I was a low-information student, first to go to college in family. Once I decided to go however, the entire equation was what college could I afford and the living costs. Loans never felt like an option. Because of that, I basically was forced to choose a state school and live off campus in cheap housing.
Plus side is I came out with no debt, drawback is I didn't have much fun.
I guess that biases my thinking, but student debt forgiveness seems ridiculous for most all of the people I know who went deep in debt for a non-economically practical degree.
If that's your perspective, I can understand why it would seem ridiculous. But consider other perspectives. Think of all the people who weren't the first in their family to go to college.
Imagine that you're 18, and everyone you know tells you that you need to go to school to get a good job. People are competing to get into better schools, and you get admitted to a relatively nice private college with a beautiful campus. Your parents went to a similar college, graduated, got jobs, started a family, and are encouraging you to do the same thing.
Except now, college is something like 5x as expensive as it was for your parents, teachers, and advisors, adjusted for inflation. Your job prospects after college are worse, too. Maybe you manage to pull in $15/hr and you think it's pretty good, but meanwhile rent is 50% higher than it was for your parents and teachers.
You feel like you were lied to, betrayed, and you feel trapped. As a society, we created this problem. I'm not trying to take away agency from the people who chose to take out loans and study whatever they felt like, but we did send an army of teachers and academic advisers after our children telling them that college is what you need, and loans are how you pay for it.
The idea of a "non-economically practical degree" is a bit of a red herring, here. It doesn't matter as much which degree you get as an undergraduate. Sure, there are a few high-paying degrees like geology but in many fields you can get work with a range of degrees. Based on what I was majoring in, people would ask me if I was going to go into teaching, as if that were the only option for someone in my field. Yet here I am, working in industry.
It is the result of deliberate policy decisions, such as excluding student debt from being cleared through personal bankruptcy.
These deliberate policy decisions magnify the advantage that accumulated wealth has on success. Deserving outsiders are thwarted from fulfilling their potential in the so-called "meritocracy", so that by and large social mobility is stilled and American "meritocracy" becomes a first-order approximation of aristocracy.
When the policy decisions which have led to this crisis are so vast and immoral, why not consider an action as dramatic as forgiving all student debt?
> why not consider an action as dramatic as forgiving all student debt?
What about folks who couldn't afford college because they actually had to work to make money? The ones who were busting their ass 60 hours/week while their better off (and less financially responsible) peers partied on cheap government money in college? If you don't think there is already a huge amount of resentment in a sizable minority of the "working underclass" on this point you are mistaken.
As one of those guys who had to forego college in favor of starting a career I'd be absolutely livid. A relatively spoon-feed population gets yet another handout? The below market rate debt that you could only get due to taxpayer guarantee wasn't enough? That's what the optics will look like to the vast majority of the country. Most of the country will never have the privilege that a kid with a 4 year college degree already has had in their life - debt or not.
Talk about creating winners and losers. Reading comments like this on HN (and other places with similar demographics) makes me realize how utterly socially disconnected as a society we are. It's downright scary at this point.
> why not consider an action as dramatic as forgiving all student debt?
As someone who would like to see public education be free for future students, I’ll give you 3 great reasons why rewriting the past is an awful idea:
1. It would treat someone who worked throughout college (and possibly learned less and earned worse grades because of it) in order to borrow less - and someone who didn’t even attend because they couldn’t service the debt - the same as someone who borrowed heavily. It rewards a poor decision, one that others handled better.
2. It would treat someone who took on $30k/year in debt for a mediocre private school the same as someone who took on $10k/year to go to an in-state school (or nothing because they worked), or $30k/year to go to a top private school. At least 1 of those choices is a low-return decision.
3. There’s a lender on the other side of every transaction and they may not have had anything to do with the policy decisions you disagree with.
Finally, the paper covers many possible implementations. If by “forgiveness” you mean that the government should negotiate a payment to lenders (so taxpayers are paying off everyone’s loans), here’s why that shouldn’t happen. There’s a much stronger argument that future education from public universities should be free.
Until that happens, given finite resources, any money that would go towards debt should go towards future students, not retroactively rewarding what may well have then been a poor decision. Pay/fund public colleges, not lenders.
Basically, any retroactive move rewards a lot of people who made what were then poor choices, and penalizes those who didn’t. Focus on making (public or otherwise verifiably cost-effective) education cheaper or free for future students.
Student lending wouldn't work if loans were simply dischargeable in bankruptcy. The deliberate policy decision here was to ensure that tuition lending would be available to pretty much everyone regardless of cosigning family wealth.
Before the HEA, loans were dischargeable, but only after being in repayment for 7 years. As a practical matter, young pre-family college graduates in the workforce couldn't discharge loans in bankruptcy.
Is this the most effective and most moral way to spend a trillion dollars? The benefits of such a policy would accrue primarily to households that don't really need financial assistance, and would do little to help those who really do.
I imagine federalizing municipal pension obligations would be a better idea.
It would have to follow some sort of extremely firm commitment to overfund future pensions though (future residents getting a rebate from previous taxpayers is way less hazardous than future residents getting taxed for current services).
I can’t say it’s the most effective or most moral way to spend a trillion dollars. I can say it’s much more moral and effective than spending a trillion dollars on waging useless wars in Iraq and Afghanistan. It’s much more moral and effective than giving trillions to the very wealthy in the form of tax cuts.
Higher education is a public good. It used to be the case that tuition was around 1/3 the cost of running a university. Now it’s north of 50%. It’s not good for society to have some many people in a lot of debt in their 20s. The so called greatest generation in American history, at least partly, got their greatness from free higher education.
Maybe this isn’t the best option but something needs to be done because the current system isn’t sustainable.
Journalists love welfare for upper middle class people. Mortgage interest deductions on your $1 million McMansion? Forgiveness of your $250,000 law school loans? Bring it on!
Our student loan system is fine. Under PAY-E, you’re payments are capped at 10-15% of your income, and high interest rates means you recover some extra from high income people that can be used to defray the costs to lower income people. It needs tweaking to make sure it stays in the black, but that’s it.
The really gross thing here is the insane moral hazard that universities represent in this feedback loop.
Universities, particularly through the media, exercise strong influence over public discourse about education spending. They also benefit massively from that spending. Canceling student debt without penalizing that feedback loop likely accomplishes nothing or a negative.
Whether you forgive student debt or not, universities keep their huge gains that they've pumped into infrastructure, administrators, and influence.
My solution: Make it dis-chargeable in bankruptcy. Since it's a for profit loan--albeit at lower rates, especially compared to 20+% a year credit cards--the lender took the risk. The next time, they'll price this in and think twice before approving every loan.
The borrower that took the loan--you signed it, right, and you were 18+ years old ? --makes a calculated decision on whether to file for bankruptcy or not. It has costs for the filer, at least for 7 years, and possibly for life (some jobs will ask if you ever filed for bankruptcy).
Other than that, who cares: you are a big bank...sometimes you win, sometimes you lose. You should treat a bank like it treats you, if you can get away with it, of course.
I think there's too much moral hazard there. A young person, with no real assets (you can't repossess a degree) would probably decide bankruptcy is a relatively good option, immediately after they graduate. And so the interest rates spike to cover the risk, which makes bankruptcy an ever better option.
This is one of things, like corporations being able to sue governments, that sounds horrific but has relatively clear benefits because if the risk is too high the business deal won't happen. A classic prisoner's dilemma, and the answer to that is always to change the rules of the game to try to make cooperation pay for both parties.
But but... what about $rich_schooling when they declare bankruptcy? Those doctors are screwing us all over!
Which, the above happened in the late 70's and early 80, as bankruptcy protections were whittled away for everyone, because of a small percentage of bad actors.
The doctor issue seemed simple: a judge has to approve the bankruptcy. And they can make a determination that it was happening to ignore scholastic debt and cancel the doctor's license. But I guess the "applies to every american" was much more profitable.
After person graduates, they must use x percent of their income to pay student debt. In this way the student avoids the debt trap in the case of unemployment, or personal difficulties. Some may be able to pay the debt, some may not, but it's the government that shares the risk and has stake in seeing people getting the education they need.
Implementation can happen trough government either guarantees for the loan or direct loans from the government.
We have this system in the UK, you pay 9% on everything above 21k, and the debt is written off after 25(?) years. It’s a stealth tax on the poor/low middle earners. Anyone who can afford to not take out the loans ends up with a 9% pay rise. Anyone who can afford to pay them back early (high earning graduates) end up saving. Then you end up with the majority of people who will end up paying back many many times the debt over in interest.
A fairer option for all would be a flat graduate tax where all graduates pay x% of their earnings over a threshol.
Sweden has that system. The loans are also very low-interest (for a while the interest on my loan was lower than the interest on my basic savings account) [edit: just checked, the interest for 2018 is 0.13%. my savings account is 0.20%]
Sweden also has free tuition, and small living stipends for all (in my time it basically covered rent and nothing else), so your student debt is only for living expenses. I had classmates who took on no student debt by working all summer and living frugally.
We must cancel everybody's debt for the economy's sake, but we also have to do it in a fair way. Thankfully, we have Steve Keen, who has already worked out a solution:
Cancelled debt is usually taxed as income. Which would simply create another liability.
One alternative, is to securitize student obligations. they have avalue which is non-zero. And allow them to be traded in an exchange. It would provide the reverse incentive that certain majors or career paths would obtain better terms.
But an even better option is to simply allow for direct corporate sponsorship at the undergrad level. If Apple needs 300 extra kernel hackers by 2022. They should begin recruiting right at the high school level. Offering full tuition, stipend and guaranteed employment upon successful graduation.
In other words, transfer education "risk" away from students. And provide some insurance mechanism in case of failure.
I'm OK with cancelling anyone's student debt, IF they also get their degree CANCELLED as well. As in, when an employer calls to verify their resume, the institution will have to say they DO NOT have what they claimed.
Otherwise, what about the many people like me who didn't do something so stupid? We can't go back in time. They end up with a free degree for being stupid, we end up with nothing for being responsible?
This seems dramatic. Why not just cancel the Clinton administration's sinister provisions Higher Education Amendments of 1998 (the 1998 HEA) which made student debt non-dischargeable in bankruptcy? They sold out all the students with that.
Student debt is a nonsecured loan (you can't repossess their education/degree if they default). The only reasonable way to get what you're asking is to allow lenders to vet whom they are lending to. In other words, allow lenders to deny a loan to someone with no assets who wants $150,000 to study art history.
When people graduate from college, they basically have nothing yet. They haven't had time to acquire anything. This would make it trivial to get free education at the taxpayers' expense. Declare bankruptcy on graduation day, and then move on with your life.
I find it difficult to understand how taking money from people who earned it, even if used to "forgive" loans borrowed with expectation of repayment, is a means to increase economic activity. How is this different than the broken window fallacy? The students, loans forgiven, are now going to spend their former loan payments, sure, but the former recipients of those payments will not be spending them. Sounds like zero-sum game with a feel good motive.
This article is clearly wishful thinking, but it struck me that they want to do a big debt forgiveness thing without worrying about why people rack up these debts and just leave that as something to be figured out after we've done this big expensive thing.
People always bring morality into these discussions which then makes discussion difficult, since it becomes about how we all feel about it.
Rather than thinking about how much it's 'right' or 'wrong' to forgive debt, let's try to keep focus on the effect it would have on society. Positive? Negative? And, if it truly is deeply immoral to forgive debt, what effect would this have on society? Would the problems introduced thereby outweigh the benefits?
No, this is just plain stupid. You (wherever student debt is so common) must prioritize early school education about personal finance and loan consequences.
[+] [-] gedy|8 years ago|reply
[+] [-] klodolph|8 years ago|reply
Imagine that you're 18, and everyone you know tells you that you need to go to school to get a good job. People are competing to get into better schools, and you get admitted to a relatively nice private college with a beautiful campus. Your parents went to a similar college, graduated, got jobs, started a family, and are encouraging you to do the same thing.
Except now, college is something like 5x as expensive as it was for your parents, teachers, and advisors, adjusted for inflation. Your job prospects after college are worse, too. Maybe you manage to pull in $15/hr and you think it's pretty good, but meanwhile rent is 50% higher than it was for your parents and teachers.
You feel like you were lied to, betrayed, and you feel trapped. As a society, we created this problem. I'm not trying to take away agency from the people who chose to take out loans and study whatever they felt like, but we did send an army of teachers and academic advisers after our children telling them that college is what you need, and loans are how you pay for it.
The idea of a "non-economically practical degree" is a bit of a red herring, here. It doesn't matter as much which degree you get as an undergraduate. Sure, there are a few high-paying degrees like geology but in many fields you can get work with a range of degrees. Based on what I was majoring in, people would ask me if I was going to go into teaching, as if that were the only option for someone in my field. Yet here I am, working in industry.
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] RickJWag|8 years ago|reply
[+] [-] rectang|8 years ago|reply
https://pixel.nymag.com/imgs/daily/intelligencer/2018/02/09/...
It is the result of deliberate policy decisions, such as excluding student debt from being cleared through personal bankruptcy.
These deliberate policy decisions magnify the advantage that accumulated wealth has on success. Deserving outsiders are thwarted from fulfilling their potential in the so-called "meritocracy", so that by and large social mobility is stilled and American "meritocracy" becomes a first-order approximation of aristocracy.
When the policy decisions which have led to this crisis are so vast and immoral, why not consider an action as dramatic as forgiving all student debt?
[+] [-] phil21|8 years ago|reply
What about folks who couldn't afford college because they actually had to work to make money? The ones who were busting their ass 60 hours/week while their better off (and less financially responsible) peers partied on cheap government money in college? If you don't think there is already a huge amount of resentment in a sizable minority of the "working underclass" on this point you are mistaken.
As one of those guys who had to forego college in favor of starting a career I'd be absolutely livid. A relatively spoon-feed population gets yet another handout? The below market rate debt that you could only get due to taxpayer guarantee wasn't enough? That's what the optics will look like to the vast majority of the country. Most of the country will never have the privilege that a kid with a 4 year college degree already has had in their life - debt or not.
Talk about creating winners and losers. Reading comments like this on HN (and other places with similar demographics) makes me realize how utterly socially disconnected as a society we are. It's downright scary at this point.
[+] [-] troydavis|8 years ago|reply
As someone who would like to see public education be free for future students, I’ll give you 3 great reasons why rewriting the past is an awful idea:
1. It would treat someone who worked throughout college (and possibly learned less and earned worse grades because of it) in order to borrow less - and someone who didn’t even attend because they couldn’t service the debt - the same as someone who borrowed heavily. It rewards a poor decision, one that others handled better.
2. It would treat someone who took on $30k/year in debt for a mediocre private school the same as someone who took on $10k/year to go to an in-state school (or nothing because they worked), or $30k/year to go to a top private school. At least 1 of those choices is a low-return decision.
3. There’s a lender on the other side of every transaction and they may not have had anything to do with the policy decisions you disagree with.
Finally, the paper covers many possible implementations. If by “forgiveness” you mean that the government should negotiate a payment to lenders (so taxpayers are paying off everyone’s loans), here’s why that shouldn’t happen. There’s a much stronger argument that future education from public universities should be free. Until that happens, given finite resources, any money that would go towards debt should go towards future students, not retroactively rewarding what may well have then been a poor decision. Pay/fund public colleges, not lenders.
Basically, any retroactive move rewards a lot of people who made what were then poor choices, and penalizes those who didn’t. Focus on making (public or otherwise verifiably cost-effective) education cheaper or free for future students.
Also, here’s a deep link to the paper PDF: http://www.levyinstitute.org/pubs/rpr_2_6.pdf
[+] [-] tptacek|8 years ago|reply
Before the HEA, loans were dischargeable, but only after being in repayment for 7 years. As a practical matter, young pre-family college graduates in the workforce couldn't discharge loans in bankruptcy.
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] tptacek|8 years ago|reply
[+] [-] montrose|8 years ago|reply
[+] [-] maxerickson|8 years ago|reply
It would have to follow some sort of extremely firm commitment to overfund future pensions though (future residents getting a rebate from previous taxpayers is way less hazardous than future residents getting taxed for current services).
[+] [-] yequalsx|8 years ago|reply
Higher education is a public good. It used to be the case that tuition was around 1/3 the cost of running a university. Now it’s north of 50%. It’s not good for society to have some many people in a lot of debt in their 20s. The so called greatest generation in American history, at least partly, got their greatness from free higher education.
Maybe this isn’t the best option but something needs to be done because the current system isn’t sustainable.
[+] [-] rayiner|8 years ago|reply
Our student loan system is fine. Under PAY-E, you’re payments are capped at 10-15% of your income, and high interest rates means you recover some extra from high income people that can be used to defray the costs to lower income people. It needs tweaking to make sure it stays in the black, but that’s it.
[+] [-] Turing_Machine|8 years ago|reply
At this stage, it's about damage control.
[+] [-] maehwasu|8 years ago|reply
Universities, particularly through the media, exercise strong influence over public discourse about education spending. They also benefit massively from that spending. Canceling student debt without penalizing that feedback loop likely accomplishes nothing or a negative.
Whether you forgive student debt or not, universities keep their huge gains that they've pumped into infrastructure, administrators, and influence.
[+] [-] username8884547|8 years ago|reply
The borrower that took the loan--you signed it, right, and you were 18+ years old ? --makes a calculated decision on whether to file for bankruptcy or not. It has costs for the filer, at least for 7 years, and possibly for life (some jobs will ask if you ever filed for bankruptcy).
Other than that, who cares: you are a big bank...sometimes you win, sometimes you lose. You should treat a bank like it treats you, if you can get away with it, of course.
[+] [-] ZeroGravitas|8 years ago|reply
This is one of things, like corporations being able to sue governments, that sounds horrific but has relatively clear benefits because if the risk is too high the business deal won't happen. A classic prisoner's dilemma, and the answer to that is always to change the rules of the game to try to make cooperation pay for both parties.
Not that both systems couldn't be improved.
[+] [-] crankylinuxuser|8 years ago|reply
Which, the above happened in the late 70's and early 80, as bankruptcy protections were whittled away for everyone, because of a small percentage of bad actors.
The doctor issue seemed simple: a judge has to approve the bankruptcy. And they can make a determination that it was happening to ignore scholastic debt and cancel the doctor's license. But I guess the "applies to every american" was much more profitable.
[+] [-] nabla9|8 years ago|reply
After person graduates, they must use x percent of their income to pay student debt. In this way the student avoids the debt trap in the case of unemployment, or personal difficulties. Some may be able to pay the debt, some may not, but it's the government that shares the risk and has stake in seeing people getting the education they need.
Implementation can happen trough government either guarantees for the loan or direct loans from the government.
I think Sweden has this kind of system.
[+] [-] maccard|8 years ago|reply
A fairer option for all would be a flat graduate tax where all graduates pay x% of their earnings over a threshol.
[+] [-] kalleboo|8 years ago|reply
Sweden also has free tuition, and small living stipends for all (in my time it basically covered rent and nothing else), so your student debt is only for living expenses. I had classmates who took on no student debt by working all summer and living frugally.
[+] [-] dmitrygr|8 years ago|reply
[+] [-] c8d3f7b49897918|8 years ago|reply
http://www.ideaeconomics.org/a-modern-jubilee/
[+] [-] indescions_2018|8 years ago|reply
One alternative, is to securitize student obligations. they have avalue which is non-zero. And allow them to be traded in an exchange. It would provide the reverse incentive that certain majors or career paths would obtain better terms.
But an even better option is to simply allow for direct corporate sponsorship at the undergrad level. If Apple needs 300 extra kernel hackers by 2022. They should begin recruiting right at the high school level. Offering full tuition, stipend and guaranteed employment upon successful graduation.
In other words, transfer education "risk" away from students. And provide some insurance mechanism in case of failure.
[+] [-] criddell|8 years ago|reply
It's hard for me to express, but I really don't like this idea. It turns education into training.
[+] [-] wonderflpancake|8 years ago|reply
Otherwise, what about the many people like me who didn't do something so stupid? We can't go back in time. They end up with a free degree for being stupid, we end up with nothing for being responsible?
[+] [-] threepipeproblm|8 years ago|reply
[+] [-] defen|8 years ago|reply
[+] [-] dmitrygr|8 years ago|reply
[+] [-] stmfreak|8 years ago|reply
[+] [-] bfuller|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] Eridrus|8 years ago|reply
[+] [-] TYPE_FASTER|8 years ago|reply
[+] [-] rendall|8 years ago|reply
Rather than thinking about how much it's 'right' or 'wrong' to forgive debt, let's try to keep focus on the effect it would have on society. Positive? Negative? And, if it truly is deeply immoral to forgive debt, what effect would this have on society? Would the problems introduced thereby outweigh the benefits?
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] rehemiau|8 years ago|reply
[+] [-] RickJWag|8 years ago|reply
People need to make responsible decisions, that's all.