An alternate headline for this story might be 'Students temporarily relieved of crushing lifelong debt slavery actually able to get mortgages and achieve a basic level of human dignity that would have been commonplace 50 years ago'.
The education system needs a stupendous amount of reform, not the least of which is the ridiculous debt load we put on young adults in what should be the years they're laying the foundation for a productive, happy life.
I'd encourage looking at actual average student loan debt, which in my reading is significantly different than the typical online narrative. According to the DoE[1], in 2018 the average debt of a public university Bachelor's degree completer was $26,100. That's not 'lifelong debt slavery', that's a Toyota Corolla.
To be fair this is debt they take on willingly. Now if the government should be letting 18-year olds take on huge amounts of debt without understanding the long term consequences...thats a different story.
50 years ago was a pretty special time, if we're being honest. The ratio of home prices to income was an all time low. Go back to the 50s and it was the more typical 4x ratio. Clearly the 6x and 8x bubbles we've recently experienced aren't sustainable, but we're also probably not going back to the relative utopia that was 1970s house prices.
Universities are part of the problem in my opinion.
With enrollment trending down many colleges appear to focus on making up the loss through raising tuition.
To attract students the universities invest in prettier buildings and more "college experiences" to attract students.
Meanwhile information is cheaper and more easier to replicate than ever in human history.
Books ought to included in tuition, a good professor can note any updates needed.
Lectures ought to be digital. Let classroom time be for students to work or ask questions or discuss. Saves both students and professors money.
Integrate and use/teach open source software. This would lower costs to students and long term lower the technology costs to the university (especially if universities are aiding each other in development).
That's three core parts of modern college that can and ought to be reduced in costs.
There's no (good) excuse for academia to not do this in my opinion and if they (universities) fail to keep up with the rate of opportunity sadly I believe we'll see a lot of knowledge lost.
I'm not going to argue with your alternate headline. Whether its yours, or the one in the article, or something somewhere in between doesn't change from the fact that we have people who took on debt because another debt is paused.
And that's where I have a problem. If I pay $613 per month for the next 10 years (https://www.forbes.com/advisor/student-loans/average-student...), and all of the sudden that gets paused, I will not go out and think: oh let me get a new car with on a 5 year, $400 / month note.
I don't know how anyone can support student loan forgiveness. it's simply a fact that college graduates and people who even partially completed college make more money than those who never attended. there's really no argument that would justify forgiving peoples' loans vs giving the same amount of money to the poorest people in reverse order (poorest getting richer). if for some odd reason the poorest people also happened to be college participants (though to be clear, this is not true) then fine; still no broad student loan forgiveness required. I've asked people who support student loan forgiveness for their response and I get blank stares.
and yes, we shouldn't give the rich tax breaks either.
What about interest rate deduction?
I have dutch student debt, 44000 originally. But the interest rate is 0% which makes paying back decently doable. Besides that, there are hardship clauses which can yield partial debt forgiveness if my income were to fall.
These measures make the debt easily manageable. At 7% interest the debt would suck.
The final goal behind this is to get more people into higher education, not incone distribution.
That "partially completed college" statistic includes people who received certificates (without graduating with a degree).
I believe parents who took out loans for since deceased children should be forgiven. Not for economic reasons, but because every single month they pay the bill they are gut-punched anew.
I believe students (and parents of) who became disabled, such that they could not work in the field they went to school for, should have their loans forgiven, as debt has a particular psychological toll on the disabled compared to the abled.
When it comes to giving money to poor people circumstances matter. Some of the poorest people will be members of cults that provide for all of their needs, for instance.
Loan forgiveness is a temporary solution to appease voters with debt. It doesn't solve the root cause because in 10 years, the number of people with crushing student debt will be back to up to the same levels.
You solve the problem by re-allowing student debt to be dischargeable through bankruptcy again. This is the root cause of the problem. The fact Clinton and Bush allowed this to happen is disgusting. All it did was allow banks to give loans to EVERYONE without any fears. Then schools could raise rates knowing kids would still pay the predatory prices, and that's how we get into the mess we are in now.
By allowing student debt to be dischargeable, banks are now taking a risk of losing their money, which means that they won't give loans to people who frankly are wasting their money. A parent at my workplace was asking how she could afford to pay her daughter's $80k/yr tuition for a sociology degree. The fact that this completely stupid idea was even being considered shows the depths to which society is fucked up.
Banks have made no new loans since 2010, and apparently carried none of the credit risk even before then -- so there's never been any private-risk based discipline to granting of loans.
>Initially, private banks provided capital for students loans, with parameters set by the government under the FFEL Program. These loans were owned by lenders and guaranteed by the government; in the case of default, lenders were reimbursed. In 1992, the DL program was created under which loans were directly made by the US Treasury. For many years, both the FFEL and DL programs existed side by side, and colleges could choose the source of funds. Despite the different source of funds and ownership, FFEL and DL loans were otherwise identical in terms of limits, interest rates, and repayment plans available, and many students likely were unaware of the different source of funds when taking loans through their schools’ financial aid offices. In 2010, following analysis and a bribery scandal of college administrators, the Health Care and Education Reconciliation Act of 2010 eliminated new loans under the FFEL program. Since 2010, all federal student loans have been made under the DL program.
You solve the problem by cutting back the availability of student loans.
Freely available student loans have pumped enormous amounts of money into the system, and tuition prices increased accordingly, driving the need for yet more loans.
In the end what we have is young people taking on unthinkable amounts of debt to get the same level of education that they did 40 years ago, but now with nicer student centers and bigger stadiums (and, somehow, instructors who are paid less than before).
If we cut off the endless supply of loans, and instead use limited grants to continue to foster diversity, we can reverse the cycle. Schools will once again have to compete on cost.
Then we can talk about loan forgiveness for those who were victimized by the current system. But doing the forgiveness before fixing the system only makes the problem worse.
> But the introduction of the U.S. Bankruptcy Code in 1978 caused a major shift with regard to student debt.
> At the time, the intent of Congress was to protect educational loans from bankruptcy abuse. The amended bankruptcy code stated that funds received as an educational benefit would no longer be discharged unless the borrower could demonstrate undue hardship, which is no easy feat.
Loan forgiveness is not a workable solution, it rewards one generation of students at the expense of the older folk who have paid and the younger folk who are not in college yet.
The former is a sunk cost fallacy, and the latter is solved by changing how education is financed -- making public universities free like most of the developped world.
I took up debt to study at the graduate level, I won't use that past painpoint to defend forcing people to enter into debt now.
It's especially not workable if it doesn't involve a correction to the system that let the debt accumulate to begin with. It just becomes an expectation for future generations. If anything it'll drive the debt higher, faster.
> it rewards one generation of students at the expense of the older folk who have paid
Hmm... by that reasoning, wouldn't people who default on SBA business loans or FHA/VA home mortgages be doing so "at the expense of those who have paid"?
And yet they're allowed to file bankruptcy. What's different?
As I observed before, in the case of a small business there often aren't any recoverable assets, or only a small amount. In the case of real estate... I saw a story the other day where a San Francisco office building changed hands for only 25% of its price the last time it was sold, and I don't think we've seen the bottom there by any means.
The older generation didn't pay- parents' ability to pay is factored into student aid decisions. Instead the older generation enjoyed lower tax rates by not funding the colleges and grants that they enjoyed.
Where is there a source - is there a source - for less aggregated student loan data?
For example, not everyone gets the same amount loaned. What does that distribution look like? Map it to higher edu schools? Map it to tuition? Map it to high schools? Etc.
The point is, there are a lot of students and therefore a lot of debt. Naturally, such a big pool is going to have outliers. When the media parades a student loan "victim" is that (e.g.) $100k of debt typical or atypical?
> Most student loan borrowers owe less than $25,000 on their loans. The median amount of education debt in 2021 among those with any outstanding debt for their own education was between $20,000 and $24,999. One-quarter of student loan borrowers had less than $10,000 in outstanding student debt (figure 40). Student debt balances vary across different demographic groups. Borrowers with an income of less than $50,000 a year were more likely to carry lower balances of student loan debt.
This is a firm misunderstanding of the issue at hand.
The real problem is less the large universities but the area under the curve. Notably...community colleges. These ask for only ~$20k for a degree but the degree is sold to be worth more than it is (virtually valueless) and the Finance departments basically shovel students in, have them fill out a form, and tell them "you were approved" and the student never sees the interest rates, payments, or rough estimated profit of the degree. A large college has to answer to regulatory pressure..the little ones though are the real evils.
As someone who has is currently enjoying the pause (on PLUS loans for my daughters' college- on a side note whatever happened to college being the parents' responsibility) the ideal solution to me is to resume payments with either no interest or relatively low interest (the rate was 7-8% even when credit was cheap). That way the loans are being paid back, but the students are not immediately burdened with crushing debt payments (basically the equivalent of a pretty low car payment).
This seems so blindingly obvious to me that I'm really worried I've become totally disconnected from reality that no one else has floated the idea.
Borrowers with government owned loans had those loans paused during the pandemic, and took on more debt. Borrowers with loans that were not government owned did not have those loans paused during the pandemic, and did not take on more debt.
Why should I pay for the fire department when my house has never caught on fire? Why don't we instead have the fire department directly bill the property owners after they put out a fire?
Frankly I think the problem of student debt is so large and so burdensome on the younger population that I don't really care if they're considered "underperforming assets" or whatever. The more money this generation spends on debt the less they have to buy houses and have children, and I personally will benefit from them being able to buy my house when I'm old and want to downsize and them having children so that there will be income into social security when I'm retired. All in all I would consider it an investment into my future retirement by ensuring the younger generation can support me.
Yes loan forgiveness is not ideal but its a makeshift solution to a really bad situation government has created by federally backing student loans and making them non-dischargable in bankruptcy. IMO the ideal solution is to remove the non-dischargebility condition and let the market take its course but that needs congress to act & pass law, loan forgiveness does not!
IMO the subtle reason why republicans hate it is because loan forgiveness effectively signals (to borrowers) that no need to pay this loan, just wait around for a Dem president to show up defer/cancel etc it. which is a step towards discharging the loan in 'special circumstances'.
The basic economics politicians dont seem to get about education cost is that if you dont increase supply and just increase demand pool by making loan cheaper/federally backed all you will get is price inflation & thats been happening at rate way outpacing inflation.
Education is investment in community, not a profit generating vehicle.
I will gladly invest in my communities knowledge base any day of the week. Tax me. Please. Pay the teachers what they're worth and make the NIMBYs and FYGMs cry.
That is not how money works. Your income is other people going into debt. Your salary rise means more money in the system. Loan forgiveness means more income to you.
[+] [-] idiotsecant|2 years ago|reply
The education system needs a stupendous amount of reform, not the least of which is the ridiculous debt load we put on young adults in what should be the years they're laying the foundation for a productive, happy life.
[+] [-] 1shooner|2 years ago|reply
1. https://nces.ed.gov/fastfacts/display.asp?id=900
[+] [-] j_walter|2 years ago|reply
[+] [-] rootusrootus|2 years ago|reply
50 years ago was a pretty special time, if we're being honest. The ratio of home prices to income was an all time low. Go back to the 50s and it was the more typical 4x ratio. Clearly the 6x and 8x bubbles we've recently experienced aren't sustainable, but we're also probably not going back to the relative utopia that was 1970s house prices.
[+] [-] thx-2718|2 years ago|reply
With enrollment trending down many colleges appear to focus on making up the loss through raising tuition.
To attract students the universities invest in prettier buildings and more "college experiences" to attract students.
Meanwhile information is cheaper and more easier to replicate than ever in human history.
Books ought to included in tuition, a good professor can note any updates needed.
Lectures ought to be digital. Let classroom time be for students to work or ask questions or discuss. Saves both students and professors money.
Integrate and use/teach open source software. This would lower costs to students and long term lower the technology costs to the university (especially if universities are aiding each other in development).
That's three core parts of modern college that can and ought to be reduced in costs.
There's no (good) excuse for academia to not do this in my opinion and if they (universities) fail to keep up with the rate of opportunity sadly I believe we'll see a lot of knowledge lost.
[+] [-] WirelessGigabit|2 years ago|reply
And that's where I have a problem. If I pay $613 per month for the next 10 years (https://www.forbes.com/advisor/student-loans/average-student...), and all of the sudden that gets paused, I will not go out and think: oh let me get a new car with on a 5 year, $400 / month note.
[+] [-] surgical_fire|2 years ago|reply
This debt load is also voluntary, is it not?
I mean, when I went to college, I went to one that I could afford.
[+] [-] endisneigh|2 years ago|reply
and yes, we shouldn't give the rich tax breaks either.
[+] [-] rocqua|2 years ago|reply
These measures make the debt easily manageable. At 7% interest the debt would suck.
The final goal behind this is to get more people into higher education, not incone distribution.
[+] [-] anonymouskimmer|2 years ago|reply
I believe parents who took out loans for since deceased children should be forgiven. Not for economic reasons, but because every single month they pay the bill they are gut-punched anew.
I believe students (and parents of) who became disabled, such that they could not work in the field they went to school for, should have their loans forgiven, as debt has a particular psychological toll on the disabled compared to the abled.
When it comes to giving money to poor people circumstances matter. Some of the poorest people will be members of cults that provide for all of their needs, for instance.
[+] [-] skinnymuch|2 years ago|reply
No one has said that to you?
[+] [-] purpleblue|2 years ago|reply
You solve the problem by re-allowing student debt to be dischargeable through bankruptcy again. This is the root cause of the problem. The fact Clinton and Bush allowed this to happen is disgusting. All it did was allow banks to give loans to EVERYONE without any fears. Then schools could raise rates knowing kids would still pay the predatory prices, and that's how we get into the mess we are in now.
By allowing student debt to be dischargeable, banks are now taking a risk of losing their money, which means that they won't give loans to people who frankly are wasting their money. A parent at my workplace was asking how she could afford to pay her daughter's $80k/yr tuition for a sociology degree. The fact that this completely stupid idea was even being considered shows the depths to which society is fucked up.
[+] [-] everybodyknows|2 years ago|reply
>Initially, private banks provided capital for students loans, with parameters set by the government under the FFEL Program. These loans were owned by lenders and guaranteed by the government; in the case of default, lenders were reimbursed. In 1992, the DL program was created under which loans were directly made by the US Treasury. For many years, both the FFEL and DL programs existed side by side, and colleges could choose the source of funds. Despite the different source of funds and ownership, FFEL and DL loans were otherwise identical in terms of limits, interest rates, and repayment plans available, and many students likely were unaware of the different source of funds when taking loans through their schools’ financial aid offices. In 2010, following analysis and a bribery scandal of college administrators, the Health Care and Education Reconciliation Act of 2010 eliminated new loans under the FFEL program. Since 2010, all federal student loans have been made under the DL program.
https://www.nber.org/system/files/working_papers/w31247/w312...
[+] [-] D13Fd|2 years ago|reply
Freely available student loans have pumped enormous amounts of money into the system, and tuition prices increased accordingly, driving the need for yet more loans.
In the end what we have is young people taking on unthinkable amounts of debt to get the same level of education that they did 40 years ago, but now with nicer student centers and bigger stadiums (and, somehow, instructors who are paid less than before).
If we cut off the endless supply of loans, and instead use limited grants to continue to foster diversity, we can reverse the cycle. Schools will once again have to compete on cost.
Then we can talk about loan forgiveness for those who were victimized by the current system. But doing the forgiveness before fixing the system only makes the problem worse.
[+] [-] anonymouskimmer|2 years ago|reply
It actually happened under Carter. https://www.bankrate.com/loans/student-loans/private-student...
> But the introduction of the U.S. Bankruptcy Code in 1978 caused a major shift with regard to student debt.
> At the time, the intent of Congress was to protect educational loans from bankruptcy abuse. The amended bankruptcy code stated that funds received as an educational benefit would no longer be discharged unless the borrower could demonstrate undue hardship, which is no easy feat.
[+] [-] rocqua|2 years ago|reply
[+] [-] germamme|2 years ago|reply
[+] [-] hikingsimulator|2 years ago|reply
I took up debt to study at the graduate level, I won't use that past painpoint to defend forcing people to enter into debt now.
[+] [-] rootusrootus|2 years ago|reply
[+] [-] Turing_Machine|2 years ago|reply
Hmm... by that reasoning, wouldn't people who default on SBA business loans or FHA/VA home mortgages be doing so "at the expense of those who have paid"?
And yet they're allowed to file bankruptcy. What's different?
As I observed before, in the case of a small business there often aren't any recoverable assets, or only a small amount. In the case of real estate... I saw a story the other day where a San Francisco office building changed hands for only 25% of its price the last time it was sold, and I don't think we've seen the bottom there by any means.
[+] [-] panzagl|2 years ago|reply
[+] [-] chiefalchemist|2 years ago|reply
For example, not everyone gets the same amount loaned. What does that distribution look like? Map it to higher edu schools? Map it to tuition? Map it to high schools? Etc.
The point is, there are a lot of students and therefore a lot of debt. Naturally, such a big pool is going to have outliers. When the media parades a student loan "victim" is that (e.g.) $100k of debt typical or atypical?
[+] [-] anonymouskimmer|2 years ago|reply
It's atypical. Only 10% owe $100k or more: https://www.federalreserve.gov/publications/2022-economic-we...
> Most student loan borrowers owe less than $25,000 on their loans. The median amount of education debt in 2021 among those with any outstanding debt for their own education was between $20,000 and $24,999. One-quarter of student loan borrowers had less than $10,000 in outstanding student debt (figure 40). Student debt balances vary across different demographic groups. Borrowers with an income of less than $50,000 a year were more likely to carry lower balances of student loan debt.
[+] [-] agloe_dreams|2 years ago|reply
[+] [-] unknown|2 years ago|reply
[deleted]
[+] [-] beej71|2 years ago|reply
[+] [-] panzagl|2 years ago|reply
This seems so blindingly obvious to me that I'm really worried I've become totally disconnected from reality that no one else has floated the idea.
[+] [-] D13Fd|2 years ago|reply
[+] [-] jryan49|2 years ago|reply
[+] [-] rufus_foreman|2 years ago|reply
[+] [-] 0zemp2c|2 years ago|reply
a loan used to buy a degree
a degree which isn't generating enough income to pay off the loan
if you buy out other underperforming assets like foreclosed homes, there is a discount...where is the discount on these underperforming degrees?
why do I want your underperforming asset? I already have a degree, but thanks!
[+] [-] slg|2 years ago|reply
[+] [-] EatingWithForks|2 years ago|reply
[+] [-] DesiLurker|2 years ago|reply
IMO the subtle reason why republicans hate it is because loan forgiveness effectively signals (to borrowers) that no need to pay this loan, just wait around for a Dem president to show up defer/cancel etc it. which is a step towards discharging the loan in 'special circumstances'.
The basic economics politicians dont seem to get about education cost is that if you dont increase supply and just increase demand pool by making loan cheaper/federally backed all you will get is price inflation & thats been happening at rate way outpacing inflation.
[+] [-] searine|2 years ago|reply
I will gladly invest in my communities knowledge base any day of the week. Tax me. Please. Pay the teachers what they're worth and make the NIMBYs and FYGMs cry.
[+] [-] dragonwriter|2 years ago|reply
So do government loan guarantees in the first place, though.
[+] [-] mempko|2 years ago|reply
[+] [-] ouid|2 years ago|reply