is to take a huge burden off the debtors. But bankruptcy is itself a burden. So you're just replacing one burden with another. Sometimes necessary, but still bad.
The only effective difference between student loan forgiveness and student loan discharge in bankruptcy is that in the latter case, you're making life more difficult for the debtor. In either case, the loan holder doesn't get their money back.
> primary school where it's as much about socializing kids as it is academic
So is college. Arguably, who you meet at college is more important than what you learn. This is why people want to go to highly prestigious schools, because you're surrounded by rich and powerful and influential people. Note that Mark Zuckerberg and Bill Gates both dropped out of Harvard — they didn't even get an undergrad degree!
There's not much evidence that what students learn in the classroom at Harvard is significantly different than what they learn at any other school. Math is math, science is science, literature is literature, etc. The point is to go to Harvard, to be at Harvard, and to have Harvard on your résumé. It's mostly social. The exclusivity is the point.
> for the university case, tuition has risen in the face of the two deflationary technologies i showed above (which on their own, should have decreased the cost of an equivalent education).
One thing you didn't mention though is decreasing government funding for colleges, at both the state and federal level. It's not the case and never been the case that tuition covers all operating costs.
> endowments aren't large enough to both make higher-ed free to future students and compensate previous students
You still haven't explained what "compensate previous students" means.
My feeling is that making higher-ed free to future students in perpetuity is the much more expensive proposition than forgiving some debt to former students, so if there's enough money for the former, it's unclear why there's not enough for the latter.
yes, we can apportion resources from one area of society for another. this doesn't create new resources: it moves them. instead of me donating 5% of my paycheck to my favored cause, that spending power is erased by the resources which were redirected to another cause (this is the point of me sharing that personal example earlier).
> The only effective difference between student loan forgiveness and student loan discharge in bankruptcy is that in the latter case, you're making life more difficult for the debtor.
not all whose debt was forgiven in this act were in default or incapable of repaying. otherwise, agreed.
> There's not much evidence that what students learn in the classroom at Harvard is significantly different than what they learn at any other school. Math is math, science is science, literature is literature, etc. The point is to go to Harvard, to be at Harvard, and to have Harvard on your résumé. It's mostly social. The exclusivity is the point.
what's constructive about subsidizing an exclusive-by-design system? i don't want to subsidize anything which is fixed-sum. subsidized schooling makes sense to the degree that the subsidy enriches society (loaded term but e.g. more freedom/ability to pursue the things which enrich a life and the lives around you). university as job training is the crude/direct way this happens; learning skills/knowledge relevant to any participation in society achieves this (e.g. communication, collaboration, organization skills); acquiring wisdom does this, in a cloudy manner difficult to measure. making social connections can do this, but if exclusivity is important to that then subsidies can't improve that, and if exclusivity is unimportant then we have loads of cheaper ways in which to congregate and make these connections. my state already offers effectively free community college: i assumed the depth/breadth of the curriculum were insufficient compared to more expensive universities, but if this turned out to be either false or irrelevant then i would claim that existing subsidies to higher-ed are already sufficient (at least in my state; i don't know about the rest of the country).
> My feeling is that making higher-ed free to future students in perpetuity is the much more expensive proposition than forgiving some debt to former students, so if there's enough money for the former, it's unclear why there's not enough for the latter.
without doing the former, the latter has to be done every 4 years (and if forgiving loans today causes future students to take on greater amounts of unrepayable loans, then this gets more expensive every time we do it). it's the "why not both" question again: if we had the resources for both, sure (or, refining this after earlier points of discussion, "if we could do both for a reasonable cost"). if we don't, then it's a question of what proportion we allocate toward improving the long future v.s. patching the narrow present. i simply put more value on an expenditure which can benefit N*M future students v.s. one which benefits only M present (or past) individuals at an equivalent cost. especially if improving things for the M present individuals has a real risk of making the situation worse for N*M future students.
Yet another false dichotomy. Is there a reason you can't continue to donate the same amount of money to your favored cause even if your taxes were raised? You already said that you made more than $142,800 last year (the social security contribution limit), and it appears from your profile that you're still in your 20s, all of which suggests that you're doing better financially than most people.
Let me go back and disagree with something you said earlier:
> inflation correlated to public/deficit spending led me to cut my own charitable donations.
Current inflation is mainly due to: 1) Supply chain problems caused by the pandemic 2) Supply chain problems caused by the Ukraine war 3) Corporate profiteering under the cover of 1 and 2.
It's truly bizarre that people think pandemic relief funds are the cause of inflation when pandemic relief funds were only a partial replacement for the money that was already moving in the economy before the pandemic hit.
Anyway, returning to charity, there are multiple problems with relying on uncoordinated charity rather than concerted government spending. First is that there's never enough charity if it's voluntary. My favorite thing as a developer is when people suggest that I should make my software open source and free and take donations. That would be the fastest way to homelessness! At which point I would need even more donations.
Another problem is that people tend to want their small individual amount of charity to go to the "worthiest" cause (as they perceive it). The result is that certain "sexy" charities are oversubscribed, while other important societal problems get ignored.
> what's constructive about subsidizing an exclusive-by-design system?
Nothing. But tell that to employers who require or favor college degrees from prestigious schools.
Even if we abolished the whole university system, though, the existing student loan debt problem would remain.
> if forgiving loans today causes future students to take on greater amounts of unrepayable loans
It's worth noting that the biggest supporters of student loan debt forgiveness also tend to be the biggest supporters of publicly subsidized college. The opposite tends to be true of the biggest opponents of student loan debt forgiveness. So I'm not very sympathetic to complaints that forgiving student loans would raise college costs, because the proposed alternative seems to be: do nothing whatsoever about the problem.
Everyone complaining about debt forgiveness now, are they calling for their elected representatives to do something about college costs? Where have these people been before the forgiveness debate?
The very reason we need debt forgiveness now is that we've ignored the college cost problem for so long. So I don't want to hear "no forgiveness without comprehensive reform", because the refusal to do comprehensive reform is the source of the whole debt problem.
> i simply put more value on an expenditure which can benefit N*M future students v.s. one which benefits only M present (or past) individuals at an equivalent cost
N, M, N times M, there are all empty hand-waving. You still haven't said what you meant in specific terms by "compensate previous students", and thus it's impossible to estimate the costs or claim that it's too expensive.
i can donate the same amount as before if i decrease the rate at which i'm saving for a house. this tradeoff exists, will always exist, and is influenced by outside forces (taxes, inflation). that's the point.
> Current inflation is mainly due to: [...]
which is distinct from saying that state spending does not contribute to inflation.
the rest of your points... i could respond but i don't see any path to resolving our disagreements. from my perspective you seem unwilling to admit an environment where distributing resources toward one purpose necessarily means redistributing them away from some other purpose, whereas i'm solidly convinced we don't live in the post-scarcity society. you suggest that individuals aren't to be trusted to distribute funds toward socially-good destinations (charity), yet i see a single individual bypassing the peoples' elected congressional representatives and doing just that.
i expect you would dispute this characterization (as someone who shares a democracy with you, i would hope you dispute it), and that i would dispute your characterization of my views, and that we would get bogged down there just as we are here. i have no reason to doubt your intentions, but there seems to be a large gulf between us and i'm getting the feeling this medium is ill-suited to the task. but it's good for other things, so please enjoy this photo of a very special cat as my parting gift instead: https://uninsane.org/share/captain_the_cat_in_a_box.jpeg
Of course. However, note that people with large student loan debts are also facing a tradeoff between paying for student loans and other things in life. In some cases, student loans can be like a mortgage. And many of the debtors are making less money than you (the current plan limits forgiveness to individuals making <$125K, and the claim is that ~90% of the beneficiaries make <$75K). The less money someone makes, the less able they are to successfully handle financial tradeoffs.
> from my perspective you seem unwilling to admit an environment where distributing resources toward one purpose necessarily means redistributing them away from some other purpose
This is not true. I've already suggested cutting spending on the military and police and raising taxes on the wealthy as two possibilities for redistributing funds.
If you want your tax money to be used to pay other people student loan, be my guest, while you are at it, pay their mortgage too.
Don’t force others to do it.
Biden is a tyrant puppet, no difference than president orange loompa. Both are criminals. But I’ll vote for oompa loompa rather than student loan forgiveness.
Your comment seems to come from a place of anger and envy rather than a genuine concern over government spending.
In recent history, the US government has allocated hundreds of billions, if not trillions of dollars to bailing out various industry sectors.
To me, as an outsider, it seems completely reasonable to take the load off of people who are trapped under the weight of their student loans. In my humble opinion, the deciding factor for this kind of intervention should simply be whether it has a good chance of having an overall net positive effect on the society overall - a complex combination of factors that should include 2nd and 3rd order effects such as positive impact on mental health.
"I suffered so you should suffer too" seems like a generally unproductive and harmful approach when it comes to politics.
Why draw the line here? What makes this different from every other government handout, apart from the fact that this time it's regular citizens receiving the benefits rather than corporations?
Also let's avoid the whataboutism, it is disgusting when corporations are bailed out too.
So aside from the giveaway, Biden’s EO has also sweetened the deal on the public service loan forgiveness program by lowering the percent of income you pay, raising the income exclusion, lowering the interest rate, and increasing the type of loans that qualify.
What schools have figured out is they can charge atrociously large amounts of tuition and it doesn’t matter anyway, because the student is only ever going to pay a percent of non-excluded income for a certain number of years and then the rest goes poof.
There is apparently no limit to how large the “poof” can be at the end of the 10 year income-based repayment period. So they charge several hundred grand for tuition because YOLO (You Only Loan Once).
But it’s even better.. schools will even make a side hustle agreement to pay your income-based payments for you if you let them charge even more. Apparently they do it so often there’s even a name and acronym for it!
But it’s even better, because you can also tack on “living expenses” onto these loans so go big or go home! Actually the article suggests students go big by renting an expensive home and then subletting.
So great that this toxic policy is even driving up rents!
I mean it’s money-funnels like this that when VCs or negative-margin startups, or crypto-bros do it, everyone can see how market distorting and insane it is. Now it’s the Federal Government doing it, and you know they just print at much as they need of the “dollar” thingies…
Maybe when milk is $10 a gallon and college tuition is $50k a semester and apartments in college towns rent for $8k/mo we will rethink it?
In the meantime, the only way to reasonably go to college is to either not have any money so tuition is waived, or know that you won’t have to pay it back. Pitty the poor schmucks who have saved into their 509s for a decade to pay their way through.
I have two kids who will soon be college age. I told my ex-wife, make sure as hell you don’t get a raise, ask for vacation time instead. If the kids can’t go for free, it’ll cost like half a million dollars to send them. So we have to be sure we don’t earn too much. This is an effective marginal tax rate well over 100% on the middle class. The only way to win the game is not to play, and people generally speaking when they figure this out are not stupid. Why the heck would anyone work their asses off to make a $150k household income just to walk face-first into a $100k/year college bill? A lot of the best colleges are free for undergrads as long as the parents don’t earn too much.
The government subsidizing a more educated US workforce is a "giveaway", but you don't hear that word applied to the tens of billions Lockheed Martin and Ukraine get from the US taxpayer.
"Indeed, these programs are likely to be very expensive and the resulting increase in the price of tuition will lead to calls either to end the program or for price controls on education." (emphasis mine)
Terrific! A good start!
Next, unwind Reagan's privatization of higher education, end usury lending, and restore state investment in an educated populace.
Aka rejecting the reactionary project to end public education initiated by James M Buchanan and financed by all the usual suspects. https://en.wikipedia.org/wiki/Democracy_in_Chains