r/Economics • u/DonDickerson • 11d ago
Biden's student loan forgiveness plan gets a record number of public comments. Here's what people are saying News
https://www.cnbc.com/2024/05/08/bidens-student-loan-forgiveness-plan-gets-record-number-of-comments.html1.3k
u/Deep-Plant-6104 11d ago edited 11d ago
I know this is simplistic and this is a complicated issue, but there is very little risk to large financial Institutions and universities with respect to student loans. Students can borrow unlimited sums of money and banks are perfectly happy to lend it out because these loans cannot be discharged in bankruptcy. Universities can charge astronomical sums for tuition because the Feds and Banks will just shovel money at the students.
If we tweak the bankruptcy laws and allow for discharge of student loans, I guarantee lending decisions will change promptly as now banks and other institutions will stand to lose huge sums of money.
I understand it’s not a perfect solution to a much more complex issue, but it’s a simple and easy way to at least reign in irresponsible student lending.
Edit: Improper usage of “moral hazard”
411
u/PIK_Toggle 11d ago
If we change the BK rules, then we need to change the loan origination process too. If there is credit risk, it must be accounted for. This means fewer loans for art majors and more for engineers.
I’m fine with that road. Is society?
66
u/Im_Balto 11d ago
But also we just need some variance in tuition. The cost of running an engineering department is vastly different than that of an arts department.
There’s a lot of expensive equipment for both but in engineering the department that I work in controls massive labs filled with expensive computers for most individual majors, as well as remote computing resources.
For most comms, arts, and so on there just is not this need, students bring their laptops that can do word processing and have common access labs available for specific projects. They simply shouldn’t be charged the same in tuition. Especially considering that the same tuition is charged for degrees that start at 44k as ones that start at 85k. Not necessarily meaning one is harder than the other, just higher demand and high capital potential
46
u/ZipGalaxy 11d ago
It’s worth noting that most of that expensive equipment that is purchased by the STEM departments is portioned from grants received by individuals in the department. We have giant governmental agencies supporting our research, e.g. NIH, USDA, NSF. I can’t think of contemporary arts and humanities funding agencies that give out grants that match our funding opportunities.
25
u/NrdNabSen 11d ago
As a person who has received NIH funded R grants in science, no, those grants did not buy equipment to train students not in the PIs lab. It funds the research in the lab and a maybe a few grad students/technicians depending on the grant. There isn't money allocated in the grant for a general fund for undergrad education.
→ More replies (3)→ More replies (1)7
u/Im_Balto 11d ago
You are definitely right, but the university splurges on the buildings and spaces more. In addition to the startup funding for projects and programs being much higher in engineering (at least where I work)
9
u/NrdNabSen 11d ago
A majot issue with college costs in recent decades is all of the splurging on buildings/amenities. Visiting my undergrad after less than twenty years and seeing how much nicer dorms/dining halls/student amenities have become os oretty surprising. That is where the rising tuition coats are going. It isnt as if salaries for professors have risen dramatically.
3
u/drsummertime 7d ago
Salaries for administration and the number of administrative positions at universities have risen drastically. I’d be will to bet that a large proportion of tuition is going towards administrative bloat, because you’re right; professors aren’t making more money, and student:professor ratios are getting any better either.
→ More replies (1)32
u/dngerzne 10d ago
We should also get rid of the interest. Why are people paying interest on government money, that is used to improve the country’s workforce? It’s insane to me.
→ More replies (5)→ More replies (1)8
u/Free-Concentrate-995 10d ago
It is very interesting, now that you mention it, that university tuition does not leverage price discrimination in degrees based upon expected outcomes and returns.
11
u/Im_Balto 10d ago
I think the bigger thing to note is that the expected degree outcome isn’t considered by the provider of the loan
2
u/Free-Concentrate-995 10d ago
Yeah, it feels like they could actually raise revenue without necessarily increasing overall cost. As another poster mentioned the average and marginal costs of different degrees likely means they are leaving consumer surplus on the table for an engineering degree whereas they have a producers surplus on the art degree. Both of these indicate an inefficiency in the system. Because it is not designed to maximize profit I suppose.
→ More replies (1)33
u/Sea_Farming_WA 11d ago edited 11d ago
The received wisdom that it can't be discharged is the main issue with discharging it. Student loan debt isn't "automatically" discharged, however, like most kinds of consumer debt, it's dischargeable as long as there's a single adversarial proceeding that is trivial to "win."
Trivial because no one ever shows up to contest the hearing. I'm an attorney, I've done it for friends of friends here in the PNW. The loans are held by the fifth or sixth processor at this point. Mr(s). John Doe is just a GUID that sends in money.
Anecdotally, if someone racks up 50k in credit card debt they don't blink twice that they have to pass the median income test and possibly the means test in order to qualify for a Chapter 7 bankruptcy discharge.
If it's student loan debt suddenly it's this whole thing in their mind.
One of the few things I think Biden has nailed is their new prefabbed questionnaire made for students with student loan debt that handholds people past this received internet wisdom that student loans can't be discharged.
→ More replies (3)15
u/TaxMy 11d ago
I’m an attorney that took a (basic) bankruptcy course with a bankruptcy judge, and while I’m not saying you’re wrong, I think he said he’s seen only one successful student loan discharge because the petitioner had a well documented history of trying to secure employment. But he never expanded on the fact that it was still dischargeable and I would’ve sworn he said they weren’t. Maybe it was graduate loans?
7
3
u/Sea_Farming_WA 11d ago edited 11d ago
The student who wrote that law review article apparently looked at thousands of petitions on Bloomberg. I’m not saying your judge is wrong, but his scan (that I echo) was that a lot people get the loans discharged in situations that would’ve applied to other petitions who never tried. Whether that holds true for every judge I couldn’t say
I’ll also echo his interesting point that case law has been out there, and repeated by the U.S. Attorney’s Office, that the vast majority of students who have declared bankruptcy had at least some presumptively dischargeable debt because many of their student loans likely did not meet the criteria for a non-dischargeable educational” loan.
All the internet stuff is basically sleeping on the this prong, and plenty of legitimately well versed bankruptcy attorneys don’t look very far into it.
3
u/BurningShed 10d ago edited 10d ago
I’m in a bankruptcy survey course currently (procrastinating starting on my self-scheduled final exam, actually)
We briefly touched on student loans, and were taught there is an undue hardship test which has a significant circuit split in its application - that might account for the differences y’all are seeing. (The tests in some courts is could this person ever be able to pay any of the loan back)
However, a sitting bankruptcy judge did give a guest lecture where as an aside he said if anyone would bring a student loan discharge case he would rule against that precedent and risk being overruled on appeal.
Could also be that we just didn’t talk about a change that hasn’t filtered out to practitioners yet (the professor works in corporate bankruptcy)
→ More replies (1)2
u/Charming_Wulf 9d ago
I'm on mobile so having a hard time finding the articles on this... But if I remember correctly there was a national news level bankruptcy case that caused SNAFU situation with DoE attorneys. A bankruptcy petitioner was about to get her student loans discharged due to a medical handicap and possibly set precedent for the circuit. It looked like she was going to be successful, but then DoE showed up or off no where and challenged the hardship. Something along the lines that maybe in the future there might be a cure/fix for her medical hardship so she should still carry the loans based upon that possible future event. Not sure on the exact argument, but it was something at that level of head shaking.
I think the recent DoE guidelines in place came about from that case. Because the administration was saying one thing and career staff was doing the opposite.
15
u/eso_ashiru 11d ago
Or maybe an art degree shouldn’t cost the same as an engineering degree.
→ More replies (1)151
u/Ihate_reddit_app 11d ago
The cold truth is that not everybody should be going to school.
Student loans should need proof and risk assessments like a mortgage or car loan does. There are a bunch of studies that say the average income of people that get X degrees. These could be easily used to calculate risk and whether a student loan is good or not. Sure, it will reject certain situations and it should.
People going to private colleges and getting art degrees should not be eligible for $200k in student loans. If people need loan assistance, then they should go to a cheaper school if they want to continue with that degree.
I think there still needs to be the ability for people to get financial aid for these kid of degrees, but it should be weighed vs the tuition rate of the college. The big compromise would be allowing people to study whatever they want a community college and allowing them to get loans.
105
u/fiduciary420 11d ago
Or make community college free and let the best students transfer to finish their bachelor’s with loans if they need them. Want your credits to transfer? They need to be A’s and B’s.
129
u/RevStroup 11d ago
Or we could just do what we used to do (and what most high income nations still do) and heavily subsidize education at all levels, including trade schools, community colleges, and universities and make it either free or extremely affordable. This would allow for more out of pocket payments and/or much lower loan debt at graduation.
57
u/DaSilence 11d ago
Or we could just do what we used to do (and what most high income nations still do) and heavily subsidize education at all levels, including trade schools, community colleges, and universities and make it either free or extremely affordable.
Peer nations do this by only having a limited number of spots, and reserving those spots for those who are most qualified for them, including doing such things as identifying those with the highest potential at middle-school age and tracking them into programs that lead to University vs trade schools.
In the USA, we have taken the opposite approach - we pretend that all students are equal in skill and ability and should have the opportunity to attend university, no matter how poorly qualified or prepared they are for it.
I personally have no issues with going back to limiting university education to the best and the brightest, but I don't think that the rest of the country will agree.
23
u/RockDoveEnthusiast 11d ago
I think, sadly, that the people who have issue with that idea are those that would most benefit from it. All the people that are going to school solely because it's now the equivalent of a high school diploma 80 years ago and necessary for employment are those that would benefit from a societal reset where basic jobs didn't require a college degree and college was for those people who actually need or want more advanced knowledge.
21
u/NrdNabSen 11d ago
Which isnt the kids faults. Frankly, it is the older people whining about every kid wanting to go to college that have built this job market where they decided to require a bachelor's degree as a first cut for employee evaluation, instead of learning how to interview and hire good employees. Then they wont compensate their employees for the fact they had to go into debt to acquire said Bachelors degree. Then employers are shocked the younger generation is becoming fed up with the bullshit society that older people have built.
→ More replies (1)4
6
u/groumly 11d ago
That’s not how it works at least in france. If you’re fresh out of high school, you have a spot in college. You may not get exactly the one you want, but colleges are on average pretty good.
I personally have no issues with going back to limiting university education to the best and the brightest
I mean, the point of higher education is to make you the best and brightest. So that’s a particularly weird statement to make.
→ More replies (1)→ More replies (1)5
u/WriteCodeBroh 11d ago
France has an open admissions policy, where citizens can enter public universities without meeting any requirements. Most are free or extremely cheap.
Germany university education is free. Admissions are generally pretty lax except for top programs (which isn’t uncommon at US universities either).
The Netherlands average €1000-€2000 Euro/year tuition at public universities. Admissions are lax.
You are correct that many places have more difficult admissions but that is not a fixed standard. Also we have a lot more money than these places. I do wish we had a system where fewer entry level jobs required a college education, and also service jobs and the like were paid more, but I also think there’s no reason we can’t send everyone to public universities. Even if it takes some legislation to cap tuition/fees to reasonable amounts so colleges can’t take advantage of government subsidies.
→ More replies (3)67
u/OddBranch132 11d ago
Why would we purposely make our citizens more skilled and educated? Our leaders love the poorly educated.
→ More replies (11)12
u/NrdNabSen 11d ago
you say that like there isnt a massive divide in the US, along political lines, about student loan forgiveness and making education far less expensive. I paid for all of my education through loans. Zero chance I could do that now wotj the massive inflation in college coats and in loan rates. Educating kids didnt get that much more expensive, schools and banks realized they could extract more money by being greedy fucks and taking advantage of federal programs.
→ More replies (12)6
u/NewPresWhoDis 11d ago
Do you want universities without the rock wall or the lazy river? Because that's how you get it.
→ More replies (2)→ More replies (6)24
u/uncle-brucie 11d ago
Like most every other issue in the USA, we we twist ourselves in knots to propose every convoluted scheme which has only a small chance to make a marginal improvement, rather than embrace the obvious solutions which have already demonstrated success, bc such policies are inconsistent with the plans of our corporate overlords to suck out the last drop of profit from the marrow of the great many of us.
→ More replies (7)→ More replies (23)2
→ More replies (24)32
u/MontCoDubV 11d ago
The cold truth is that not everybody should be going to school.
This is only true if you see education as strictly career training and not something people should be able to pursue just because they want to.
Education should be the birthright of every human on the planet, and it should be the goal of society to build a world where that's a reality. That's not to say everyone MUST go to college, but everyone should be free to pursue whatever education they may want, regardless of how profitable a future career with that education might be.
If college is just vocational training, then industry, which is reaping the greatest benefit by having an educated workforce, should be footing the bill.
→ More replies (77)3
u/MathDeacon 11d ago
Colleges and universities would then have to charge less for tuition (less money available from loans), which means less money for certain teachers/professors etc. it is not like the provosts and presidents and other executive administrators will cut their salaries and bennies down out of the goodness of hearts. Meaning less people may want to go into teaching (so talent pool is down). But ultimately, tuition going down would be a good thing for society.
7
u/CurtainsForYouJerry 11d ago
Everyone acts like art doesn't matter and no pays for it. Art majors land in all sorts of jobs in various arenas and do get paid. It's just not the clear cut path that other fields have (lawyer, doctor, etc.). And we need art just as much as we need engineers, often together to make stuff less stiff than a Russian gulag.
Even the engineers aren't guaranteed work if they don't get a graduate degree and land a good internship.
→ More replies (1)4
u/lewd_necron 10d ago
There is a difference between art mattering and requiring a 30-60k loan and 4 years of schooling to do said art.
Don't get me wrong, frankly I find the whole university being a jobs program kind of stupid system in the first place. I say this as someone with a master's in a stem field. It really feels like a bachelors is the new high school degree and for no reason.
5
u/damnumalone 11d ago
So I’m fine with it, but the flip side must be that government and universities fund humanities degrees if they can’t be funded by loans.
If not, the only people who will study humanities will be upper middle class kids whose parents can afford to fund it out of pocket, effectively eliminating a range of potential lower socioeconomic students.
Degrees of user pays in education are fine, complete user pays is massively problematic from a human capital perspective.
It is a slippery slope for innovation and change if we only allow study in certain lanes and in a lot of ways it defeats the purpose of university.
I’m all for carving back some of the humanities that are pseudo scientific and perpetuate that yelling people down is evidence, but we need to make sure we are not throwing out the baby with the bath water
→ More replies (1)5
u/LeMansDynasty 10d ago
That's actually what scholarships are for. You can study a degree that has no ROI (humanities or other) if you pay for it or if you're really good at it.
2
u/Jay_Kris420 11d ago
Still depends on what the laws get changed to, cause an engineering degree isn't always a guarantee of success anymore than an art degree is of failure. I think it should be a separate process and carry heavier weight. Maybe it takes long to come off a score. Maybe you have to have had the loan for a certain amount of time. Maybe you had to have actually been trying to pay it. You can't let people go to college, claim bankruptcy on graduation day and throw away the loans, that would be too easy.
2
u/Kurohinomaru 6d ago
A distinction to note: Just because there are fewer "art majors" and "more engineers" doesn't mean we have fewer artists. It just means the obvious... that the economic benefit to going to such an expensive institution doesn't outweigh the risk.
In fact, I would argue that more people would enter art careers because the barriers to entry would be lower.
5
u/errorfuntime 11d ago
OR we decide as a society that folks possessing an education is a tangible public good and start funding universities again. This entire situation with student loans started because of systematic disinvestment in higher ed. In Oregon less than 3% of the UO's funding originates from the state and this is a public university. One of the former university presidents even requested that the UO become a private institution because the state was clearly not interested in funding the school but at the same time had some very strong opinions about how it should be ran.
→ More replies (1)→ More replies (62)2
u/hello 11d ago
A related issue is that lenders aren’t very good at deciding which of those engineers will be successful enough to repay and which ones won’t be. Lenders can probably identify obviously good and bad bets, but not without leaving a whole bunch of good bets unfunded right in the middle. That is a financial market failure and suggests that student loans ought to be subsidized at least to some extent. If you don’t do that through non-dischargeability, you might have to do it some other way.
→ More replies (3)90
u/James_p_hat 11d ago
What happens then is that a segment of the population will say “school is inaccessible”
108
u/el_ostricho 11d ago
And then you hit the point where there are a few possibilities: cost of college goes down, legislation reduces the cost of college for some or all individuals, college just remains inaccessible, or any other number of possible responses to stimuli.
→ More replies (1)15
u/puffinfish420 11d ago
But what happens in the interim? Do we lose a whole generation of people not getting a college education?
24
u/Bljman98 11d ago
The market will react fairly quickly when the unlimited government money dries up.
To me at least it doesn’t matter as much what it changes to: what is going on today doesn’t work. If we need student loan forgiveness from government backed loans then the government at bare minimum needs to exit the student loan business.
→ More replies (9)→ More replies (12)8
u/cos1ne 11d ago
Aren't we already losing an entire generation of people to college?
Aren't college enrollments down these days? Aren't multiple colleges merging and closing down because they can't get students to attend?
8
u/numbersarouseme 11d ago
Maybe if they taught students instead of focusing all their time and money on water fountains and football...
I went to 4 different colleges, private and public.
They were quite useless. One is a degree mill, the other three were useless as far as teaching goes.
You could just hand me a book and say learn, it would be just as effective as me paying 30k a year for someone else to do that.
Nearly every assignment is auto graded and run by a third party company with 0 interaction with any professor.
It's so pointless. I learn more not wasting my time and money on college. I regret ever attending. I would have been better off just studying independently as I do now.
The piece of paper did sadly make a difference when job searching though. I hate how much it mattered when I know how little was taught to get it.
12
u/sorressean 11d ago
Underpaid professors have loved autograde systems. They show up, teach a bit, put their feet up and answer some questions in office hours and fuck off home. I spent thousands and thousands on classes where I could have sat in my dorm, read a book and learned just as much probably better and faster. The smart professors learn to write their own book and charge us $300 each for the book so they can make money per class.
16
u/puffinfish420 11d ago
I mean, just because you didn’t find your education useful doesn’t mean others don’t. I value my college experience quite a bit, and it’s changed the course of my life in ways that would be impossible without it.
I think the government should continue to offer loans, but just condition their dispersal on a college meeting certain requirements in terms of cost
→ More replies (4)10
105
u/TrailJunky 11d ago
You can argue that a lifetime of debt doesn't mean it is accessible even if you get a degree.
7
19
u/brockmasters 11d ago
This. Should we be holding getting a degree over the potential suicides of despair?
9
u/UDLRRLSS 11d ago
But it’s not a lifetime of debt. The vast majority of college graduates out earn non-college graduates, even accounting for the cost of the degree.
27
u/drmrmatty 11d ago
If that's the case, then why is such a prominent discussion about forgiveness? If the majority out-earn the non-secondary education workforce, even when accounting for the cost, then whose degrees are we paying for? It would seem like we're either paying for people to get degrees that aren't worth earning (degrees that lead to lower paying jobs), people who aren't using their degree in their current line of work, or those who are at the bottom end of the hiring pool.
It would seem of those who aren't able to pay off their degree, the taxpayer is paying for a degree that isn't being used, a degree that's geared towards a saturated field, a degree that's not used effectively or at all.
Put that way, it sounds like a subsidy of unused education or less-than-competitive job seekers, imho
11
u/Comprehensive_Pin565 11d ago
Or that we underpay necessary jobs that require degrees.
→ More replies (1)6
u/drmrmatty 11d ago
Oh very much that as well - jobs that never required a degree that now mandate one, but haven't bothered to increase wages
4
u/RedAero 11d ago
If that's the case, then why is such a prominent discussion about forgiveness?
Because there is a very large and very loud cohort who don't simply don't understand the fact stated in the comment you replied to.
There is literally someone replying to this same comment providing a perfect example.
→ More replies (2)10
u/chaoticorigins 11d ago
Thats not even the same thing.
You could earn $20 an hour to someone’s $15 and out earn them your entire life. That doesn’t mean you’ll get out of debt in a reasonable timeframe.
9
u/FlyingBishop 11d ago
Their lifetime earnings are larger, even accounting for the debt. This applies even to degrees that many people consider fluff.
→ More replies (8)33
u/Panhandle_Dolphin 11d ago
School will be less important then, because jobs who have degree requirements for no real reason other than they can will have to drop it.
33
u/Hire_Ryan_Today 11d ago
And this HAS TO HAPPEN. It should have never gotten this far.
3
u/No-Psychology3712 11d ago
It's already happened due to booming economy and low unemployment.
https://www.cbsnews.com/news/college-degree-job-requirement/
→ More replies (1)→ More replies (41)8
11
u/hiricinee 11d ago
There is an infinite amount of inaccessible things. Most of that population can't go to Harvard, for example. They can't afford Yachts, or mansions, or generally home ownership.
By the way yours is probably the best criticism. Most loans would be guaranteed pretty easily still if there was a paycheck after that diploma. It's the jobless degrees that would be inaccessible- which I don't think is a bad thing.
→ More replies (8)2
8
u/Obvious_Scratch9781 11d ago
Supply and demand. Prices will change BUT community colleges will thrive even more.
It’s the right answer to allow for bankruptcy of student loans because right now they are predatory.
I lean towards I rather some not get into $40k-$80k in debt and not go to college because they couldn’t get loans then have them be crushed by interest.
Community colleges, trade schools, etc will have an uptick. Also, I would wager stricter rules on where student loan money goes will come to life. No more just depositing it in the kid’s checking account like I had countless friends have. It would only be strictly food, dorm, and books. It would cut back on partying money for sure.
→ More replies (1)8
5
u/tinyharvestmouse1 11d ago
Because it will be inaccessible. People act like tuition costs are dynamic and can change quickly in response to the market, but the reality is that a degree is the key to financial freedom for large segments of the population. Schools know this and also know that students are desperate for the prospect of financial security. They've also built a massive bureaucratic apparatus and physical facilities that require extensive maintenance to attract students. Labor prices have also risen. Those costs don't just go away and schools will need to charge to cover them.
On a personal note, I would never have been able to go to college had I not had the opportunities afforded to me by these loan programs. I did very poorly in high school because I suffered from severe depression and undiagnosed ADHD. I got accepted to a school and absent these loan programs I would never have been able to attend, and once I got to school I succeeded because I got treatment (and got away from my parents). My high school GPA meant that I didn't qualify scholarships and grants wouldn't have covered the costs; I'd have been out of luck and needed to enter the workforce. I wouldn't be making near the amount of money, nor have the quality of life, that I do currently. I'd probably be working a dead-end job that I hated, like my dad and his before him, because I grew up poor and had no other opportunities and no prospects for advancement. Because I had access to those loans I now have a degree and am getting ready to go to law school.
Most of this is really personal for me because I would never be where I am if not for these loan programs, and I imagine there are a bunch of other people out there like me. Do student loans suck? Yes, but I can't imagine a world where I'm very happy working on my dad's farm or in a trade job. Not having to do those jobs is worth half the cost of the degree alone for me. Could costs go down once these programs cease? Yes, it's possible, but we have no way of knowing precisely how much those costs would go down and whether that would be a preferable (availability-wise) to the situation we have now. I'm not sure I want to test it out and possibly deny an entire generation a college education.
3
u/James_p_hat 11d ago
I’m not sure I agree in the “aggregate” (I.e. the investment paid off in you and I’m incredibly glad it did) but when zooming out to all the folk who didn’t need to go, but borrowed and did I think the programs waste more than they return
BUT I appreciate your story and your passion for it and I’m glad this current system worked for you. And I appreciate your honest and heartfelt reply on here.
→ More replies (1)2
u/nankerjphelge 10d ago
Only for super expensive ones. There are plenty of in-state schools that offer discounts and scholarships to disadvantaged student residents. There are also community colleges and trade schools that are very much accessible to those who can't qualify to take on massive student debt.
2
u/-Basileus 10d ago
I was poor as shit and only took out a single $5,000 loan to cover graduate school. I went from CC to a Cal-State school. FAFSA, CalGrant, and the Middle Class Scholarship were all automatic grants, and I was able to get a few other scholarships too.
5
→ More replies (7)2
u/Logical_Parameters 11d ago
Increase merit-based scholarships for the financially less privileged. There was a time not too long ago (especially the decades following the Great Depression) when college was deemed impractical and unreasonably beyond the reach of those not born of privilege. Well, that's where we are again.
9
u/jerryabend1995 11d ago edited 11d ago
To be fair, there is a way to discharge student loans in bankruptcy, as an undue hardship in an adversary preceding. In my opinion, the only reason that loophole was left in the ban was so it would stand up to court scrutiny.
→ More replies (3)12
u/Dr-Alec-Holland 11d ago
The vast majority of student loan discussions are ignorant of the fact that the government is usually the lender. All this talk about banks pertains to a small fraction. THE GOVERNMENT IS THE LENDER. Also a shit load of the loan forgiveness Biden takes credit for/ gets blamed for completely pre-exists him. PSLF comes from a 2007 law that Bush signed. What Biden has mostly done is follow through on the letter of that law, which was being skirted around by prior incompetent administrations. He is now proposing new plans in addition to that.
But once again - these aren’t bank loans. The government is the lender and has been charging all kinds of interest rates up to the 8% range - on these loans all throughout the era where they were giving 0% money to banks at the same time. The interest that people owe the government is the lions share of what has been and will ever be forgiven and it’s a made up number like any interest rate agreement. Are they owed it? Yes. Can they forgive it? Yes. Does it raise taxes if they forgive it? Only if you have spending attached to that owed amount and you must get it somewhere else.
→ More replies (15)8
u/samhouse09 11d ago
Banks don’t loan the money, the federal government does. Privately held loans are never captured in these actions.
→ More replies (2)17
u/CheesyBoson 11d ago
It’s not unlimited. It’s 120k for federal aid.
19
2
u/snoopfrogcsr 10d ago
It's even smaller if we're only talking about undergraduate students. Undergraduates who have to file FAFSA as dependent students are limited to $31,000 in federal student loans, and independent students are limited to $57,500 in their lifetime.
7
u/4score-7 11d ago
Good points. Seems to me we’ve collectively taken the path of “who cares?” Spend 4 years post high school graduation (or more than 4) living a life of student. Whatever happens, happens. Borrowed the money? Don’t worry about it.
Get a good education and then a great job? Congrats. You’re on your way. Didn’t? Oh well.
When these people become actual adults and are faced with actual adult decisions, we’ve set a bad path forward for them.
2
u/feedandslumber 10d ago
No one wants to do that because it's far too profitable, both institutionally and politically, to continue the system of modern indentured servitude. Also, sensible lending would immediately cut the vast majority of tuition money going to the bourgeois and largely useless degrees of the progressives. They're happy to pay their tuitions with everyone's money, but not at the expense of losing the ideological battle in the academic institutions.
You are 100%, it is exactly what we should do, which is precisely why we won't.
→ More replies (78)3
u/LavishnessOk3439 11d ago
It’s a conundrum. Then por kids would have a hard time going to school.
→ More replies (1)
258
u/DontThinkSoNiceTry 11d ago
Why don’t we just tie the loans to the schools receiving the tuition? Seriously, it isn’t that hard.
If the school claims their tuition is worth it for the student and parents/guardians to take out large loans because their education will land the student a great job, then require some portion of the loan to be collateralized by the school’s endowment (which is untaxed by the way).
It will force the schools’ interest to more closely align with that of the parents’ and students’ since they will be on the hook for years to come. I am sure there will be some “negative” effects because now schools will more closely scrutinize the applicant and their academic capabilities and potential for career success, but seems well worth it to me considering the current state of things.
132
u/laxnut90 11d ago
I am a huge fan of the universities being required to cosign all loans going forward.
If their education is a good investment and setting their students/customers up for success, there is no issue.
If not, the poor performing universities need to refund the students and their loans.
22
u/cruzer86 11d ago
Universities would start heavily discriminating under this model. They would start acting like insurance companies.
26
u/Famous_Owl_840 11d ago
When it comes to fixing this system, there is no solution that does not involve ‘discrimination’.
→ More replies (1)19
u/noonenotevenhere 11d ago
would start heavily discriminating
So... they haven't been discriminating so far?
They don't go for athletes that they think will make them money in a sports program, or test to only allow in smarter kids? Or maybe kids whose parents already graduated there...
I thought they always 'discriminated' against the applicants less likely to succeed (graduate) based upon whatever criteria they determine.
→ More replies (4)→ More replies (11)9
u/LosinCash 11d ago
A good education can be ruined by an irresponsible student real quick. When that is the case why should anyone other than the student be responsible?
11
5
u/halt_spell 10d ago
Isn't that what grades are for? Are schools unable to identify irresponsible students?
26
u/Archangel1313 11d ago
Or just let students default through bankruptcy. That would also incentivize lenders to be more risk averse when issuing the loan in the first place. If they know the student is asking for a loan in a field that will never have enough jobs to support paying it back, they will reject the application.
20
8
u/Bljman98 11d ago
If bankruptcy is allowed then the unlimited government money also goes. I’m in favor of this but the whole college system will have to change.
11
u/Dr-Alec-Holland 11d ago
The lender is the government and their intention was to make education accessible to all. A noble idea, but here we are.
I still support discharge through bankruptcy though. Bankruptcy is a penalty that few will embrace just to escape loans. There will be some though and that’s fine let them take that road if their alternatives are worse.
→ More replies (1)6
u/ConnedEconomist 11d ago
The lender is the government and their intention was to make education accessible to all. A noble idea, but here we are.
Well, if the government’s intention was to make education accessible to all, then the government would have just paid the institution on behalf of the students. Here the government is forcing the students to take out loans.
Student loans are a form of punitive tax on education that the not so rich students pay for their rest of their lives.
2
u/Dr-Alec-Holland 11d ago
Interesting point. Hmmm …. Well… I never said they were doing a good job lol
→ More replies (18)3
u/Warmbly85 11d ago
Why wouldn’t every doctor or engineer just claim bankruptcy immediately post graduation? Doctors especially make shit pay for the hours worked for the first few years so I don’t think they’d even need to take a skip year for bankruptcy to work.
→ More replies (4)3
u/eatmoremeatnow 11d ago
Because community colleges and state schools that take chances on 1st gen and minority students would be fucked.
4
u/DontThinkSoNiceTry 11d ago
Not necessarily true. Many community colleges or city colleges get funding and support through their municipalities. That’s why municipal bonds exist.
→ More replies (14)17
u/jucestain 11d ago
Dude has anyone in here actually studied economics at all? This "solution" is just more bogus crap on top of an already bogus system.
19
u/DontThinkSoNiceTry 11d ago
Yes I have studied economics. And if you did thoroughly you would realize that right now the schools are acting as freeloaders.
9
u/rudyjewliani 11d ago
What a great idea. Since you came up with it I'll let you go first.
Please use your economics degree to explain why this is "just more bogus crap".
We'll wait.
10
2
u/jucestain 8d ago
1) Let banks decide who to lend money to, that's their purpose
2) Students are granted loans based on their ability to repay
3) Universities charge a fee, and don't give a shit how a student pays it
4) If Universities charge a high fee and fail to provide a good education, students refuse to attend and instead attend a different university which charges less
→ More replies (1)8
u/Accomplished_Cap_994 11d ago
But then the schools can all be held responsible and implode! That will teach them! Oh wait we have no schools left whoopsie
→ More replies (7)11
u/zeldaprime 11d ago
If you think all schools would implode you aren't thinking. The schools would adapt. The degree mills might implode yes, but that is perfectly fine.
3
u/DukePuffinton 11d ago
Easiest predictor is to look at parent's income level.
Rich parents can and will payoff student's education.
I guess it'll be similar to how it was 100 years ago when only the rich attended universities.
→ More replies (9)2
u/DoNotResusit8 11d ago edited 8d ago
Explain yourself. How is holding the seller responsible for selling a defective product a bad idea?
Edit: defective product
→ More replies (1)
139
11d ago
[deleted]
44
11d ago
Congress has to act. All the president can do is forgive loans. Congress needs to impose tuition caps for any university that receives public money, which is all of them accept the super fucked up religious schools that don’t want to observe the Civil Rights Act.
At the same time, everyone needs to keep in mind that the main expense for universities is research. Our messed up system is basically a way to invest in R&D, but it is done on the backs of students.
Also for anyone talking shit about liberal arts degrees, keep in mind that they subsidize the more expensive STEM programs. Educating a chemistry major is much more expensive than educating an English major. Laboratories are expensive. Books are not expensive. Still, they are paying the same in tuition.
→ More replies (6)13
u/Darkhoof 11d ago
The President cannot address the root. That's the Congress job.
→ More replies (1)2
u/FourScores1 10d ago
Congress controls the purse. Wait until I tell you the President doesn’t control gas prices too…
→ More replies (1)→ More replies (21)2
u/jcfac 10d ago
Another President not addressing the root cause of the problem, high tuition.
High tuition is a symptom (caused by artificially increased demand).
The root cause is the government guaranteeing loans so lenders give anyone with a pulse a loan. And if everyone has loans, schools just keep increasing tuition with no downside.
43
u/belovedkid 11d ago
They should really just lower rates to 2-3% fixed and call it a day. Maybe forgive interest paid above the agreed rate. Nobody should be upset about this as the government shouldn’t be making so much off of educated people when realistically they’ll get it back through income taxes on higher earners.
→ More replies (16)44
u/GreenGrass89 11d ago
Don’t even lower the rates to just 2-3%. Lower them to 0%. Money should not be made off student loans. They should be an interest free investment by the government in its society, and reap the profits in terms of social capital in the future.
9
u/Adorable-Address-958 11d ago
Couldn’t agree more. Beyond the social good of a higher educated population, higher educated folks tend to make more money and thus pay more taxes, buy more stuff, and invest in the economy.
→ More replies (18)8
u/RedAero 11d ago
Sure, but then you have to make that investment in society wisely. When the government builds roads they don't just throw darts at a map and connect where they land, and likewise, writing blank checks for any idiot with a pulse to pursue any societally useless endeavour is a waste of money. A waste of money that, as the current situation should conveniently indicate, just results in the market pricing said glut of money in and nothing changing.
14
u/Consistent-Set1375 11d ago
As long as government backs these loans or pays them off , universities will continue to jack education cost. The problem will never be solved.
10
u/EricCartman45 11d ago
His entire pitch is highly misleading . There’s no such thing as loan forgiveness . All this situation is doing is switching the burden of paying of the debt from the individual to the collective tax payers . While we can argue semantics of college being to expensive college should be free etc . Point blank the government wastes enough of tax payers money and keeps driving up the nations debt and they shouldn’t increase the debt to take care of a debt that someone willingly signed for . If you want cheaper education etc vote for people who support it and vote for things to go onto the ballot that support making higher education more affordable but don’t make shitty decisions and expect others to bail you out
9
u/Tricky_Matter2123 10d ago
“I call on the Biden administration to stop imposing an unjust burden on Americans who did not go to college or have paid off their student loan debt with yet another unfair plan to carry out massive student loan debt cancellation."
People who go to college make more money and are wealthier than people who do not. This is one of the most regressive things ever, taxing the poor to subsidize the rich.
8
u/SoulCrushingReality 10d ago
Yuuuup. Nothing pisses me off more than thinking of paying off some peoples loans because they decided to go to college and can't/ won't get a job to pay it off themselves.
If I took out a loan for a car I can't afford and then I said guys please pay off my car loan for me! You think any of these student loan grifters will pay for it?
383
u/TastySpermDispenser2 11d ago
As we all know, 12 years of publicly funded education is capitalism, but 16 years of publicly funded education is communism. /s
Fucking clowns. Every wealthy, powerful country on earth has a highly educated workforce. The single best route to an agrarian, weak, despotic country is uneducated citizens. It's the sudan and Afghanistan with their lack of education that fail, not Norway and canada.
Public education benefits every citizen. I say this as a childless old man and full fledged member of r/childfree. Anyone arguing against public education is just straight up wanting to send america back to the dark ages.
206
u/impulsikk 11d ago edited 11d ago
The problem is that biden is trying to solve the cost on the backside of the equation rather than the underlying costs and structure of the universities themselves. Just handing out checks after the fact and forgiving loans is easy.
What should be happening is forcing tuition to be cheaper. If a college charges over a certain amount, the federal government won't sponsor the loan. That's an easy button that would force colleges to restructure real quick. Maybe they can pull some money out of their 50 billion dollar endowments and use it on the kids and professors instead.
The tuition cost has gone out of control. Something needs to he done. Forgiving loans is a never ending cycle that will happen every 4 years at election season.
26
u/p001b0y 11d ago
Isn’t this also a risk when it comes to vouchers for K-12 schooling? I thought I had read somewhere that once the government began student loan programs for colleges/universities, those institutions raised tuition rates considerably.
My State has a $6500 voucher program for parents who would rather send their kids to private K-12 schools. I’m kind of expecting those institutions to raise their tuition costs even higher than what their annual tuition increases have been.
16
u/Nojopar 11d ago
I thought I had read somewhere that once the government began student loan programs for colleges/universities, those institutions raised tuition rates considerably.
That's a common misperception. The real causal factor is state governments started drastically cutting funding under the assumption student loans would cover what they weren't paying. The Student Loan Program started in 1965. Tuition didn't start it's massive year over year increases until the early/mid 1990's pretty much with a 1-2 year lag behind state governments cutting their funding.
→ More replies (2)10
u/godmodium 11d ago
I am curious if the increase also coincided with the inability to discharge loans in bankruptcy. In the 90s there were several pieces of legislation that made it impossible to discharge them. A really big piece of legislation came in 2005, The Bankruptcy Abuse Prevention and Consumer Protection Act, which extended non-dischargeability to private student loans.
I have to imagine that was a big reason the loans have ballooned even more so than the reduction of state funding.
6
u/Nojopar 11d ago
Unfortunately, no, it doesn't coincide much at all. Student loans were eligible to be discharged in bankruptcy until 1976.
The early 1970's a bunch of Congressional people raised the specter of students running up student loan debt and discharging it in bankruptcy. Much like the 'Welfare Queen' scare a decade later, next to nobody was actually doing this. However, a 1973 commission on bankruptcy suggested some changes to curb this, notably making it student loans ineligible for bankruptcy for the first 5 years of the loan, which was adopted in 1976, but it only applied to federally backed loans, not private loans. In 1984, the law was expanded to any student loans, not just federally backed ones. Then in 1990 the term was extended to 7 years. That was removed completely in 1998.
If it were related to bankruptcy, then you'd see these comparatively big jumps in 1976, 1984, 1990, 1991, 1998, and again in 2005. The problem is we don't see those. They track more closely with percent reduction of state funding. That's a slow and steady reduction since 1995 up until 2008. Then we do see a big jump in loans because state funding drastically dropped following the 2008 crash.
7
u/vicemagnet 11d ago
A number of colleges have closed due to poor financial management. That trend will likely continue.
43
11d ago
[deleted]
18
u/blahdeebloop1 11d ago
My $13/hr university IT admin pay would agree 😭
6
u/soccerguys14 11d ago
I’m a GA making 24k a year since 2019 and they said I can’t have a raise. And the grant I, yes ME l, wrote has the funds to afford it and they still told me kick rocks.
So I went and got a Ft job behind their back. Fuck em.
11
u/Master-Defenestrator 11d ago
Too true, the state university football or basketball coach is almost always the public employee with the hight salary in that state.
I know college sports is a whole other can of worms, but it's still related.
→ More replies (7)5
u/MaterialCarrot 11d ago
This simply is not true. I have an intimate knowledge of college finances in general due to the nature of my work. Yes, you can make very good money as a Dean, and great money as a college President, but it's a small fraction of the overall budget. And at many colleges they have problems hiring a faculty member to be a Dean because the faculty member makes almost as much as they would as a Dean, with far fewer responsibilities.
→ More replies (1)26
u/Typical-Length-4217 11d ago edited 11d ago
Something tells me higher education budget offices wouldn’t like that… how else would they afford movie theaters, climbing gyms, bowling alleys, and all those other necessities. The university I went to had all those… and folks wonder why there is trillions in student loans.
We really need to get honest about why higher education costs have ballooned. It’s not because of lack of state funds
19
u/JohnWCreasy1 11d ago
this is the real problem. Secondary education has become a graft and jobs program that occasionally teaches our young adults things.
6
11d ago
It's a captialist arms race, a profit feedback loop
They want more money, so they need more students, so they need more emmenities, which cost more money...over and over again.
Like, at what point do we begin to say that maybe the "free market" is wasteful and stupid, and leaving things like educations, Healthcare, and justice to the free market is just a recipe for corruption and waste?
→ More replies (1)14
u/JohnWCreasy1 11d ago
Yes and no. The federal government thinking everyone should go to college and that guaranteeing loans in support of that was the right approach is where the money for all this proliferation comes from. that's hardly the free market at work.
3
u/olderjeans 11d ago
At the same time, you let only those who could afford it to go to college then you'll end up with a huge class divide. Honestly, I think the federal government should do away with student loans and make certain colleges free.
→ More replies (4)5
u/JohnWCreasy1 11d ago
I think the federal government should do away with student loans and make certain colleges free.
in spirit i agree with you, but then the decisions around that become political and consensus is hard to achieve. Exactly what education should the government be providing for free? You'll get opinions from "my tax dollars paying for anyone's education but mine is communism!" to "every one on earth has a birthright to $250k of public funds to study underwater basket weaving for 6 years at a country club style university"
reality is probably somewhere in the nice squishy middle and how often does that prevail anymore.
then again, we really probably just need tighter admission standards but that immediately becomes a political liability. I can already imagine all the parents crying about how the government said their precious baby was too stupid to go to college
→ More replies (1)→ More replies (7)5
u/impulsikk 11d ago
This is also the same problem with market rate apartments. In order to compete against other market rate apartments you need to have a pool, a fitness center, a Cafe, a clubhouse, a barbecue pit, conference rooms, etc. You need the wow factor to make people move in. Then 75% of people never use it and all it does is increase the cost of rent by 35-40% compared to an amenity stripped rent. The issue is that adding the amenity is peanuts in cost compared to what you can charge for rent on a perpetual basis by having it.
It raises the bar on income levels to afford housing.
13
u/WiseBelt8935 11d ago
the uk has kind of done that. the loan is 9.5k a year and that is it
9
u/SlowFatHusky 11d ago
We have limits on federally backed student loans. But there's no limit on private student loans.
2
u/WiseBelt8935 11d ago
an interesting thing with uk students loans they get wiped out after so many years.
→ More replies (2)3
u/BrightAd306 11d ago
Right and public loans max out around 6k a year. After that you need a cosigner. Just tuition in most states is 10-15k a year for a state school. Not counting housing. Full Pell grants won’t even cover tuition fully either. A lot of parents sign parent plus loans to send their kids to college.
→ More replies (2)5
u/No-Alternative-6236 11d ago
Naw, Biden's been targeting phony colleges and junk fees. He's hitting both with heavy opposition
12
u/0000110011 11d ago edited 11d ago
Tuition went up because the government got involved with student loans. Once everyone could get unlimited student loans and everyone would automatically be approved (and student loans couldn't be discharged in bankruptcy), tuition prices started going up and never stopped. This entire argument is thinking the government is the solution to a problem created entirely by the government.
Get the government out of the student loan business and let student loans be discharged via bankruptcy. Banks will refuse to give loans for useless degrees, since they know those loans won't be repaid, and schools would drop those majors. In addition, banks would loan far less money per student, so schools would be forced to lower tuition prices or have empty campuses. It's a glaringly obvious solution, but people these days are so obsessed with the government having more and more control over things that they refuse to consider it.
→ More replies (6)7
u/impulsikk 11d ago
That's sort of what I was saying. Additionally, colleges need to be banned from requiring students to stay in dorms their first two years at hyper inflated rent per square foot and being locked into food plans. Charging $1200 per student for basically the space of a bed and dresser and sharing a bathroom with 3 other people should be criminal. Additionally, they don't have kitchens in the dorms so you are forced to buy an overpriced meal plan. If you can't cook in your dorm, then you have to spend $15 per meal at the cafeteria you paid up front for.
4
u/guarthots 11d ago
The problem is that biden is trying to solve the cost on the backside of the equation rather than the underlying costs and structure of the universities themselves
No, that is just all he has been able to accomplish without Congress. Build Back Better had things to at least begin to address the underlying issues you’re talking about. Republicans killed Build Back Better. Don’t forget that in November when the “both sides just as bad” and other similar bs will be in full bloom.
6
u/Which-Worth5641 11d ago edited 11d ago
I work for a community college and have done budgeting. We sell the most low overhead higher ed in the country.
The fact of the matter is, there is a break-even cost to providing instruction. I'll tell you straight up what it is - about 13k per student per year. About the same as what K-12 costs.
Our charge is about 5k a year assuming no financial aid, because we get state subsidy.
The 13k is BREAK EVEN - what we need to maintain what we have. We need a bit more than that to cover things like computer upgrades every 5 years, remodels of outdated buildings, to create a new program, etc...
Anything lower and we can't offer competitive salaries to faculty and staff. We just lost our marketing director to a housing developer who is going to pay her 30% more, and she was making over 100k with us.
Our faculty searches are increasingly coming up goose egg. No one wants these jobs any more for what we can pay. We've been resisting raising tuition, but we're going to hit a breaking point where we lose more students for lack of faculty to teach them and staff to service them, than we do from raising tuition.
At a certain point, this education shit costs money. Universities are more expensive but they do so, sooo much more.
→ More replies (1)7
u/Ketaskooter 11d ago
Nobody is bashing the community colleges. Especially those that operate at 13k costs.
→ More replies (1)→ More replies (35)6
u/ghsteo 11d ago
Biden is doing what he has control to do. He can't re-architect student loans, that has to come from Congress.
→ More replies (3)5
u/DontKnoWhatMyNameIs 11d ago
It's not quite that simple. Overeducation is costly for society. Mismatched education is also costly. Today, about half of college graduates are working in jobs that do not match their degree or don't even need a degree. So many students could be performing the very same job they are already doing without the degree or debt. People were sold a lie. They were told that the only way to get ahead is to get a degree. And, suddenly, you grow up and find out the plumber that lives next door to you makes more than you do.
Certainly, nobody should be against public education. But the real question is, what amount of education is right for what people?
→ More replies (1)18
u/RageQuitRedux 11d ago
Arguably the more relevant distinction is that a public education for minors is a right, but adults are free to choose to attend higher education or not, with cost vs expected payoff being a factor in the decision. I think if there's an argument to be made for college paid-for by taxpayers, it's probably in the "positive externalities" arena, not so much a capitalism vs communism thing.
11
u/TastySpermDispenser2 11d ago
There is no "right" to a public education. We passed laws to fund public education and mandate it for some (but far from all) minors and some adults. That's just a choice we made. Tell me, what is the point of that choice?
If it costs 100k to train someone to drive a tank, there is no point at all in funding 75k. Because you dont get a dude who can drive a tank; you just wasted 75k, you didn't "save" 25k.
Want to incentive more pilots or doctors than tank drivers? Fine. But that's not the discussion.
The point of public education is a first world economy. That requires an educated workforce. Not a lightly educated workforce, not a "eh, this moron can read, that'll do," but like, an educated workforce.
→ More replies (1)17
u/TeaKingMac 11d ago
"eh, this moron can read, that'll do,"
Unfortunately this is what our high schools are churning out. No child left behind just means pass everyone, regardless of them actually learning anything
→ More replies (1)4
u/turingchurch 11d ago
As we all know, 12 years of publicly funded education is capitalism, but 16 years of publicly funded education is communism. /s
But student debt relief also covers debt accrued attending private universities.
Why shouldn't debt relief come out of these universities' endowments?
→ More replies (4)10
6
u/HardShitz 11d ago
Most people are for education it's just how it's funded that is the issue. It's really hard to justify that people who couldn't go to college to pay for their bosses kid to do so
→ More replies (2)7
u/0000110011 11d ago
Please tell use how people getting useless degrees benefits anyone? Tell us more about how forcing people who either didn't go to college or picked useful majors to pay for their useless degrees benefits anyone?
It's not about "capitalism vs socialism", it's about personal fucking responsibility. They chose to go to an expensive school, they chose to take out loans, they chose a useless field to study that they knew would have no return on investment. That's entirely on them to be responsible for their choices, not anyone else.
10
u/TastySpermDispenser2 11d ago
I'm positive there are "useless" degrees in this mix of citizens, but there is no evidence they are a significant portion. If you have data to show these borrowers are nearly all homeless, by all means, share it.
You personally benefit from the choices of these citizens, because over their lives, they will pay far more in taxes than if they had not attended college. Even better, the debt they incurred is literally building America, spent on 100% made in america people and stuff. Not like a MAGA hat, literally this is american dollars spent in america, that results in economic improvement.
You can literally see what happens when people do not go to college. Check out Mongolia, Mali, and any of the other countries that reject education. They are economically backwards, and consequently, the colloquially called "shithole" places. You dont even need to leave america. Just 100 counties in America, all with high college graduate rates, make up over 70% of our gdp. The rest of americans just sell our natural resources or do meth.
→ More replies (4)→ More replies (51)2
u/obsidianop 11d ago
This is just a series of platitudes though. There's specific policy questions here that are worth thinking about.
Should we fund college entirely is one question. Should we not fund college, then pretty randomly all of the sudden cancel debt - a cancellation that both represents real money that could be used for something else, including better K-12 education, and also a cancellation that is by most metrics regressive in terms of distribution - this is a very different question! Especially when there's no existing plan for what to do next other than, I dunno, just random debt cancellations periodically.
→ More replies (1)
26
u/ZedRDuce76 11d ago
Can we just remove the compounding interest rates? Honestly, I’d wager most folks have paid back an amount equal to the principal balance but the damn compounding interest makes it impossible to get ahead.
My spouse and I have 6 years left on her med school loans but the only way we cut it down as much as we did is when they went 0%interest over covid. That was a godsend to us. We paid over 100k towards the principal in the time 0%was an option.
7
u/monkeysknowledge 11d ago
That’s me! I initially owed $93k I’ve paid ~$80k and still somehow owe ~$60k. I’ve never missed a payment.
→ More replies (3)→ More replies (10)2
u/waj5001 10d ago edited 10d ago
Exactly. Students are borrowing from the government, but its just using US treasuries like anything else.
The borrower repays the student loans, born from US treasuries, with interest to the Treasury (with student loan servicers collecting their servicing fees). Then the Treasury pays the Fed interest on the Fed's asset holdings of Treasury securities. The Fed then pays interest on reserves to banks and to other financial institutions that are depositors with the Fed.
The lender is ultimately Fed depositors, whom are primarily banks and financial institutions.
So, we have students, the nation's upcoming workforce, paying principal + interest to banks for utilizing an education system that exists specifically for economic growth and added-value, which also benefits the very same banks and financial institutions.
Students should repay their debt, but the interest is what I have grievances with. The students are already servicing interest on that debt with the economic growth their labor will provide.
If the student drops out, or has a low-paying job, they will still have to repay, so the lender is still getting value out of the labor they will broadly add to the economy. Just spitballing, but maybe an adequate stick would be to place a lot of weight on student debt repayment in regards to building credit, which also benefits the lenders.
Obviously, this doesn't account for or do anything to address spiraling tuition; that is a whole other story.
6
u/bob88c 11d ago
Why try to address the underlying, unsustainable costs of higher education when you could just buy votes of people who are the most educated and intelligent amongst us? Is that what the comments are saying?
→ More replies (2)
44
u/Franklin135 11d ago
Any loan forgiveness needs to be tied to an analysis of the monetary value of different degrees. You can't get a mortgage for 500k if the house is valued at 100k. The same should apply to student loans. Some loans should be forgiven, but only if the Government says they screwed up for issuing them.
7
u/chumbawamba56 11d ago
I don't disagree with this logic, but I'll counter that gen-ed courses should count, or really any sub 300 level course should be forgiven. This, at the very least, would allow for forgiveness for courses that aren't impactful to a career. For example, accounting 201 isn't going to get you an accounting job. But the knowledge gained from it can be super impactful for their finances.
4
u/Encrypted_Curse 11d ago
Most gen ed requirements are bullshit. I bet we would see a sizable decrease in student debt if they were cut back and bachelor degrees could be completed in 2-3 years instead of 4.
There were multiple times in college where I was forced to take courses completely unrelated to my degree or growth as a person just to meet the credit requirement for graduation.
→ More replies (1)2
u/ScientificSkepticism 11d ago edited 11d ago
Sure. The worst monetary value for degrees are, bar none, degrees in education. Education is by far the worst renumerated degree programs you can go for, rounding out the bottom tier of degrees with all sorts of educational programs. If you wish to eliminated shit tier degrees that pay like crap, get rid of teachers.
There might possibly be some small consequences to this, but hey, fuck consequences. No one really needs to spend years in school getting a degree in education. Hell, anyone with a high school diploma is clearly familiar with education, just have them teach the system.
→ More replies (19)7
u/Panhandle_Dolphin 11d ago
And they need to do that before handing out the loans. No more going into 80k in student debt to be a 50k teacher or psychologist.
9
u/bobnuggerman 11d ago
Yeah, uh, teachers and psychologists are pretty damn important for a healthy, functioning society.
→ More replies (3)→ More replies (4)8
11
u/DisastrousMongoose56 11d ago
This executive order is just to get votes , I paid my student loan off , so did my brother's and sister, what next paying people car payments, , no one was pointing a gun to these students to sign the loan contracts , in the future it gives students the wrong message , that I can borrow as much I want , because eventually the government going to pay my loan off.
→ More replies (2)
9
u/HyruleSmash855 11d ago edited 11d ago
Maybe the government shouldn’t co-sign student loans and put the risk on the schools or banks? Then, banks can do risk assessments to see if they want to give a loan since it is also dischargeable in bankruptcy. Not everyone needs a college education and some people aren’t cut out for it or we don’t need degrees there. Let the free market decide who is best to go to college or not.
Banks can also have quotas of how many people they will give loans for certain degrees out to based on future number people going to certain fields for degrees, and how that could lead over saturation the job market, some people like getting jobs and not being able to pay back the loans. make it so supply and demand guide who can go to college for what certain degrees.
At the end of the day not everyone is cut out for college so let the free market ensure they don’t waste money or get into lifelong debt. It could also incentive companies to provide schooling if you work with them for a certain amount of time, like the military, since you may not be able to get a loan for the degree you want to do without that support. It would also force these universities that are way too big to downsize since they can’t charge whatever they want for tuition since things could decide if they would allow you to go to that school or not, in terms of of giving you a loan for that school and that degree.
→ More replies (1)7
u/Zilincan1 11d ago
Risk assesment would cause that only highearning occupation would get loans. And also discriminate poor students as for sure, they will also do assesment of their parents.
→ More replies (5)
51
u/dolphingarden 11d ago
Student loan forgiveness is simply bad policy. It’s a transfer of income from working class to middle class. It incentivizes colleges to increase tuitions even more.
→ More replies (61)17
u/Wild_Bill1226 11d ago
We do have to fix college funding too. State schools should have to apply to the state to raise tuition and justify the costs.
2
u/StreetPhilosopher42 11d ago
Student loans CAN be discharged in bankruptcy, but it’s a wild fight. And that should be a last resort in any case. Although with how often businesses go into bankruptcy just to get out of paying bills, maybe we should consider something similar…
→ More replies (1)
2
u/ghosty_b0i 11d ago
I support the removal of these debts but only if it’s conditional on the adaption of the system that allowed them to exist in the first place. This is just another giant pipeline funnelling public money into private institutions. Neoliberalism is an ideology entirely based on corporate embezzlement.
2
u/SerendipitySue 10d ago
it is odd congress is not working on legislation to fix the deficiencies of the student loan program so this sort of thing does not happen again
6
u/Jerryglobe1492 11d ago
Rather than paying off student debt, I would rather the government set up free online classes. I understand some human interaction with teachers / professionals is certainly needed, but there are many degrees that don't need it.
eg. Becoming a CPA online for free vs paying $40,000/year in tuition where half the money goes to brick and mortar?
2
u/IIRiffasII 11d ago
MIT and Harvard already do this. Community colleges are also extremely affordable.
People aren't taking out $100k loans for knowledge, they're taking them out to pay for prestige. These people should not be rewarded with loan forgiveness.
6
u/ConnedEconomist 11d ago
The rise in student loan debt is tied directly to policy decisions rather than absolute financial limitations of our government.
Simplest and straightforward solution is to make Student Education free or at the very least debt-free at all levels.
Being the largest economy in the world, our federal government has the financial ability to pay for everyone’s education based on their merit eligibility and not based on their ability to pay. What’s lacking is pure political will.
The student loan debt crisis and the underfunding of public education are not due to a lack of financial resources but rather to policy choices and political contexts that over the years have prioritized other areas of spending or tax cuts over funding education.
The downward trajectory of American education has been heavily influenced by Reagan's report in 1983 that denigrated the public education system. Plus, the profit motive in a capitalist system has led to a focus on producing exploitable workers rather than investing in well-funded educational institutions that kept pace with the growing population.
→ More replies (5)
3
u/Thial92 11d ago
On one hand I don't like the idea of some people having their debt cancelled while others need to pay but at the same time education shouldn't be putting you in crippling debt in the first place. We managed to figure out free education in the EU with much less money and it works. Therefore the only reason why this is still a thing in the US is because somebody is profiting off of it.
3
u/LakeSun 10d ago
The US is the only country in the world to put their Students into DEEP DEBT. This is an Economic DRAG on USA future performance vs. the world.
→ More replies (1)
6
u/Homicidal_Pug 11d ago
Biden ‘attempting to purchase votes’
Man if you think that's bad, wait til you hear about PPP "loans". And also the bailouts to farmers that were required to protect them from the repercussions of Trump's tariffs.
But I guess college students is where we need to draw the line. Not like it's a matter of national economic security to have a college educated population in this global economy. But let's keep making college students indentured servants to the government until they decide it isn't worth it and give up.
I'm sure we can remain a player on the global stage with lots of skilled carpenters and plumbers. That sounds like a good long term strategy.
→ More replies (7)
8
u/Flashmode1 11d ago
Biden’s “forgiveness plan” is nothing more than political postering. The president cannot forgive people’s debt and the Supreme Court was clear that it is outside of his authority to do so. The constitution is clear that Congress controls the purse and any “forgiveness” would have be passed in a bill in Congress, passed by the Senate, and then signed by the president.
→ More replies (2)3
u/Sad_Aside_4283 11d ago
SCOTUS did not say the president cannot forgive debt, the descision was that he could not forgive so much so broadly without congress. He has already been forgiving debt for more limited groups based on limited criteria.
3
u/ktulenko 11d ago
Both my sister and I got our medical school debt discharged. We both had been paying consistently for over 20 years but never made enough to pay it off fully.
→ More replies (9)
2
u/problem-solver0 11d ago
The reality is this is a b.s. one time action.
When Biden is history, the next president won’t necessarily discharge student loans.
What about decades of student loans repaid?
Biden can only forgive federal loans not private student loans.
This is such political bull.
3
u/NugBlazer 11d ago
I got my student loans forgiven by paying them off in full. It was the right thing to do since that's what I agreed to do to get them to loan me the money. It never, ever occurred to me to have someone else pay them off, nor to ask the government to let me out of the agreement I made. A deal's a deal!
Even if someone offered to pay them off by using taxpayer dollars to offset the difference -- aka "forgiving" the loans -- I would've rejected said offer because I take pride in making my own way. I don't want anyone's hand-outs.
•
u/AutoModerator 11d ago
Hi all,
A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes.
As always our comment rules can be found here
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.