But the problem remains, what do you do about a problem that is stifling a whole generation? It's leading many to postpone buying a home and even starting a family. I suspect it's affecting the size of the next generation too. They never should have gotten into so much debt. But they did. Now what?
Practically, this shouldn't make those who already paid off student loan debt regret having done so, as going through bankruptcy instead would have given them a much different life path. But it would give a way out to those hopelessly underwater.
I agree that the government shouldn't be loaning money for college, but I also don't think the government should be loaning money for housing, nor loaning money to banks at ridiculously low rates to bid up the everything bubble - listed in increasing order of importance.
But OP asked what we can concretely do right now, to address the problem that has already been created. Stopping student loans cold turkey isn't going to make colleges magically downsize their bloated layers of administrators and lower their tuition - it's just raging at what has already occurred. Just like how raising interest rates a little bit didn't unroll the screwed up housing market, but rather just caused it to lock up and remain in the inflated state. So the first stab at a practical middle of the road approach is to end the poorly thought out legislative subsidy of non-dischargeability, and start letting the already-created financial situations be resolved through the standard processes. Bonus points if some of the money can be clawed back from the colleges that received it, but the basic dynamic has to be defined before that can happen.
From the individual perspective, going through bankruptcy isn't instantaneous and has effects that last a significant amount of time for someone who just graduated from college. Courts do look at things like ability to generate income. The option is only going to be practical for those with little hope of actually benefiting from their degree.
Who are we to declare that they're bloated? If they provide massive value, great.
When a student cannot pay back a loan that is not their fault. It is the fault of the college who claimed their education was worth x dollars when it was clearly not.
Software engineers that routinely dig through layers of abstraction to grok how systems function. Not everything needs to be treated as a black box. Like I know very little about medicine, and I'm certainly not capable of diagnosing medical problems. But when I try to ask a doctor a question, and get confronted with a phone tree in front of an answering service in front of a receptionist in front of a nurse in front of the actual doctor, with days of delay in between some of those layers, I can confidently say the place has organizational cancer.
The "risk premium" on these loans likely would've been FAR higher (or rather, people might've just stopped making loans altogether) if people were just allowed to declare bankruptcy right after getting the education.
Why would the most secure debt have such a high interest rate? (Treasuries at the time were 2-3%)
> is already jacked
If you're arguing why it's not the same rate as treasuries, I'm not sure what more I can say. There's more that goes onto pricing loans than just the risk premium. It's a part of it, but not the whole story ("why are government-backed MBSes not the same interest rate as treasuries?").
Furthermore, just look around: you sure there's no "risk" with these loans? You cannot in honesty argue otherwise.
When I took out student loans in 2013, I got a 6.5% rate for 25 years. It can’t be discharged and any default is guaranteed by US Department of Ed (eg, I die, or use income based repayment for 25 years and discharge the balance). So to the borrower, the “risk” is that the USG defaults.
For comparison, I bought a house that year and got a 4.25% 30-year mortgage that has my house as collateral.
Why would a student loan that can’t be discharged have a higher rate than a mortgage?
Apparently Joe Biden himself pushed and voted for the bill that made student debt not dischargeable in bankruptcy: https://www.theguardian.com/us-news/2019/dec/02/joe-biden-st...
It’s a political stunt. It’s not like he is someone who just got into politics and just wasn’t aware how the system works.
This kind of grandstanding happens all the time. Representatives propose radical bills knowing full well they would never pass. But they can then turn around and say “Oh no, I was going to do all these nice things for you, but $otherside got in my way. Thanks for believing me and voting for me, though”
Not a chance. Look at the timing. He was going for driving young college educated voters to the polls for the midterms. It worked exactly as planned.
Since the Democratic Party has abandoned the working class as a whole, they rely on mobilizing the college-educated minority, which is loyal in spirit but unreliable when it comes to actually placing votes. Until something changes, the Democratic Party will drum up a new cause every 2 years (based on their available resources at the time) targeted at this demographic, and it won't always work, but it did this time.
This has happened before: the SCOTUS ruled that the Indian Removal Act was illegal and struck it down. Andrew Jackson did it anyway, yielding the Trail of Tears. SCOTUS is powerless to enforce its rulings on the executive branch; only Congress can actually act against the President.
This whole thing works due to the consent and demand of the people and the people they ultimately put in the government.
No, he doesn't. The military does. The military is sworn to uphold the Constitution, so if the President is impeached and his powers removed by Congress, the military has to follow Congress's orders, not the President's. Of course, the military could ignore the Constitution, which would be a coup, but then it seems unlikely that all the officers and enlisted would go along with it because they'd all be breaking their oaths as well, not just the top brass.
The people by and large supported debt forgiveness. The people by and large want health care and labor reform. The people by and large supported Roe V. Wade.
The Federalist Society controls SCOTUS and the will of the people no longer matters.
A rural minority of white conservative Christians are doing a good job of voting according to their interests in a system biased in their favor. But they're still a demographic and cultural minority overall.
The law clearly states that the president can "waive or modify" any provision of the federal student loan program. Justice Roberts argues that forgiving some student loans is not waiving or modifying provisions, it is rewriting it from the ground up. Which I don't think any honest assessor would agree with. You could literally add one line to the existing provisions to accomplish the loan forgiveness.
But more importantly, you must have standing to bring a lawsuit and this was one of the weakest cases the court has ever approved for standing (possibly with the exception of the 303 creative case) because there was zero evidence of harm to the plaintiff.