Forgiving Student Loan Debt Discussion

[Exchme]

I think the talk is coming from a desire to help those less fortunate as it seems true that some talented people are priced out and that reduces lifetime earnings and reduces opportunities for their kids, on down through generations.

But if we really want to help those less fortunate, we can learn something from COVID - there is little reason for college age folks to pay big money for tuition, housing, campus fees, etc. Remote learning could do nearly everything except lab classes and exams. If structured right, remote learning could bring the costs way down, which would end the issue.

Since it's not possible that politicians have missed these fairly easy to grasp points, I conclude they rather like getting us all riled up at each other as that drives donations and votes.

 

[DektolMan]

Do high schools or the colleges really prepare the incoming freshmen? Do they explain what a 4 year degree will cost with tuition, room and board etc? Do they explain current interests rates for students loans and the repayment schedules? Do they explain the approximate monthly loan payment and including interest what their actual education costs them? Will they be told the salaries they could be paid in the field they are majoring in and will be enough to repay their loan?


If not they should be. Colleges should be as transparent as possible and educate the students before they step onto campus.

 

[38Chevy454]

OP here, wow has this subject taken off with replies and discussion. Thanks to all for the input.

.......
My solution - let the schools underwrite the loans, not the Fed. If the schools really believe in their product, and in their highly selective admissions process that only pick the best, why wouldn't they support the loans?

I really like Harvey's last line here. I do believe that tuition and school costs are mostly a result of the easy money. So let the schools prove it by backing it up themselves, skin in the game. Won't work for state schools as easily as private of course.


One thing that I have never understood is how a student can take out such high loans and get a degree where the employment prospects have no better pay potential than they could have gotten out of high school. That is entirely the student's fault. I can hear it now, but the student was pursuing their passion. What a crock of BS, not my problem if their passion can't support a lifestyle they want.


I am still mixed on whether forgiveness is a good thing or not. Getting away from the fairness/equitable aspects - is it financially good for the gov't to allow some to get out of paying back some amount of their loan obligation? I just don't see it as a good move that will benefit society as whole. But then I am also a proponent of getting gov't out of our lives and let people control their destiny. That control means being responsible for your debt, even if you were ignorant of the consequences when you took the loan out. Growing up and maturing is part of life, I do not think it is an excuse that you are given a pass.


The earlier reply(ies) that have identified the debt and loan forgiveness as symptoms of the real root cause are right. The root cause is bloated school administration, salaries, facilities, and overhead. All that doesn' come without a cost that has to be paid for. Easy loan money enabled it to grow without any real checks and balances.

 

[Out-to-Lunch]

Well, that's the common thought. In reality, as many current CEOs went to U Kentucky as Stanford, Princeton or Harvard. The most current CEO's went to UT-Austin. See https://www.usnews.com/education/be...ere-the-top-fortune-500-ceos-attended-college

I agree that where you went will open doors. However, it does not guarantee success.

In my experience Sr VP's don't hire entry level. When they pick their teams they pick based on experience, not where someone got their undergrad. At the same time, I don't think most people don't ask where their lawyer, doctor, or kid's 3rd grade teacher got their undergrad.

Well, that was an interesting link. But by my reckoning, the most CEOs graduated from Penn. Why US Booze and World Retort split Penn into two separate categories, I do not venture a guess. (See 4th and 12th entries on the list you cited.)

PS. I am not referring to Penn State.

 

[pb4uski]

Well, you kind of made my point.

They have a legal right to do both, mature or not.

Contracts are binding.

OldShooter implied that the "children with immature brains (physiological fact) and absolutely no sense of what they are getting themselves into" were not competent to enter into these agreements.

I will leave it at that.

I think in many cases that Old Shooter is right, student loan borrowers are young, naive and are taking loans that will financially handcuff them for a long time because they haven't thought things through, many other students are doing it so it must be ok, etc. IME students are focused on the goal of getting a degree and give little thought to the next steps of whether their earnings in their desired field will be adequate for them to support themselves and service the loan... in some cases they falsely assume that the lenders would not lend to them if they couldn't pay them back.

 

[Nemo2]

So...um...burglars who get caught should not be penalized if they were naive and thought they'd get away with it?

 

[Foghorn Leghorn]

There is no such thing as free. Someone must pay or the lender gets the shaft.

Government cannot give to one that which it did not take from another

 

[CardsFan]

I think in many cases that Old Shooter is right, student loan borrowers are young, naive and are taking loans that will financially handcuff them for a long time because they haven't thought things through, many other students are doing it so it must be ok, etc. IME students are focused on the goal of getting a degree and give little thought to the next steps of whether their earnings in their desired field will be adequate for them to support themselves and service the loan... in some cases they falsely assume that the lenders would not lend to them if they couldn't pay them back.

Just to be clear, I do not take much exception to what you have posted, or to the post by OldShooter. BUT, I do not believe forgiving the debt is the proper solution, for many of the reasons already presented here.

If this debt is really such a big problem (and I am not so sure it really is) then the previous recommendations to change the law back and allow discharge under bankruptcy seems to make the most sense to me.

 

[sengsational]

My direct observation indicates that the information about loans is made available, and in fact student borrowers must take and pass a test about what it means to borrow, and what the obligations are. Also by direct observation I can say that deep thinking about the topic wasn't evident (I presume too much else was going on, and was crowded out). Finally, the process is easy to traverse... just fill out the FAFSA, accept the package, and your tuition gets paid. So no back-pressure on price, as mentioned.

 

[Aerides]

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.

 

[Nemo2]

I guess this must be something I feel (relatively) 'strongly' about because I keep chiming in.

As others have noted, 18 year olds have joined the military or embarked on some other ventures, (me, I was working as a laborer on a remote (very remote) dam site in the wilds of N.W. Australia).

My concern is.....if people, (and they're not babies), keep getting bailed out and never face the downside(s) of their decisions......how are they ever going to grow up?

 

[OldShooter]

... Should we also cap new car prices? ...

No cap on higher education costs or new car prices unless the buyer is using taxpayer-subsidized money for the purchase. In a subsidized purchase, taxpayers have an economic interest in the transaction since increasing the amount of borrowed money increases taxpayers' risk of loss. So taxpayers get to set limits.

To be clear (again) a "should cost" determination would be devilishly hard, maybe impossible, to implement but IMO it is clear that costs are out of control. Until that root cause is addressed, the "student loan crisis" will continue to be as common as crabgrass and the victimization of student borrowers will continue.

 

[oneill225]

I guess this must be something I feel (relatively) 'strongly' about because I keep chiming in.

As others have noted, 18 year olds have joined the military or embarked on some other ventures, (me, I was working as a laborer on a remote (very remote) dam site in the wilds of N.W. Australia).

My concern is.....if people, (and they're not babies), keep getting bailed out and never face the downside(s) of their decisions......how are they ever going to grow up?

I think it is much bigger than just helping poor decision makers, it is the first step in pushing for free college followed by free job training of any sort. How can you justify making future students pay for college if we are cancelling debt for current and past students? This is why it will never fly; way too expensive and unnecessary.

The real solution going forward is to get the government out of the student loan guarantee business. When the risk is placed with the lender, ridiculous loan amounts will not be tolerated or offered and Universities will not be able to jack up the cost of attending without paying a price.

 

[OldShooter]

Yet, they are qualified to vote. Either they are immature, or they are able to make decisions. You can't have it both ways.

Do you think your first two sentences are somehow related? Being qualified to vote doesn't infer any kind of wisdom, a fact amply illustrated in voter interviews every news cycle.

Also, your second sentence offers a false choice. Beginning soon after leaving the womb, immature individuals are making decisions. It's not even close to being either/or.

 

[Nemo2]

I think it is much bigger than just helping poor decision makers, it is the first step in pushing for free college followed by free job training of any sort.

Once people get used to 'free' stuff, (paid for by someone else...anyone else), they'll perpetually support those who offer them even more free stuff..."All ya gotta do is...."

 

[Markola]

Higher education is a distorted market, like healthcare and the defense industry. In all three, society demands much more supply than a free market could distribute equitably on its own, hence imbalances followed by various government interventions.

 

[oneill225]

Higher education is a distorted market, like healthcare and the defense industry. In all three, society demands much more supply than a free market could distribute equitably on its own, hence imbalances followed by various government interventions.

"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.

 

[jollystomper]

Do high schools or the colleges really prepare the incoming freshmen? Do they explain what a 4 year degree will cost with tuition, room and board etc? Do they explain current interests rates for students loans and the repayment schedules? Do they explain the approximate monthly loan payment and including interest what their actual education costs them? Will they be told the salaries they could be paid in the field they are majoring in and will be enough to repay their loan?

If not they should be. Colleges should be as transparent as possible and educate the students before they step onto campus.

Unfortunately, based on my experiences when our children applied to college, they do not.

Across all of our kids we visited 20+ colleges when they applied. the sessions focused on the school history,. what the campus looked like, the current amenities, the food and housing options, etc.

DW and I were among the few parents who would ask questions along the lines you suggest. We rarely got a direct answer We were more likely to get what I call a "political" answer. A couple of replies, regarding student earnings after graduation, were along the lines of "we don't track that, that is an individual choice".

Colleges and universities do not waste their time on this, as they are not held accountable for this. They do not compete with other schools less on results and more on getting warm bodies... one reason they now spend so much on infrastructure and extra amenities to show that "we look as nice or better than other schools".

 

[jollystomper]

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.

Uhh! I like that.

And the rich universities with huge endowments should be taxed at a higher percentage to fund the debt relief, than universities with smaller endowments.

This is an interesting thought. My alma mater's endowment is so large that less than 10% of it would completely cover tuition, room, and board for all undergraduate students. Some type of tax I would not have a problem with. However... so many politicians from both parties have so many ties and networks to the schools with the largest endowments that it likely would not happen. They cannot even get them to be accountable for their charges in the first place.

DW and I both have a personal struggle with this. We considered ourselves blessed to attend our university. We enjoyed our time there, made lifelong friends, and it opened doors and networks to us that, particularly as minorities, we would not have access to if we had gone to a less well known school. But we still get regular solicitation for donations. While we do want to support our alma mater, the amount of money they already have, and how they use it (we gained additional insight as we both served for years on alumni advisory committees and boards that gave us much more details in these areas) has become more disturbing over the years. Our decision was to donate twice the financial aid they provided us, as a way of "paying back" our education costs to them. Beyond that we only give directly to specific undergraduate student groups.

 

[ziggy29]

It's a hard one for me. On one hand, there is the zero-sum argument of "I had to pay for it, why shouldn't they?" On the other hand, people my age and older were able to go to college for a LOT less money, even after inflation, and people rarely racked up student loan debt that was larger than their annual salary. My first semester at a state-run four year university in the fall of 1983? $295.

That said, we have badly distorted the markets and our idea that "everyone should go to college" has resulted in demand greatly outracing supply. More and more college grads are going back to learn the trades, too, which can often be done at a community college and/or through apprenticeships that don't leave someone $50-100K in debt. More folks are starting to learn that there are more jobs with good pay and benefits in another route.

 

[pb4uski]

How about that the school is required to hold at least 10% of the student loan debt granted... so if the tuition, room and board is $35,000 for a year and the student needs a $30,000 loan to fund it then the school must hold $3,000 of the $30,000 loan with the other $27,000 held by banks or investors. Schools might act differently if they had some skin in the game... especially if you added to that that their tranche is the last to get paid.

 

[Car-Guy]

I guess this must be something I feel (relatively) 'strongly' about because I keep chiming in.


My concern is.....if people, (and they're not babies), keep getting bailed out and never face the downside(s) of their decisions......how are they ever going to grow up?

Once people get used to 'free' stuff, (paid for by someone else...anyone else), they'll perpetually support those who offer them even more free stuff..."

I'm sure there are many others here, like me, that agree with you.

 

[LOL!]

I know someone who was actively encouraged to take on student loans by their university. The university actually had a workshop in how to do it and use the PSLF (Public Service Loan Forgiveness) program to have a low paying job in the public service sector for 10 years (?) then to move to a higher paying job. Also taught was how to use married-filing-separately to exclude spouse's high income from the equation.

So are universities complicit in all this? (Note: without students to pay for programs, the university would have to lay off many of the employees who administered or taught those programs & degrees.)

How about lawmakers for setting things up to game the system?

If the government is handing out apparently free money, I know that I am going to get in line if my circumstances dictate that.

(We do know that the PSLF program has had some political fingers trying to change it because too many were feeding at the trough.)

Basically, if this was couched as a "Jobs Program" with jobs for universities, banks, students, farmers, government workers, student bar owners, and returns for investors, then it would not look so much like it was money that was just being burned up.

 

[Music Lover]

Once people get used to 'free' stuff, (paid for by someone else...anyone else), they'll perpetually support those who offer them even more free stuff..."All ya gotta do is...."

That already happens.

 

[Time2]

MOD HAT ON

Please be careful not to get into politics.

MOD HAT OFF

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.