Forgiving Student Loan Debt Discussion

[Car-Guy]

I'm at the point where I'm afraid to say anything that could have the slightest chance of being construed as controversial.
I'm sad.

Yep, me too! Lot's to say on this one, but...............

 

[Andre1969]

I'm a bit torn on this issue as well. I'd be all for some sort of loan modification...reduce the interest rate, or whatever. But the idea of being able to walk away from it free and clear just bothers me.

A few statistics...googling around, it looks like in 2019, around 69% of graduates had outstanding loans. Which means that around 31% have graduated free and clear.

The "average" debt at graduation was around $30,000. However, I don't know if they mean the mean debt, or the median. Nowadays a lot of people tend to use those terms interchangeably. I have a feeling they're talking about the mean, which is going to be swayed by those people who ran up those really big debts.

I also found this blurb from Pew Research:

"The median borrower with outstanding student loan debt for their own education owed $17,000 in 2016. The amount owed varied considerably, however. A quarter of borrowers with outstanding debt reported owing $7,000 or less, while another quarter owed $43,000 or more."

I have a gut feeling this problem isn't as bad as people are really making it out to be. It's just that these days, too many people expect something for nothing. They don't want to sacrifice, and scrimp, and want others to pick up the tab. Not all people, naturally, but enough.

 

[Markola]

"Higher education" will do just fine without government intervention (unlike national defense and health care for the poor). In fact, government intervention in the form of guaranteed student loans has largely driven the ridiculous cost of college because universities have little incentive to control costs or offer job worthy degrees. There is too much higher education, not too little.

I have to both agree and disagree.

There is a huge need for public intervention in higher education. President Lincoln created the Morrill Act to establish public research universities, because the church-affiliated private schools were not meeting the need. State universities have undeniably been a massive public good that has transformed our nation and it’s unthinkable for our economy that we would close them down. Same for the gargantuan benefits of federal research dollars, which flow to both public and private universities.

I agree fully that guaranteed student loans have warped and exploded tuition rates at both public and private universities with perverse incentives. Even worse, an entire for-profit university industry has emerge to feed off of federally-backed tuition loans as parasites, with abysmal graduation rates.

I understand the problem as an economics major who worked at a major state university for many years. However, my best solution is for families to be smarter with debt. Don’t let 18 year olds blindly bury themselves. There are ways to navigate the system intelligently, including taking as many AP courses as possible in high school, attending junior college for the first two years then transferring to a state school, ideally while living at home. And there is military service, Americorps, Peace Corps and part time work at UPS, etc. Crushing debt is, at least, optional.

 

[ExFlyBoy5]

Admittedly, I haven't read most of the replies here but wanted to throw in my .02 worth.

I have been very fortunate in life to not have spent a dime on secondary education thanks to Uncle Sugar. I joined the Air Force as a HS drop out (long, LONG story) and while I shouldn't have even been allowed to join, I was allowed to enlist on a waiver. Over the next 22 years, I got my GED, three associates, one bachelor, and a master's degree. All at no additional cost (except for my service to the AF). I contributed $1200 to the Montgomery GI bill but didn't even use it as I qualified for the Post 9/11 GI Bill.

After I retired, I used the GI Bill to pay for law school. Between the GI Bill and the yellow ribbon portion (where the government and school split the cost that is over the limits of the GI Bill) the total $ value of that experience was $142,000. Yes, almost $150k!!! I don't have the records handy, but had I paid out of pocket for me BS and MA degree, that would have been another almost $100K. Needless to say, education can be very, VERY expensive. As a matter of fact, I have almost an entire year of GI Bill eligibility left, so that total value of that benefit could easily be $200,000.

I am not envious of the law school classmates that came out of that experience with over $150,000 in debt that they will have to pay back FOR YEARS not including what ever debt they might have incurred getting the requisite bachelor's degree.

Is the system broken? Yes, yes it is. Easy to fix. Certainly not.

 

[pb4uski]

I'm at the point where I'm afraid to say anything that could have the slightest chance of being construed as controversial.
I'm sad.

My impression is controversial is ok... political is not.

 

[oneill225]

I have to both agree and disagree.

There is a huge need for public intervention in higher education. President Lincoln created the Morrill Act to establish public research universities, because the church-affiliated private schools were not meeting the need. State universities have undeniably been a massive public good that has transformed our nation and it’s unthinkable for our economy that we would close them down. Same for the gargantuan benefits of federal research dollars, which flow to both public and private universities.

I agree fully that guaranteed student loans have warped and exploded tuition rates at both public and private universities with perverse incentives. Even worse, an entire for-profit university industry has emerge to feed off of federally-backed tuition loans as parasites, with abysmal graduation rates.

I understand the problem as an economics major who worked at a major state university for many years. However, my best solution is for families to be smarter with debt. Don’t let 18 year olds blindly bury themselves. There are ways to navigate the system intelligently, including taking as many AP courses as possible in high school, attending junior college for the first two years then transferring to a state school, ideally while living at home. And there is military service, Americorps, Peace Corps and part time work at UPS, etc. Crushing debt is, at least, optional.

Please do not misunderstand me. I have nothing against colleges and universities for those who want to attend. I do have a problem with the notion that college is the primary answer for economic achievement, however. We push it on every high school kid while devaluing trade jobs and other worthy efforts (like the military). Combined with guaranteed student loans, higher education has transformed from training needed professionals into a profit making juggernaut that views each additional student as more money.

The answer is really very simple. End guaranteed gov student loans and the ship will right itself.

 

[6miths]

Another broken system that needs to be fixed. There are many possible reasons for why the system is so costly for students, most mentioned above. The US has the highest university tuition costs of any OECD country. Double the next highest. This is when you consider the average for US public universities. Closer to 6-fold if one considers the 'average' private US university. And for many of the OECD countries the cost is zero. There are many possible solutions but one would hope that something that would hold universities, business and governments accountable and leave students with some skin in the game but not with life-altering debt early in life. What is going to happen when interest rates are allowed to return to more historic levels.

 

[pb4uski]

.....I am not envious of the law school classmates that came out of that experience with over $150,000 in debt that they will have to pay back FOR YEARS not including what ever debt they might have incurred getting the requisite bachelor's degree.

Is the system broken? Yes, yes it is. Easy to fix. Certainly not.

Totally agree on the last part.

At the same time, $150k over 20 years at 5% would be less than $1k/month loan payment. Average starting lawyer salaries are ~$100k... so a burden in the first year but less of a burden over time as pay raises come on and the loan payments are fixed. Now certainly, some public sector lawyers make much less and $12k a year might be more of a burden.

 

[ExFlyBoy5]

Totally agree on the last part.

At the same time, $150k over 20 years at 5% would be less than $1k/month loan payment. Average starting lawyer salaries are ~$100k... so a burden in the first year but less of a burden over time as pay raises come on and the loan payments are fixed. Now certainly, some public sector lawyers make much less and $12k a year might be more of a burden.

This isn't entirely true. The numbers are skewed because of the top [-]10%[/-]15% (for year 2018...of 34,221 grads, 4,773 went on to the top law firms) of law grads that are hired at white shoe firms at $190,000 for the first year. The vast majority of law grads (that pass the bar) make $60K or less the first year.

https://data.lawschooltransparency.com/images/nalp_2018.pdf

https://data.lawschooltransparency.com/jobs/salaries/

 

[6miths]

This isn't entirely true. The numbers are skewed because of the top 10% of law grads that are hired at white shoe firms at $190,000 for the first year. The vast majority of law grads (that pass the bar) make $60K or less the first year.

https://data.lawschooltransparency.com/images/nalp_2018.pdf

https://data.lawschooltransparency.com/jobs/salaries/

I was going to mention this too. Greatly skewed by grads from top private schools going to top firms in NYC, DC, LA and Chicago. Many lawyers struggle and their debt burden is a yoke for many. Medical student debt averages above $200k but job prospects tend to be better. Even so, this level of debt greatly reduces the chance that the student is going to chose to do any low paying or volunteer work early in their career. And if they don't do it early they are less likely to do any at all.

 

[ExFlyBoy5]

I was going to mention this too. Greatly skewed by grads from top private schools going to top firms in NYC, DC, LA and Chicago. Many lawyers struggle and their debt burden is a yoke for many. Medical student debt averages above $200k but job prospects tend to be better. Even so, this level of debt greatly reduces the chance that the student is going to chose to do any low paying or volunteer work early in their career. And if they don't do it early they are less likely to do any at all.

The difference in how MDs are treated vs JDs in where they went to school is mind boggling to me. At the largest of the law firms, when you go to the attorney directories, you can usually search for someone by LAW SCHOOL. I don't know of any large medical practice that has such a directory. It is probably one of the most robust "good 'ole boy" systems in existence.

Nonetheless, those that are thinking about law school really should do the research before committing themselves to these loans. Employment and bar passage information is widely available and should be thoroughly researched before pulling that trigger. There is NO WAY I would have gone if it weren't for it being a "free" ride.

 

[pb4uski]

This isn't entirely true. The numbers are skewed because of the top [-]10%[/-]15% (for year 2018...of 34,221 grads, 4,773 went on to the top law firms) of law grads that are hired at white shoe firms at $190,000 for the first year. The vast majority of law grads (that pass the bar) make $60K or less the first year. ...

I was going to mention this too. Greatly skewed by grads from top private schools going to top firms in NYC, DC, LA and Chicago. Many lawyers struggle and their debt burden is a yoke for many. Medical student debt averages above $200k but job prospects tend to be better. Even so, this level of debt greatly reduces the chance that the student is going to chose to do any low paying or volunteer work early in their career. And if they don't do it early they are less likely to do any at all.

... Nonetheless, those that are thinking about law school really should do the research before committing themselves to these loans. Employment and bar passage information is widely available and should be thoroughly researched before pulling that trigger. There is NO WAY I would have gone if it weren't for it being a "free" ride.

I totally agree.

It's sad/odd that they're smart enought to get accepted to law school, complete law school and pass the bar but not smart enough to realize that the student loans that they are taking out to go to law school will be a huge financial burden on them?

I recall back in the late 1970s when I was a young CPA that we had a guy join the firm that had worked as a CPA and quit to go to law school and found out that he could make a lot more as a CPA then he could as a lawyer. Seeing his experience disuaded me from pursuing the law and steered me to an (employer paid) MBA instead.

 

[ExFlyBoy5]

It's sad/odd that they're smart enought to get accepted to law school, complete law school and pass the bar but not smart enough to realize that the student loans that they are taking out to go to law shool will be a huge financial burden on them?

Therein lies the problem. It's not very hard to get into law school...not hard at all, really. It IS hard to get into a GOOD law school that has decent bar passage and employment rates. There are simply too many for-profit schools that are bilking the government (student debt that is federally backed and is almost IMPOSSIBLE to get rid of) for all the $$$ they can. The problem is getting a little better, though. The DOE has been riding the accrediting body of law schools pretty hard in the last few years and that body has recently changed the rules for accreditation. Before, there were so many loopholes, schools that had overall bar passage rates of 30% and less could remain accredited indefinitely which is a travesty. --Sorry to have taken this thread so off track-- I will move on now.

 

[6miths]

Agree that people should consider the long term plan but often they don't. It's one thing to have $300k in med school debt and become an orthopedic surgeon, it's another to do it and become a pediatrician.

 

[ExFlyBoy5]

Agree that people should consider the long term plan but often they don't. It's one thing to have $300k in med school debt and become an orthopedic surgeon, it's another to do it and become a pediatrician.

That is a good point. I am not sure of the current #s, but a few years ago the highest income for a graduate level (professional) for the first year was from...

The University of Alabama. No, really.

What school you ask? School of Dentistry.

 

[MrsHaloFIRE]

I agree with Aerides that parents sometimes push that exact narrative: everyone gets loans, cheapest money you can borrow, easy to pay off when working after a degree, you're definitely going.... And often these are good parents trying to be good parents. I was given zero option to not attend college. In fact I didn't realize that was even avail on the menu. My going to college was discussed from when I could form sentences

Between the students, the colleges and the loan providers, there are, of course, parents.

I've no doubt that in many homes kids are raised with the expectation via Mom and Dad that they will take out loans because everyone does and it's not that bad and it's low interest and blah blah blah. And in many homes kids to go college because their parents make darn sure they do, despite the individual student's readiness or career goals.

So we can blame the naive 18 year-olds for not thinking it through, but it's really hard at that age to second guess your parents on financial matters.

Again, I have no idea what the solution is, but there are many parts of the problem.

 

[PatrickA5]

I think any loan forgiveness should be tied to making some kind of payments. I know of some kids that aren't paying on their loans thinking that eventually some kind of loan forgiveness will come out of Washington. Maybe something like after 3 years of payments, 25% of the balance is forgiven.

True, it's not "fair" to those that didn't take out loans or paid them off. I went to 7 years of night school to self pay for my college. I also paid for my three kids college so they wouldn't have to be burdened with loans. But, I realize not everybody is as fortunate so I wouldn't be totally against some kind of forgiveness, but only if they make an effort first.

 

[pb4uski]

I agree... I could swallow some scheme of modification so the loan burden is not debilitating but not total forgiveness. Perhaps something along the lines of ACA subsidies... a tax credit for loan payments or loan interest in excess of a percentage of income.

 

[CardsFan]

Agree that people should consider the long term plan but often they don't. It's one thing to have $300k in med school debt and become an orthopedic surgeon, it's another to do it and become a pediatrician.

But these are choices people make. I don't disagree at all with the proposition that Universities have taken advantage of the current loan environment. That does not absolve the buyer (student) of paying a debt they willingly incurred. It may not have been a wise decision, but they were of legal age to sign the papers. Sorry. You owe the money.

Is I stated earlier, allowing these debts to be discharged in bankruptcy would make some sense. Forgiving them, with no prejudice, a non-starter for me.

And, forgiving current loans does nothing to fix the problem, as new loans are issued everyday.

 

[Time2]

That is a good point. I am not sure of the current #s, but a few years ago the highest income for a graduate level (professional) for the first year was from...

The University of Alabama. No, really.

What school you ask? School of Dentistry.

Oh good, my daughter has 1-1/2 terms left in dental school, in Florida, that's close to Alabama.

 

[cyber888]

I don't favor it. Universal basic income would be more equitable than selective debt forgiveness.

 

[Gumby]

So many words. So little communication.