Forgiving Student Loan Debt Discussion

[38Chevy454]

I am struggling with the information and trying to understand what is going on with the talk about forgiving or reducing student loan debt. I am not sure if all the claims on either side are completely valid or without scrutiny. Claims such as:
1. Student debt is holding back those who have it so they can't get ahead.
2. Student loan debt is a racial/poor problem as those groups are more affected by it.
3. Forgiveness will benefit all Americans by freeing up money to flow into the economy.
4. Debt relief benefits the rich more since they are more likely to have higher income due to college degrees and debt incurred getting that degree.
5. Forgiveness is not fair.
6. If you do not support forgiveness you are being selfish.
7. The gov't money for student debt forgiveness could be better used on other spending.
8. Student debt is not as much of a problem as it is made out to be.
9. Forgiveness would be political suicide for Democrats.
10. Students took out debt, knowing what they were doing and need to accept responsibility.
11. Increasing student debt is a self-fulfilling problem since education costs are rising faster than inflation.
12. Forgiveness will not result in more money going to the economy if the debt amount is just sitting there not being paid by borrowers.
13. Millions of American people will be very PO'd.
14. Can forgiveness happen without a law passed by Congress? Can executive action make it happen?



I am sure there are more claims and statements besides what I have listed. Overall I am on the side that student debt loan forgiveness should not happen. I worked my way through school, no debt. I was also on the co-op and 5 year plan getting my engineering degree. What about all the parents that saved and scrimped to help their kids? How do they feel putting off bigger purchases and discretionary spending, just to see their neighbor's kid now potentially get forgiveness?


I do not see any way this can happen without major disruption and even further divide of the country. I fall on the "no" side and probably based on the fact I am firm believer in personal responsibility where you pay your debts.



Overall, please try to keep this out of political and let's discuss the financial aspects of it. I don't want it closed, although I certainly understand there is a bear in the room with the political aspects of it.

 

[Nemo2]

I just want some free ****!

 

[MichaelB]

There is no proposal under consideration, which really makes this more “campaign rhetoric” than anything else. Difficult to discuss, especially when everyone defines it anyway they wish.

If you want to keep politics out of the discussion you might consider removing point 9, or at least ignoring it.

 

[Freedom56]

I think it would be unfair to those who did not take on student debt and chose to work part-time and paid their way through their studies. People should take personal responsibility for their debts.

 

[statsman]

I think it would be unfair to those who did not take on student debt and chose to work part-time and paid their way through their studies. People should take personal responsibility for their debts.

Or those who did incur some student debt and paid it off.

 

[Car-Guy]

I fall on the "no" side and probably based on the fact I am firm believer in personal responsibility where you pay your debts.

+1

It's probably best that I just do not comment any further than that!

 

[Aerides]

The problem is many of us see this through the lens of our own experience:

College was considerably cheaper, even adjusted for inflation. Working over the summers and part time, with some help and scholarships was totally viable to pay for school. And if you couldn't, you could get an entry level job at a decent company and work your way up instead. By all accounts, that is not remotely how it works now.

The proliferation of loans themselves have fueled the supply/demand issue. Loans made paying for college easier ergo more people can go ergo prices went up. Degrees became more common, entry level jobs now require them with greater frequency.

So the loans are in large part the root of the issue. Easy Money in = Easy Prices Up.

I don't know about forgiving them, I don't have a horse in that race so I won't comment, but I do know that I don't know enough about how much the financial burden is today vs. the cost of living, and real wages, for someone starting out. And if I had a kid going to college I'd be doing everything I could so they could graduate debt-free.

 

[davebarnes]

I would suggest searching on "facts about student debt in USA" and then reading more than one article.

 

[Lawrencewendall]

I am struggling with the information and trying to understand what is going on with the talk about forgiving or reducing student loan debt. I am not sure if all the claims on either side are completely valid or without scrutiny. Claims such as:
1. Student debt is holding back those who have it so they can't get ahead.
2. Student loan debt is a racial/poor problem as those groups are more affected by it.
3. Forgiveness will benefit all Americans by freeing up money to flow into the economy.
4. Debt relief benefits the rich more since they are more likely to have higher income due to college degrees and debt incurred getting that degree.
5. Forgiveness is not fair.
6. If you do not support forgiveness you are being selfish.
7. The gov't money for student debt forgiveness could be better used on other spending.
8. Student debt is not as much of a problem as it is made out to be.
9. Forgiveness would be political suicide for Democrats.
10. Students took out debt, knowing what they were doing and need to accept responsibility.
11. Increasing student debt is a self-fulfilling problem since education costs are rising faster than inflation.
12. Forgiveness will not result in more money going to the economy if the debt amount is just sitting there not being paid by borrowers.
13. Millions of American people will be very PO'd.
14. Can forgiveness happen without a law passed by Congress? Can executive action make it happen?



I am sure there are more claims and statements besides what I have listed. Overall I am on the side that student debt loan forgiveness should not happen. I worked my way through school, no debt. I was also on the co-op and 5 year plan getting my engineering degree. What about all the parents that saved and scrimped to help their kids? How do they feel putting off bigger purchases and discretionary spending, just to see their neighbor's kid now potentially get forgiveness?


I do not see any way this can happen without major disruption and even further divide of the country. I fall on the "no" side and probably based on the fact I am firm believer in personal responsibility where you pay your debts.



Overall, please try to keep this out of political and let's discuss the financial aspects of it. I don't want it closed, although I certainly understand there is a bear in the room with the political aspects of it.

I'm on the fence on this. I have both a Niece and a Nephew that took out students loans and ended using the money JUST TO SURVIVE. They never finished their degree and to this day, can't get a regular job without their pay be garnished or even if they found a W-2 job, file taxes without their refund being taken.

They can't get out of that hole. It breaks my heart. I've been thinking of paying it off for them but I'm not at that point. Dunno.

 

[Montecfo]

The problem is many of us see this through the lens of our own experience:

College was considerably cheaper, even adjusted for inflation. Working over the summers and part time, with some help and scholarships was totally viable to pay for school. And if you couldn't, you could get an entry level job at a decent company and work your way up instead. By all accounts, that is not remotely how it works now.

The proliferation of loans themselves have fueled the supply/demand issue. Loans made paying for college easier ergo more people can go ergo prices went up. Degrees became more common, entry level jobs now require them with greater frequency.

So the loans are in large part the root of the issue. Easy Money in = Easy Prices Up.

I don't know about forgiving them, I don't have a horse in that race so I won't comment, but I do know that I don't know enough about how much the financial burden is today vs. the cost of living, and real wages, for someone starting out. And if I had a kid going to college I'd be doing everything I could so they could graduate debt-free.

Yes. Forgiving loans is dubious policy in my opinion, but it also misses the point. The point is that college costs have risen dramatically since most of us went to college, with the big driver being growth of overhead costs, and easy student access to funding from loans, grants etc. encouraging higher costs.

Technology should be making secondary education cheaper to deliver, but easy money allows those gains to be harvested and go toward more overhead, fat pensions and an arms race on dorms and facilities.

Market reforms are needed to higher education. Changing who is paying for it makes matters worse in my view.

 

[flyingaway]

I have no problem for people advocating free this and free that, as long as they have the money to do that.

For a government with mountain debts, I could not believe that they just keep handling out money without feeling guilty. How could they forgive debts when they are in deep debts themselves?

 

[flyingaway]

Yes. Forgiving loans is dubious policy in my opinion, but it also misses the point. The point is that college costs have risen dramatically since most of us went to college, with the big driver being growth of overhead costs, and easy student access to funding from loans, grants etc. encouraging higher costs.

Technology should be making secondary education cheaper to deliver, but easy money allows those gains to be harvested and go toward more overhead, fat pensions and an arms race on dorms and facilities.

Market reforms are needed to higher education. Changing who is paying for it makes matters worse in my view.

You are right about this. Tuition keeps growing every year above inflation because students can get loans easily to pay for it. They don't care about how to pay the loans back. Looks like they don't have to soon.

 

[gauss]

I'd be curious to know about who is having issues with their debt in a more granular matter than just today's graduates.

- Are we talking Medical/Law student grads who may take on huge debt but should have the earnings capacity to pay it off?

- Are we talking STEM and Business graduates?

- Are we talking those who have chosen to go into less lucrative fields?

I seem to recall hearing somewhere (maybe it was the "Money Rules" whitepaper posted hear a month ago or so by one of generous members) that a rule of thumb for student debt is not to take on more than your chosen field could generate financially in the first year of employment.

My experience as an engineering graduate,who started full time after graduate school in the early 1990s, was that I had about $ 10,000 in debt that I was able to pay off in 5 years or so without any trouble. Again -- different times and lucrative major so perhaps my experience is not appropriate today, but I would still like to know more about those who are having trouble.

You are right about this. Tuition keeps growing every year above inflation because students can get loans easily to pay for it. They don't care about how to pay the loans back. Looks like they don't have to soon.

Indeed prices will rise to what the market (ie buyers) will bear.

Another factor, at least around here however, is that there has been a major reduction in state spending on state colleges and universities with much of the balance cost-shifted to the students.

-gauss

 

[Car-Guy]

So if someone worked diligently and/or sacrificed to pay off his (or her debt) will they get reimbursed?

 

[Nemo2]

It all reminds me of a university in Toronto a number of years back, (the one where all the pseudo radicals and wannabe arty types go/went).

The instructors/professors went on strike for more money.....fully backed by the student body.

Instructors received pay increases....and tuition fees were raised accordingly.

Students were shocked.......What, cause & effect was real?

A lesson in economics.

 

[pb4uski]

I'm torn on the issue as well. I do think that something needs to be done but the student lon debt problem is as much a function of the crazy increases in the cost of college as anything else. Today's college facilities are very posh compared to when we were in college, but the cost of college reflects that.

But I also think of DD and DSIL who have been responsible, have good jobs and will have DSIL's student loan debt paid off next year and are very proud of that accomplishment. I can't see how any equitable phase in can be created that is fair to those who have paid.

Also, to the degree that investor's hold the student loan debt, will the government just pay off the student loan debt? or will investors be forced to take a haircut?

Hard to even discuss until some reasonably comprehensive proposal comes out and given the likely controversy I suspect that it is more of a backburner issue for the incoming administration... bigger fish to fry right now.

 

[gauss]

I'm torn on the issue as well. I do think that something needs to be done but the student lon debt problem is as much a function of the crazy increases in the cost of college as anything else. Today's college facilities are very posh compared to when we were in college, but the cost of college reflects that.

But I also think of DD and DSIL who have been responsible, have good jobs and will have DSIL's student loan debt paid off next year and are very proud of that accomplishment. I can't see how any equitable phase in can be created that is fair to those who have paid.

Also, to the degree that investor's hold the student loan debt, will the government just pay off the student loan debt? or will investors be forced to take a haircut?

Hard to even discuss until some reasonably comprehensive proposal comes out and given the likely controversy I suspect that it is more of a backburner issue for the incoming administration... bigger fish to fry right now.

IANAL, but wouldn't forcing a haircut to the lender outside of a bankruptcy be unconstitutional? ie. Unreasonable seizure?

As such, my assumption is that the payoff would need to come from Federal government dollars.

 

[OldShooter]

I guess I am neutral on this. It's a political foodball without much economics behind it. It also treats a symptom, not the disease.

For decades the higher educaion establishment has been gorging itself at the trough of student loan money, constantly filled by the federal government. The result is that higher education costs have risen not only far faster than CPI inflation, but far faster even than medical costs. Palatial facilties, hordes of administrative jobs, and inflating salaries have resulted with essentially no market pressure to hold them down. Inside the colleges, expanding use of near-minimum-wage "adjunct" staff has further distorted the economics. Higher education prices have risen to the point that private corporations are entering the market, seeing fat margins available for the taking. Higher education prices have risen to the point that private corporations are entering the market, seeing fat margins available for the taking. Only very recently have some schools realized that they have priced themselves out of the market even with students' access to the money troughs.

No surprise that student loans have become burdensome; they pay for the educators' parties.

Whether current loans are cancelled or not, if I were king, future loan money would be strictly limited to schools demonstrating some serious belt-tightening and producing actual cost reductions in real terms.

Porky repellent: Mods, note this is about economics, not politics.

 

[pb4uski]

IANAL, but wouldn't forcing a haircut to the lender outside of a bankruptcy be unconstitutional? ie. Unreasonable seizure?

Probably.

 

[Popeye]

The only way I’d consider it is if Universities had some skin in the game. Fund the debt relief with a special tax on their endowments. And let’s see some scrutiny of university president and staff salaries like we have of some CEO’s.

 

[gauss]

How about this as alternative way to address the problem:

Instead of debt forgiveness, the Federal personal bankruptcy laws, that were modified in the past to make Student Loan debt non-dischargeable, are restored to allow this.

In this fashion, folks that really can't pay the loans could pursue this option, along with the associated personal costs (both tangible and intangible) to the defaulting borrower that come with a bankruptcy.

That way, the students would still have some 'skin in the game' (but hopefully less than a 'pound of flesh.' )

-gauss

 

[NoiseBoy]

Warning, anecdotal evidence ahead

I have two nieces who are in their late 20's now and neither one has found a fulltime "living wage" position yet. They're California girls and their dad was a full professor at a Cal State university. Niece #1 chose to attend a different Cal State school about 2 hours from home. She graduated in 4 years with honors, debt free. Niece #2 chose an out of state, public university. She graduated on time with a bachelors in Psych. She still has student loan debt 6 years later, including $3,500 to yours truly (I don't care about it.) My point being that neice #2 could easily have taken her sister's path, and graduated with little or no debt while still experiencing the whole college life away from home thing, but she chose not to. I don't believe that this point is always brought up when the current costs of higher ed are discussed. Spending one or two years at the local community college to bag all of the pre-reqs is another solid cost saving plan. Most of the college debt stories that I've heard are in the same camp as my youngest niece. They're the direct result of choices the students made and therefore I'm not in favor of broad student debt forgiveness.

On the other side of the issue, the most expensive recent building project on the campus of my Alma Mater was....the new student rec center

 

[Nemo2]

How about only granting loans to those taking STEM courses and the like?

All other courses, especially those where the only likelihood of attaining employment is lecturing to other suckers following the same path, are to be self funded.

 

[davebarnes]

The only way I’d consider it is if Universities had some skin in the game. Fund the debt relief with a special tax on their endowments.

Interesting idea, but would not affect 'for profit' schools who don't have endowments and have provided poor educational results while saddling ex-students with debt.

 

[DektolMan]

My 2 cents for what it's worth. My brother has a step daughter who is over 100k in student loan debt. She wanted to be a teacher, wanted to go to private schools which she did & now complains that she doesn't get paid enough to repay her loans.


So I asked my brother why didn't she go to a community college for 2 years and then transfer to a state college specializing in teaching? He had no answer for me. If she took this path she would have a fraction of her debt.


College is just a business and when the gov't took over students loans and everyone could get a loan colleges kept raising tuition while telling us that everyone should get a college degree.


Oh and one more thing... here in CT the largest pension paid out is a retired professor from UCONN. His pension is $278,000 per year with automatic cola each year. Ok rant over!