Cancel student loan debt?
 

With the renewed conversation starting with Biden's incoming administration, what do you all feel about the push for 50k in student loan forgiveness being proposed by the progressive side of the party? To be clear this is being advertised as being possible by executive order, not any act of the legislative branch.

I'll start off by saying I hate both aspects of this. Such a large fiscal action by Presidential decree seems like a very bad idea. It does not seem to be a good use of political capital at all. I could be ignorant but I can't think of anything that matches that amount attempted in the past by a President.

Beyond the mechanism, I just think it is terrible policy. Helping those most capable and financially able to incur the costs does not even seem like a progressive idea to me. None of the purported benefits seem to amount to much beyond increased costs of those that weren't financially prudent. The attempt to attach this to racial inequality are especially weak, not to get into the incredibly stupid trolley meme making the rounds.

Of all the progressive policies being put forward, this might be the one I am most adamantly against. To be clear I would not personally be affected, as I only went to community college for a few semesters and incurred no debt, but the very idea is just beyond my understanding. The broad brush approach is the worst idea, and the framing of it as most benefiting minorities is disingenuous at best.

So.. thoughts?

It's something that Biden could actually do.

Let's face facts, unless we pull an inside straight in Georgia, Biden is going to have a Republican Senate that will hobble COVID-19 prevention, tank the economy, and demand a return to the coal age, just because their guy is not in the White House. If Biden can get something even remotely useful done without the GOP, he should do it. He should not waste time chasing the mirage of bipartisanship.

Point taken, but with mid terms coming in two years, do you feel this is an action that would help or hurt in the house and senate? Is the purpose to help the most people or help the most vulnerable? I am not even sure where I stand without more thought put to it, but a more limited a targeted approach would be more understandable if the underlying problem was actually addressed. Otherwise the current backlog of debt is cleared and next year's will start building up as soon as the semester hits. Helping people by signing is nice and all but fixing the underlying problem seems like the more pressing issue, no?

it's essentially eliminating a large monthly bill for a lot of people, and i'd assume that this is the first bill that goes unpaid when people struggling economically

i'm not sure what percentage of people that have high income and unpaid student loans vs. student loans they are unable to pay, but I think it may be jumping to conclusions to say that people with a large amount of student loan debt are the most able to pay it off. i would assume that people that are most financially able to pay their student loan debts have already done so, some people are on decades long payment plans, and others have completely given up on paying them at all.

but i don't have the data on any of that

I will add a post to amend to this but off the top of my head statistics around 40% of the overall debt is from people with post graduate degrees. Only 20% is from lower income earners. I would almost consider forgiveness for borrowers without a degree vs any other segment because the benefits over a lifetime of having a degree vs none is substantial in regards to lifetime earnings. Unless someone beats me to it I'll try to quantify my argument a bit better.

I have mixed feelings about this. Just because you incurred student debt doesn't mean you are capable of paying it off in a timely matter or at all. Student debt isn't just incurred at high end universities, it's often the result of for profit schools that promise jobs that aren't real. Also, the cost of education has skyrocketed and saddling young people with such a debt burden is troubling.

Seeing lots of different descriptions of the proposal.

What Biden’s student loan forgiveness plan would mean for borrowers
or this:

Biden: Student Loan Forgiveness “Figures In My Plan”


Limited to federal loans for tuition at state colleges/universities - not the (typically) much more expensive private colleges. That's not bad, I get the impression that some of the worst student debt and some of the most irresponsible borrowing relates to covering living expenses while in college. Free tuition at community and two-year colleges also seems good, those are already fairly low cost to begin with, its not going to break the bank to do that. Some articles say he is also proposing free tuition at four-year public colleges, but some say it is limited to two-year public colleges.

It is not clear what one needs to do to qualify for loan forgiveness - typically there are income and timeframe requirements for such programs. You typically can't get loans forgiven for some time after leaving college (five and ten-year spans are both mentioned in articles), there may also be income and even bankruptcy requirements. As it is, college loans have more recently been exempt from bankruptcy protection - file for bankruptcy and you're still on the hook for those student loans, they can still garnish wages to get them even if it pushes you below poverty line. The current system is very predatory and geared towards lenders.

Again, the proposal does not seem to cover living expenses, nobody's getting a free apartment while they make a pretense of going to college on the taxpayer's dime.

Limit it to In-State tuition, and add in some sort of board to look into and set standards for expenses at these state colleges and I would be very on-board with this. Tuition as it is now is vastly more expensive than it was when I went to college in the late 1990's, real estate and cost-of-living as a proportion of income has also gone up considerably. The college opportunities we had, that our parents had, those are financially out of range for the current middle class.

ETA: Also, it is not clear to me how much of the current debt load is owed to lenders under federal programs, or directly to the federal government, or just owed to lenders in general. The proposal only seems to address federal or federal-program loans, some of the most predatory loan practices out there would be unaffected

I can see the merits - education should be supported, house prices are high, debt weighs heavy, limiting freedom and risk taking. Obviously this is a kind of retro-active action to put right something that would be better if dealt with sooner and there's never a perfect solution doing that. I can see why this wouldn't be popular with those who managed to pay their loans off already.

That all said, spending must have its limits and we have an economy falling apart under the pandemic. It's hard to see this as any kind of priority right now.

Thanks for that. This very much seems influx for but I really hate the angles being pushed at times. For example the percentages of black vs white students never gives an overall number to really compare. A higher % of a minority that might also have a lower percentage of overall students very well could be a very small number comparatively. This is conveniently left out, as well as their overall debt.

While the rate might be higher, their overall % reflected I suspect is much smaller than advertised. For example if they represent only 5% of the overall student debt population while being a larger percentage by demographics due to lower population % and lower debt level per student. That way white upper middle class doctors that owe 200k can get on board and justify it as helping the poor while they represent the overwhelming cost.

Limiting to community and in state tuitions would definitely help my perception, but would still be a hard sell.




It seems more like a "we can do this so we should" vs's an actual need. Beyond the college grads that paid their loans, it actively hurts non college educated and trade workers that already have it rough. It seems to reward the worst actors and penalize the best, which seems like bad policy and incredibly bad in regards to future voting.

I am pretty sure Biden would need at least some of the GOP on side.

Cancelled student loans seems like it would involve financial aspects that would put it outside the ability of him to just issue an executive order. So it means they would need legislation, which means dealing with Moscow Mitch in the Senate.



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How exactly does it do that? This isn't a zero sum game. I don't see how helping college students hurts anyone.

Biden should set a "matching" debt cancellation in that the US will cancel, say, $25,000, and the college will cancel another $25,000. (or use better numbers)
If they don't agree, the student will be allowed to declare bankruptcy on the total amount.

The problem is mostly that colleges can charge whatever, because they get their money one way or another.
Student loans should be financed out of the college endowment - that way, they have a vested interest in making sure the students get marketable skills.

Well money for loan forgiveness and/or free tuition doesn't come out of thin air... Tax payers do end up paying at least something for it. And with plenty of competing priorities (covid relief, health care, infrastructure), education may take a back seat to more immediate concerns.

That doesn't necessarily make free tuition/debt forgiveness a bad idea, and there are certainly some benefits to society. But I don't think it is a bad thing to look at costs and benefits of various options.

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How do you figure? A forgiven loan is written off; it's not as if the federal government would be paying out the outstanding balance of the forgiven loans, since the creditor is itself.

To "officialize" it, perhaps. However, I suspect that Biden could purely by executive order simply halt collection activity, credit reporting, and social security garnishment for relevant classes of loans. The loans would still "exist", but the debt would be effectively canceled for all practical purposes.

This has the down-side of being potentially reversible by a future president unless the legislation can be passed, of course.

Yes in fact it does. There is a huge difference between macroeconomics and microeconomics. You think we had that Trillion dollars we used for COVID relief or for the debt incurred during WW2? So, we incur debt? The economy grows and we pay it off in 20 years with inflated dollars.

This is not a simple issue. I'm not saying we should or shouldn't do it. I'm just saying it simply isn't true that helping students pay off debt necessarily hurts others.

Depends on the situation....

- from what I understand, some loans are made by the government itself... So forgiving the loan means less money available for the government as a whole for various programs

- as for things like bank loans, either the government will have to compensate banks to cover the missing loan repayments, or banks will lose money (making them less likely to make student loans in the future)

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I think it is more likely that students from wealthier families are less likely to have student debt.

The college doesn't hold the debt. They got paid tuition at the time, cash on the barrel head, that students received from loans.

That's my point
Colleges should get disqualified from having access to student loan funds above a limit if they charge too much for too little.

I can't see how this plan, or broader plans to deal with the crippling costs of higher education in this country, wouldn't be a boon to the economy.

Younger generations are servicing student loans rather than consuming in the economy.

Colleges aren't in a position to cancel any debt. They don't hold the debt and they don't have the money on hand to pay it down either. Even if you gutted every overpriced administrator's salary, it wouldn't come close.

See my edit.

Any one-time debt amnesty will just push the can down the road and potentially make things worse.
Colleges must have an incentive not to charge more than what can reasonably paid back.

Sure, something must be done to stop the feeding frenzy of colleges spending wildly knowing that tuition will be covered by loans that aren't really doing any due diligence to ensure repayment is possible.

Kicking the can down the road is preferable to doing nothing, and we're talking about a large swath of the population that is crippled by student debt. A large, sweeping action like this might be exactly the thing needed to drag this issue to the forefront of public debate.

A nice idea, but it's slapping a bandage on the symptoms rather than treating the underlying problem.

Giving employers incentives to stop requiring college degrees for jobs that don't actually need them would do more. Higher education is stuffed full of people who shouldn't be there paying way too much for degrees that aren't necessary in subjects that aren't important. If Joe Sixpack went to trade school to become Joe the Plumber that would benefit him and society far more than him borrowing a fortune to get a degree in English to become Joe McEmployee, minimum wage debtor.

How are you going to stop employers from requiring unnecessary credentials?

I suppose a tighter labor market with a more politically powerful labor class could be an effective counterweight to the capricious demands of management, but I don't see anyone in power calling for that. The supposed left party in this country has spent the last few decades undermining the power of trade unions and distancing itself from working class politics, and the power of the working class is practically nonexistant.

So long as the working class is atomized as it is now, there's no way to push back on senseless demands from the managerial classes.

Everyone joining the IWW is a goal I can get behind, but doesn't strike me as plausible. ;)

Canceling student loan debt is effectively compelling then the lender to subsidize education. Not only that, but to subsidize education that is manifestly unproductive. If this is is going to be an investment in education, I'd like to see some articulation of the idea of a return on the investment. And some explanation of why the return can't be realized in the usual way, by the entrepreneur paying back their investors.

Or if it's going to be a laying off of bad debt, I'd like to see some acknowledgement that it is bad debt. That these were bad investments and we won't be making them any more.

I said nothing about "requiring", I said "give incentives". Tax credits for hiring employees who don't have degrees if the work doesn't actually need them. I've had about fifteen jobs in four different career fields, none of which actually utilized the subject I got my bachelor's degree in. All of them, however, wanted me to have a bachelor's degree, they didn't care in what.

Requiring unnecessary degrees is at best a pointless waste, but at worst it's a hidden method of keeping the lower class from getting into the middle class. My employers didn't give a damn about my degree except that it meant I was probably middle class. They wanted to exclude trash. Perhaps not consciously, I really hope, but that's the practical effect. The practice is outdated, wasteful of resources, and needs to die out.

If the notion of COLLEGE IS FOR EVERYONE cannot be overcome, then how about a hybrid approach? Encourage everyone to go through two years of learning a trade first, then move on to college if they want to? That way a) some people would decide to skip college and just start working and b) even the people who do go to college have something to fall back on if their history degree proves not to sufficient to keep them employed. There are simply too many people in college who shouldn't really be there, and too many people emerging from college with no tangible benefits. Teach them something that they can use to feed themselves with first, then do the extras if and when it's feasible for them.

Oh I am so conflicted about this.

1. Yes the current college loan cycle is straight up mob shakedown level of shady and exploitive.
2. But it exists because we decided that going to college was some sort of inherent right.
3. I'm pretty sure the same people screaming for student loan debt cancellation now are the same ones that were/would be screaming for "More student loans! Everyone should go to college!" a few decades ago. It seems like "So what happens if people can't pay these loans back?" is a question you ask before you start giving out loans, not after.

Here's my thing. What are we sending people to college for?

If it's just a vague "Well it's better if everyone is educated" well yeah that's true, hell it's basically a truism, but it's 2020. We could give everyone a Chromebook and 4 years of internet access free and they could get the same level of education from various free websites.

If we're doing it for the job market then we need to do it in a way that makes sense financially.

Well, the lender whose debt is being serviced is consuming in the economy, so that evens out.

The real problem is that younger generations aren't producing in the economy, which is why they aren't able to service their loans.

I think the problem is that employers probably see intelligence to be a trait that is preferred in an employee (depending on your definition of "intelligent"... able to learn new facts, function under pressure as during exams, etc.), so they use a college degree as an indicator that yes, the employee is smart (even if the degree isn't relevant to the job at hand). Granted, not all "smart" people went to college, and not everyone who went to college is particularly "smart" (I heard Wharton produced a real moron for example), but there is probably SOME correlation there.

Otherwise, how can a prospective employee convince a prospective employer "Yes, I'm smart... I didn't just spend my youth eating lead paint chips", especially early in their work history. Doing well in an interview may only show the prospective employee is charismatic/able to bluff well, and employment history can be hard to follow up on.

But again, even if we keep the proportion of the population that goes to college equal - tuition has gotten more expensive. Much, much, much more expensive.

College tuition rates have been rising about twice as fast as regular inflation. That really starts to add up over time.

Tuition Inflation
To me at least, the higher tuition rates are the elephant in the room. All of us thinking about what our cohort paid for college is meaningless in the current situation. The current generations, our kids and grandkids, are facing vastly higher college costs than we did.

So, taxpayers. The government raises money from taxes, and loans it to this guy. Instead of this guy paying it back, with interest, it turns into free money. Taxpayers bought this guy an education that is manifestly unproductive. Maybe that's good public policy, but if it is, there needs to be a good public policy argument for it. Not just "free money that didn't cost anybody anything". Which is obviously untrue anyway, so I'm not sure why you went there.

And if it *is* good public policy, let's talk about investments, not loans. We're investing in this guy's education. His degree will make him more productive. He'll contribute more to society. We will have a measurable payoff, either in dividends he pays back to us as investors, or in productivity that he pays forward into the economy.

Forgiving a debt is essentially saying that the lender ****** up, the arrangement isn't working, and the expected benefits will not be realized. If that's true, then yes, we should consider forgiving the debt. We should also consider letting the lender eat the loss, as an appropriate consequence of their bad investment. But either way, first and foremost, we should consider why and how the arrangement failed, and what steps to take to avoid making similarly bad investments in the future.

If we're going to be giving gifts to people because we think they can't pay back a loan, and won't pay out a return on investment, we should be clear about what we're doing, and why.

Trial periods after hiring, application tests. Both would serve far better for actually determining whether the candidate can do the actual job than possession of a degree from somewhere, even if college degree programs weren't plagued with grade inflation.

Who would you rather have working for your insurance company, Candidate A who passed an insurance work test with a 95% score and did well in their week-long trial period, or Candidate B who says she has a piece of paper (you'll have to verify it) from Generic College of Somewhere that proves she got acceptable grades in several courses about German literature?

Can we cancel mortgage debt, too? It sure would help a lot of people.



Anyway, the whole scheme is a mess. Who decided that it was a good idea to let 18 year olds pile up as much debt as they wanted? That seems like a recipe for disaster, and it turns out to be right.

Instead of just forgiving the debt, how about letting it be voidable by bankruptcy? That alone would get rid of a lot of the abuse of the program.

The ability for a government to take on debt is not unlimited. High debt loads can make lenders wary about purchasing government-backed securities (which affects the cost of borrowing). In extreme cases it ends up triggering austerity measures.

Furthermore, the idea that "the government can just let inflation and growth take care of the debt" is faulty... The borrowed money isn't "Idle", it gets increased through interest (and interest rates can sometimes exceed growth rates) And eventually it does have to get paid back.

Did you go to college Prestige? Was it manifestly unproductive?

It's probably time to consider whether college or other higher education beyond high school should just be free.

We don't really have an economy anymore where a normal person with just a high school degree can make a decent living, which absolutely was true in the past. The free public school education (K-12) that we provide today does not provide the same opportunity that it did in the past.

If it's necessary to have specific job skills to make a living wage, be that college education or training in a skilled trade, wouldn't it be beneficial for the entire society to make such schooling publicly available to all those who are academically qualified? What benefit is there to preventing people without money from acquiring the training to improve their productivity and income?

I mentioned earlier - does anyone know what the loan forgiveness eligibility would be? What does it take to become eligible for this program?

Is this really a freebee, or is this recognition that unlike most other debts, student loan debts cannot be discharged through bankruptcy?



ETA: We have a thing that is necessary for society - college. The cost of that thing rises as a rate twice that of the regular inflation rate. As a result, the cost of that thing now pushes even above median income middle class households into debt, significant debt (I expect paying for my two kids to go to college to cost nearly as much as my house and to delay my retirement by about five years, that is if I pay for it as my parents mostly paid for mine). Unlike most debts, that debt cannot be discharged through bankruptcy, it stays with one forever.

I feel like college costs vs. loans vs. lack of bankruptcy protection is reaching the breaking point. This is not about an every increasing proportion of the population wanting to go to college. This is about holding steady in the face of ever greater costs and consumer-hostile lending practices.