If loans are to be forgiven, steps have to be taken to prevent us from reaching this point again, or else history will just repeat itself in the future.
Plus its not like admission prices will just stay in place with such a massive demand shock.
The government uses this to good ends all the time. It's why we have very heavy taxes on gasoline and cigarettes: we want people to burn less gas and to smoke less. And we offer tax rebates for upgrading your house with better windows, and so forth.
Forgiveness of student loans is just a subsidy of student loans. Subsidies give you more of it, which means that the more student loans we subsidize, the more student loans we'll have.
Notice the exact words just above. I didn't say that if we subsidize student loans, we'll necessarily get more education, or that we'll get better educated people - because that's not what's being subsidized here! If we're subsidizing loans, we can expect people to take on more debt! But this doesn't necessarily lead to more actual education being done, because that's not what's being subsidized here.
Of course, that doesn't prove the converse. It doesn't prove that education doesn't increase; just that we have no real reason to expect that it will.
At some point in the recent past, at least during my lifetime, this was forbidden. It is one of the few classes of debt where it is forbidden.
I do not know why we would try to force through some weird one-off amnesty, rather than re-implementing bankruptcy for student loan debt which would fix the problem with permanence.
Bankruptcy includes many of the factors that opponents of forgiveness complain about... it's not exactly free. Those who avail themselves of it must make an uncomfortable tradeoff. They're limited in how often they can use it. It invites scrutiny to make certain they aren't using it except when they actually need it. Scrutiny from judges and arbiters who have experience sniffing out such fraud.
In the 3 or 4 years this has made the news in mainstream media, I've not once heard anyone mentioning this, or offering it as an alternative. It's quite bizarre.
For loans with no collateral, like credit cards, the lenders use credit scores and other heuristics to determine the likelihood of making their money back, and deny applicants who don’t meet their standards.
I believe the intended effect of making student loans immune to bankruptcy was to make education more accessible by incentivizing lenders to provide loans to subprime borrowers.
I share your belief that (new) student loans should be dischargeable in bankruptcy. I expect that lenders will become more choosy in what students they lend money to, and this reduction in money available to students will in turn incentivize schools for once to start lowering prices.
But that idea means fewer students will be able to receive student loans, and it will be attacked (wrongly) from an egalitarian perspective.
But you can still file for bankruptcy.
Why? It's not because "hey, lenders have remedies available"... it's because without bankruptcy, things go to shit really fast.
Like with student loans.
Lenders should be allowed to loan money, and to attempt to profit from it. But society isn't obligated to protect their interests at all costs. And if they don't like that, they can just choose not to loan. Lenders that make bad loans put society in danger (if too many lenders make too many bad loans). Society actually has the right and the proper power to tell them to fuck off.
> I believe the intended effect of making student loans immune to bankruptcy was to make education more accessible
The perverse incentive though was delivering this loan accessibility in such a way as if it were financial aid. Young kids, barely legal adults at that point, didn't know any better. And colleges and universities chase that money (why wouldn't they... the money can only be spent on them) by turning their institutions into resort spas. Any increase in cost that came with that was turned around and passed right back to the students who "paid" for it in tuition and fees, but since "someone else" was doing the actual job of paying for it they weren't cost conscious. Granted, young people aren't usually cost conscious to begin with, but this just made it worse.
And the people "paying for it" just hang that bill back around the college kid's neck with ruinous interest like a boat anchor.
Were the colleges and universities at least decent enough to make sure these kids could get a good job that might make it all worthwhile in the long run? Hell no. Instead, they scream bloody murder about how it's more important that they not be turned into vocational schools, and they're teaching people something far more important than job skills... they're "teaching them how to think". What a load of horseshit. Even the law schools are a joke. Ever look into how they cook those books to make it seem like 80% or more of law school graduates have a job lined up within 12 months after graduating?
All in all, I don't know what the intended effect of this was. Maybe it really was wholesome. But I really wish we had legislators who were smart enough to not resort to the "but we meant well" excuses when it all goes to shit, or better yet wise enough to not fuck things up so badly in the first place.
> I expect that lenders will become more choosy in what students they lend money to,
Isn't that the way it should be though?
If you're not a good investment, why waste $60,000 or more sending you to school for a degree that amounts to little more than bragging rights?
In the meantime, we've spent 30 years training an entire industry (higher education) that they don't have to be careful and control costs. Even if we made things right, they'll go on doing what they've done for decades because they know no other way. So even those who should go to college will get reamed for it unnecessarily. But educators would be screwed too, because suddenly we'd need 1/3 or even 1/5 of what we needed before that reform.
Fucking good intentions. Road to hell, yadda yadda.
> I share your belief that (new) student loans should be dischargeable in bankruptcy.
Old loans too. Lenders aren't innocent in this. Where were their objections at the time? They could have complained, could have said "don't give us this power, we can't use it without risking abuse". Burn that slice of the financial industry to the fucking ground and let its former employees wander the earth as disgraced panhandlers.
https://www.cbpp.org/research/state-budget-and-tax/state-hig...
Historically, funding was tied to tuition caps. These had to be removed when states cut funding to have balanced budgets.
So what are universities doing with that extra $1500 per year per student? I agree that schools should be better funded, but ballooning tuition costs are more than just a lack of funding.
2008 to 2021, 4 year public school tuition $7280 to $9375 = +28.8%
2008 to 2021, state support per full time equivalent student: $6552 to $7896 = +20.5%
It looks like cbpp "debunked" it by picking a year that was particularly favorable to that point of view (2018). Looks to me like the two variables have been trending together just fine as per recent data.
The article was written in 2019. There was no cherry picking. That was the most recent data available to them.
Universities _will not_ reduce tuition without being forced to do so. Universities _cannot_ reduce tuition without more funding.
Not me, no I agree with you here. It's the authors of the article you posted that think that students are price sensitive.
2010 6310 tuition 5790 federal 10420 state 22520 total (16210 from public funding)
2020 8160 tuition 6010 federal 12020 state 26190 (18030 from public funding)
Now if public funding went down $2000 and tuition went up $2000, that would lend evidence to the idea that collapsed public funding resulted in higher tuition. Yet public funding went up $2000 and tuition went up $2000. And you say this is because market forces don't apply and that the state isn't tying funding to tuition. That may be what you believe, but I don't see how any of this refutes the alternative explanation (that it has to do with student loans not being subject to bankruptcy).
Market forces do apply to colleges. Their customers simply are not price-sensitive.
Universities are not businesses. Tuition is frequently less than the cost of teaching students. The cost of an education has risen independently of how that education is paid for. Removing loans from the equation wouldn't lower prices because prices are set by costs, not by profits. There is a ton of administrative bloat, but universities will always prefer to not fire employees over reducing costs for transient members of their school.
Even if it was true, it would not prove your theory that it has anything to do with student loans not being subject to bankruptcy. Universities do not issue loans. Bankruptcy leaves lenders holding the bag, not universities. You have not given any explanation for your theory of undichargable student loans causing higher prices, you've only attempted to refute my explanation as proof that your theory is the only alternative.
This is factually untrue; the better universities do not, private for-profit often-predatory universities do, and those loans are subject to the same bankruptcy provisions as the federal loans issued to students at other schools. These are a part of the landscape that education policy must address.
The reason why it matters whether or not you can discharge the loan is because it changes lending behavior in the first place. The baby boomers used to work entry level jobs over the summer and pay for a semester of college. In the late 70s, congress changed the bankruptcy law.
Lenders loved this because it completely changes the risk equation. It incentivized them to lend as much as possible to as many as possible. This triggered a feedback loop with colleges. They could charge more for tuition, and in turn, lenders could lend more risk free debt. Rinse and repeat. Colleges would use that extra income to take on administrative bloat and wasteful programs. Four decades later, tuition is double that of other countries, colleges are happy, lenders are happy, and graduates are getting crushed by debt.