It is the result of deliberate policy decisions, such as excluding student debt from being cleared through personal bankruptcy.
These deliberate policy decisions magnify the advantage that accumulated wealth has on success. Deserving outsiders are thwarted from fulfilling their potential in the so-called "meritocracy", so that by and large social mobility is stilled and American "meritocracy" becomes a first-order approximation of aristocracy.
When the policy decisions which have led to this crisis are so vast and immoral, why not consider an action as dramatic as forgiving all student debt?
> why not consider an action as dramatic as forgiving all student debt?
As someone who would like to see public education be free for future students, I’ll give you 3 great reasons why rewriting the past is an awful idea:
1. It would treat someone who worked throughout college (and possibly learned less and earned worse grades because of it) in order to borrow less - and someone who didn’t even attend because they couldn’t service the debt - the same as someone who borrowed heavily. It rewards a poor decision, one that others handled better.
2. It would treat someone who took on $30k/year in debt for a mediocre private school the same as someone who took on $10k/year to go to an in-state school (or nothing because they worked), or $30k/year to go to a top private school. At least 1 of those choices is a low-return decision.
3. There’s a lender on the other side of every transaction and they may not have had anything to do with the policy decisions you disagree with.
Finally, the paper covers many possible implementations. If by “forgiveness” you mean that the government should negotiate a payment to lenders (so taxpayers are paying off everyone’s loans), here’s why that shouldn’t happen. There’s a much stronger argument that future education from public universities should be free.
Until that happens, given finite resources, any money that would go towards debt should go towards future students, not retroactively rewarding what may well have then been a poor decision. Pay/fund public colleges, not lenders.
Basically, any retroactive move rewards a lot of people who made what were then poor choices, and penalizes those who didn’t. Focus on making (public or otherwise verifiably cost-effective) education cheaper or free for future students.
the point of this article is that moralizing about who "deserves" it more is a waste of time that is destroying the economy. Is it really worth it to hold back everyone else just so you can finger wag at people that wern't responsible?
> the point of this article is that moralizing about who "deserves" it more is a waste of time that is destroying the economy
That was arguably the point of the NY Mag article, but the paper that the article is based on goes a lot deeper, and doesn't claim that student loan debt is destroying the economy.
> Is it really worth it to hold back everyone else just so you can finger wag at people that wern't responsible?
The last part of my comment addresses that. If you believe that (at least cost-effective) college education can have a net positive impact on the nation's economy, as I also believe, then put the money one would put into eliminating debt into making future public college free (or subsidized in whatever way maximizes impact for the subsidy).
Since they're both very expensive changes, the chances that both can happen is unlikely. Moreover, until at least some college is free, future students would still need to borrow. They'd re-create the same debt problem.
(Less important: it's not "finger-wagging" to not want to change the game underneath someone. It's trying to create a set of circumstances that reward good choices. Large swaths of our society exist to try to make incentives reward good choices.)
The only poor decision made was for the taxpayer to offer student loans in the first place. This necessitated taking the loans in order to be competitive. Canceling existing student debt does not "reward" people who took the loans, it simply nullifies the original exploitation. The only person being "penalized" is the taxpayer who deserves it for handing out $100k loans to 18 year olds.
No, other poor decisions were made. Yes, it rewards people who took out tens of thousands of dollars in loans to prolong adolescence at college when others didn't make that decision or enjoy that experience. You seem to think people with debt are the only ones at a loss here.
> There’s a lender on the other side of every transaction and they may not have had anything to do with the policy decisions you disagree with.
Part of the argument was the government owns 90% of outstanding student loan debt. Don't know how true this figure is but that's their claim.
One would think if this were a viable plan Helicopter Ben would've done it when things were really bad since they were giving away money left and right to "kickstart" the economy -- I personally got like $4200 for nothing due to the way I was discharged from the reserves.
However, even for the federal loans where taxpayers are the lender[1], there's still a choice whether to retire the debt or leave the debt as-is and fund something else (like tuition for future students).
> It rewards a poor decision, one that others handled better.
Do you believe this about health care as well?
Some people exercise and eat healthy every day yet they share the same scarce medical resources as someone who smokes and is overweight. Those people may be in the same insurance pool and may pay the same for those services.
Aren't we rewarding the poor decision? Why does the guy working his ass off in the gym every morning have to pay for obese people? These questions sound the same to the ones you're asking, except in this case, it's just money and education instead of public health which is far more grave.
Basically, making changes for the future (a shared healthcare pool, subsidized tuition, or anything else) is different than retroactively adjusting an arbitrary subset (only outstanding debt, only from tuition) of the past.
Student lending wouldn't work if loans were simply dischargeable in bankruptcy. The deliberate policy decision here was to ensure that tuition lending would be available to pretty much everyone regardless of cosigning family wealth.
Before the HEA, loans were dischargeable, but only after being in repayment for 7 years. As a practical matter, young pre-family college graduates in the workforce couldn't discharge loans in bankruptcy.
> why not consider an action as dramatic as forgiving all student debt?
What about folks who couldn't afford college because they actually had to work to make money? The ones who were busting their ass 60 hours/week while their better off (and less financially responsible) peers partied on cheap government money in college? If you don't think there is already a huge amount of resentment in a sizable minority of the "working underclass" on this point you are mistaken.
As one of those guys who had to forego college in favor of starting a career I'd be absolutely livid. A relatively spoon-feed population gets yet another handout? The below market rate debt that you could only get due to taxpayer guarantee wasn't enough? That's what the optics will look like to the vast majority of the country. Most of the country will never have the privilege that a kid with a 4 year college degree already has had in their life - debt or not.
Talk about creating winners and losers. Reading comments like this on HN (and other places with similar demographics) makes me realize how utterly socially disconnected as a society we are. It's downright scary at this point.
It doesn't seem to make much sense letting sour grapes direct policy.
For example, I eat healthy and exercise every day. I could complain that virtually nobody else does yet I'm effectively stuck in the same insurance pool as them. And I could use this to forever resent a single-payer system as well. But that's just silly.
Or something like "Ugh, I didn't eat pizzas every night because I had no health insurance. It's unfair if everyone gets healthcare for free! Think of all those pizzas I missed out on!"
> Or something like "Ugh, I didn't eat pizzas every night because I had no health insurance. It's unfair if everyone gets healthcare for free! Think of all those pizzas I missed out on!"
Since this proposal is debt-specific and retroactive, the analogy would be something like: "It's unfair if everyone gets all debt for prior health expenses repaid. Not their actual health expenses (however they were paid for), nor a reasonable health expense, but instead, whatever part of their health expenses are currently outstanding as debt."
We're fighting over crumbs. The meaningful wealth transfer in this country hasn't gone to the subpopulation with student debt, but to those well above them. I'd be equally supportive of dramatic action which benefits people who did not attend college.
But do you believe me when I say that?
Lots of people who were the intended beneficiaries of Obamacare think it wasn't for them.
> Reading comments like this on HN (and other places with similar demographics) makes me realize how utterly socially disconnected as a society we are.
Right back at you.
> It's downright scary at this point.
Agreed. But it's been scary for out-groups since forever.
After person graduates, they must use x percent of their income to pay student debt. In this way the student avoids the debt trap in the case of unemployment, or personal difficulties. Some may be able to pay the debt, some may not, but it's the government that shares the risk and has stake in seeing people getting the education they need.
Implementation can happen trough government either guarantees for the loan or direct loans from the government.
The underlying assumption is that people incentives to get jobs where they earn their living.
Political argumentation using moralizing negative or positive use cases without any attempt to quantify them can be very harmful.
The real question is if positives outweigh the negatives.
For example, is 2 to 5 ratio of misuse's vs. honestly can't pay too much? If we prevent two cases of misuse but five people have their life ruined because various unseen reasons, is it a good deal?
We have this system in the UK, you pay 9% on everything above 21k, and the debt is written off after 25(?) years. It’s a stealth tax on the poor/low middle earners. Anyone who can afford to not take out the loans ends up with a 9% pay rise. Anyone who can afford to pay them back early (high earning graduates) end up saving. Then you end up with the majority of people who will end up paying back many many times the debt over in interest.
A fairer option for all would be a flat graduate tax where all graduates pay x% of their earnings over a threshol.
>Anyone who can afford to not take out the loans ends up with a 9% pay rise.
You must take into account the potential capital income they lost and paying the risk of not getting well paying job from their own purse. If the government substituted loan has little lower rate than market rate, the choice between taking a loan versus paying it beforehand can be neutral or close to neutral.
>Anyone who can afford to pay them back early (high earning graduates) end up saving.
Isn't that a good thing? Aligning the incentives of the lender and the borrower.
Sweden has that system. The loans are also very low-interest (for a while the interest on my loan was lower than the interest on my basic savings account) [edit: just checked, the interest for 2018 is 0.13%. my savings account is 0.20%]
Sweden also has free tuition, and small living stipends for all (in my time it basically covered rent and nothing else), so your student debt is only for living expenses. I had classmates who took on no student debt by working all summer and living frugally.
Cancelled debt is usually taxed as income. Which would simply create another liability.
One alternative, is to securitize student obligations. they have avalue which is non-zero. And allow them to be traded in an exchange. It would provide the reverse incentive that certain majors or career paths would obtain better terms.
But an even better option is to simply allow for direct corporate sponsorship at the undergrad level. If Apple needs 300 extra kernel hackers by 2022. They should begin recruiting right at the high school level. Offering full tuition, stipend and guaranteed employment upon successful graduation.
In other words, transfer education "risk" away from students. And provide some insurance mechanism in case of failure.
This seems dramatic. Why not just cancel the Clinton administration's sinister provisions Higher Education Amendments of 1998 (the 1998 HEA) which made student debt non-dischargeable in bankruptcy? They sold out all the students with that.
When people graduate from college, they basically have nothing yet. They haven't had time to acquire anything. This would make it trivial to get free education at the taxpayers' expense. Declare bankruptcy on graduation day, and then move on with your life.
Sure, and the only way you're incentivised to do such stupidity is if the cost of education is unbearably steep. Do you do that for a school that's 100k a year? Probably. For one that's 10k a year? Probably not.
Also it wouldn't be taxpayer expense, if it were a privately given loan.
Have you gone to college in America? Did you hang out with somebody outside of Science and Mathematics departments? Plenty of people go to college here just for the fun experience. They go there for the bars, fraternity/sorority parties, sex, drugs, alcohol, etc. They don't have a single care in the world about what happens after college. They don't really care what it costs because they don't pay it. One way or the other.
To summarize, it wouldn't be about purposefully defrauding the taxpayers. It's just that that thought would never even come up.
That wasn't a big problem before 1998. There are many disincentives to bankruptcy which is why people who are not broke or those with prospects to earn aren't lining up to do it.
If a college actually prepares a student for the job market they would be insane to do this; if it doesn't they may have no recourse.
Very few forms of debt are excluded from bankruptcy. IMO it's far from humane to make college, of all things, in that category. Should those who pay huge $$$ for American degrees and then can't get jobs be forced to pay the bloated costs despite having to go back to a retail job where they can barely survive? The original act takes a civil liberty, which most people enjoy, from a vulnerable group. Young people just starting out who may have made a huge investment that didn't pan out... being unable to declare bankruptcy prevents such young people from getting back on sound financial ground for potentially decades. It's embarrassing that the Clintons haven't taken more heat for this, arguably nothing but an act of crony capitalism.
If lenders didn't expect to be repaid unconditionally, they would be less likely to lend money to college degrees that were likely to be financially worthless. This is as it should be. Before the modern financial aid situation, some people still managed to get degrees with more of a classical academic focus (i.e. without regard to market considerations). There were fewer of them, but then the odds they had to go work at Denny's afterwards were also probably lower.
As someone with degrees is math and physics, I used to think this. I don't anymore. I think that those fields offer many opportunities to examine and analyse ideas, and that is important.
Student debt is a nonsecured loan (you can't repossess their education/degree if they default). The only reasonable way to get what you're asking is to allow lenders to vet whom they are lending to. In other words, allow lenders to deny a loan to someone with no assets who wants $150,000 to study art history.
This article is clearly wishful thinking, but it struck me that they want to do a big debt forgiveness thing without worrying about why people rack up these debts and just leave that as something to be figured out after we've done this big expensive thing.
Is this the most effective and most moral way to spend a trillion dollars? The benefits of such a policy would accrue primarily to households that don't really need financial assistance, and would do little to help those who really do.
I can’t say it’s the most effective or most moral way to spend a trillion dollars. I can say it’s much more moral and effective than spending a trillion dollars on waging useless wars in Iraq and Afghanistan. It’s much more moral and effective than giving trillions to the very wealthy in the form of tax cuts.
Higher education is a public good. It used to be the case that tuition was around 1/3 the cost of running a university. Now it’s north of 50%. It’s not good for society to have some many people in a lot of debt in their 20s. The so called greatest generation in American history, at least partly, got their greatness from free higher education.
Maybe this isn’t the best option but something needs to be done because the current system isn’t sustainable.
I didn’t say it was bad for them to carry debt. It’s bad for them to carry a lot of debt.
Yes, it was not a great argument for spending a trillion dollars on student loan forgiveness. Mostly I was pointing out how out of whack the moral priorities of the U.S. are. There is very little debate or angst over spending a trillion dollars on a useless war. But somehow spending a trillion dollars on student loan forgiveness makes everyone think about moral hazard. You mentioned morality and so I took things a bit further than what you did.
It’s partially regressive (not all of the money to fund this would come from regressive taxes) but it’s in everyone’s interest to have an educated society that isn’t unduly debt burdened once they leave college. We all benefit from this. So forgiving this debt palatable to me. It’s why I don't mind funding k-12 education even though I don’t have kids.
It's regressive no matter how it's funded, because the benefits are structurally determined to impact primarily families of means. The wealthy attend expensive colleges. If college tuition were free, that would remain the case.
I believe you are using the word 'regressive' incorrectly then. Of course, just forgiving all student loans will disproportionately help some who don't need it. But in the U.S. we've decided against universal, public higher education for those who are qualified and thus inequities will occur no matter what happens. It's disproportionately the case that the wealthy get into schools with the best connections. Those tend to be private schools. Such is what happens when a society starts down the path toward Ayn Randian utopia.
It will disproportionately help the well-off, period; not just "some of them". The dominant distributional effect will be to shift dollars that could have been spent on services, tax relief, or debt relief for less-advantaged households to far-better-advantaged households. It's pretty simple to see why; it's the same reason why the mortgage interest deduction is regressive.
I don't see how advocates for this policy can escape that logic without declaring math irrelevant.
If we want to improve access to and financing of higher education in the US, we should radically expand Pell Grants, not write a 12-figure check to wealthy families.
> Also: why is it particularly bad for 20-somethings to carry debt?
Opportunity cost. Not making that risky but high upside potential career move at 26 because you have a $1k/mo debt payment to make is going to severely impact your total earnings far more than any other time of your life.
The advantage of youth is mobility, flexibility, and ability to take on risk. You give a lot of that up with a high debt load at that age.
So you think we should use public policy to shift debt load onto older people, who have family obligations and a much more limited window of time to ensure financial security After the conclusion of their working years, so that 20-somethings can start companies?
If we are going to have a society worth caring about and living in then we have to have shared burdens. Sometimes I’ll help pay for something I’ll never use for the benefit of others. The go it alone mentality leads to a shitty society. It’s proper, right and just for society to provide universal higher education for qualified people. It’s beneficial to everyone that this be the case.
Besides, in the U.S. a great generational theft has occurred. The older folks benefitted from much higher public support for their higher education. Now they vote to defund higher education and this has led to penury for large numbers of recently graduated college students.
If it's proper, right, and just for society to provide higher education, is it also right and just for them to subsidize tuitions for expensive private schools rather than local state schools?
How do you reconcile that position with a belief that we should forgive student debt? Do you have an estimate as to how many of those dollars will have gone into the pockets of elite schools?
I imagine federalizing municipal pension obligations would be a better idea.
It would have to follow some sort of extremely firm commitment to overfund future pensions though (future residents getting a rebate from previous taxpayers is way less hazardous than future residents getting taxed for current services).
On my phone at the moment, so I’ll have to come back with an in depth Excel spreadsheet later (and I need to do additional research on Illinois pension debt; numbers available show it somewhere between $130-250 billion).
Cliff notes are military spending is ~$550 billion a year. Halving that gives us ~$275 billion a year ($2.75T over ten years) to direct towards unfunded municipal pensions that need bailing out and student loan debt forgiveness (along with other policies such as reducing the interest on student loans to zero in the interim to give borrowers relief). I also assume that social security tax thresholds are removed, preventing the need for general fund transfers to top up Social Security.
My apologies if I made it sound like we could write a single check and this is all fixed. It’s more the thought that we have ample resources to resolve both issues in a controlled, orderly fashion if orchestrated by competent government representation (a guy can dream).
That’s a great question, but out of scope for modeling a financial solution to student loan and pension obligations.
We’ll need a way to retask redundant military employees and defense contractors, otherwise we’re trading one inefficiency for the other.
If halving military spending is a hill too far, less reduction can occur and still accomplish a student loan and pension obligation debt “wipe” (~$1.5T in total is needed).
Somewhat unrelated: rolling VA spending into Medicare and implementing universal healthcare would extract enormous cost savings, further reducing DoD spending.
Appreciate you asking me to show my work. I think I’m going to run for office now.
Unless you have countervailing qualifications —- in which case you should talk more about them so we can ask good questions of you —- it’s unhelpful to bring qualifications into the argument.
The military budget is set by those who actually do have expertise in the area, not me. I don't need to show expertise to accept the judgment of experts. The OP is disputing those experts, and thus does need to show expertise.
I admit I am not qualified to make my statement with authority, it’s simply my opinion. I’d be most appreciative if someone with significant military management experience weighs in.
I don’t see the problem with having the discussion. The US military is a disgustingly wasteful (pallets of cash in the desert “go missing”! [1]) organization that has squandered trillions of dollars. Dollars that could’ve been spent on something useful. It’s time for accountability and responsibility.
Do you seriously not see the problem with not questioning that? We can’t afford universal education and healthcare, but we can afford aircraft carriers that are obsolete for force projection (inexpensive surface cruise missiles from China) and F35s that can’t fly, kill their pilots, and are generally speaking not fit for purpose? [2].
Journalists love welfare for upper middle class people. Mortgage interest deductions on your $1 million McMansion? Forgiveness of your $250,000 law school loans? Bring it on!
Our student loan system is fine. Under PAY-E, you’re payments are capped at 10-15% of your income, and high interest rates means you recover some extra from high income people that can be used to defray the costs to lower income people. It needs tweaking to make sure it stays in the black, but that’s it.
If you're making $50k a year you net $3,350/mo. 10% of that is $335. So each month you're paying $335 against the $1500 in interest that your $250k loan demands. How is this in any way helping? At the end of the 25 years[0] your balance is written off, right? But then it may become _taxable income_[1]. So suddenly you're writing off $1,000,000 plus your salary, and that hits you with a $487,000 tax bill[2]. Hopefully you've been doing a great job with your savings, because if you can't pay that tax bill the IRS charges interest daily on your outstanding tax bill and associated penalties[4], not to mention they'll demand that you sell off any meaningful assets[3]. Then, of course, this causes another economic crises because 25 years from now, we suddenly have a whole slew of people who are 50 and no longer have their life savings, and may not have their house, depending on how the IRS is operating 25 years from now.
It looks to me like PAY-E is _exactly_ like a student loan in the first place -- a great vehicle for pushing your debt responsibilities into the future with the hopes that some other program will save you. And in this scenario, how are you supposed to attract a mate, have a family, a home, or any sort of hope for the future? Sure, you made a screwed-up decision when you were young and you should be punished for it, I totally agree. My question is, does the punishment fit the crime?
We must cancel everybody's debt for the economy's sake, but we also have to do it in a fair way. Thankfully, we have Steve Keen, who has already worked out a solution:
My solution: Make it dis-chargeable in bankruptcy. Since it's a for profit loan--albeit at lower rates, especially compared to 20+% a year credit cards--the lender took the risk. The next time, they'll price this in and think twice before approving every loan.
The borrower that took the loan--you signed it, right, and you were 18+ years old ? --makes a calculated decision on whether to file for bankruptcy or not. It has costs for the filer, at least for 7 years, and possibly for life (some jobs will ask if you ever filed for bankruptcy).
Other than that, who cares: you are a big bank...sometimes you win, sometimes you lose. You should treat a bank like it treats you, if you can get away with it, of course.
But but... what about $rich_schooling when they declare bankruptcy? Those doctors are screwing us all over!
Which, the above happened in the late 70's and early 80, as bankruptcy protections were whittled away for everyone, because of a small percentage of bad actors.
The doctor issue seemed simple: a judge has to approve the bankruptcy. And they can make a determination that it was happening to ignore scholastic debt and cancel the doctor's license. But I guess the "applies to every american" was much more profitable.
I think there's too much moral hazard there. A young person, with no real assets (you can't repossess a degree) would probably decide bankruptcy is a relatively good option, immediately after they graduate. And so the interest rates spike to cover the risk, which makes bankruptcy an ever better option.
This is one of things, like corporations being able to sue governments, that sounds horrific but has relatively clear benefits because if the risk is too high the business deal won't happen. A classic prisoner's dilemma, and the answer to that is always to change the rules of the game to try to make cooperation pay for both parties.
Debt is debt, you tried to make a profit and x% of borrowers cannot fully pay it (they might stop paying after 6 years for example, so not all is lost). The idea is to curtail this kind of debt.
In bankruptcy court they are protections, you cannot have $2 mil in the bank or a $250k salary and try to get out of paying $92k in student loans.
I was a low-information student, first to go to college in family. Once I decided to go however, the entire equation was what college could I afford and the living costs. Loans never felt like an option. Because of that, I basically was forced to choose a state school and live off campus in cheap housing.
Plus side is I came out with no debt, drawback is I didn't have much fun.
I guess that biases my thinking, but student debt forgiveness seems ridiculous for most all of the people I know who went deep in debt for a non-economically practical degree.
If that's your perspective, I can understand why it would seem ridiculous. But consider other perspectives. Think of all the people who weren't the first in their family to go to college.
Imagine that you're 18, and everyone you know tells you that you need to go to school to get a good job. People are competing to get into better schools, and you get admitted to a relatively nice private college with a beautiful campus. Your parents went to a similar college, graduated, got jobs, started a family, and are encouraging you to do the same thing.
Except now, college is something like 5x as expensive as it was for your parents, teachers, and advisors, adjusted for inflation. Your job prospects after college are worse, too. Maybe you manage to pull in $15/hr and you think it's pretty good, but meanwhile rent is 50% higher than it was for your parents and teachers.
You feel like you were lied to, betrayed, and you feel trapped. As a society, we created this problem. I'm not trying to take away agency from the people who chose to take out loans and study whatever they felt like, but we did send an army of teachers and academic advisers after our children telling them that college is what you need, and loans are how you pay for it.
The idea of a "non-economically practical degree" is a bit of a red herring, here. It doesn't matter as much which degree you get as an undergraduate. Sure, there are a few high-paying degrees like geology but in many fields you can get work with a range of degrees. Based on what I was majoring in, people would ask me if I was going to go into teaching, as if that were the only option for someone in my field. Yet here I am, working in industry.
A reasonable proposal if Baby Boomers wouldn’t continue to subjugate future generations to crippling tax rates due to irresponsible financial policy decisions today.
The US has trillions (!!!) of dollars in liabilities that will need to be paid and we're still inacting tax cuts “because taxes are too high”.
Funny you should mention future taxpayers in utero, because it's the generation with student loan debt that's not having children because they're too busy paying off student loans. They're skittish about getting married because maybe you're in love with someone who's $50k in debt, and you're not sure if you want to deal with that kind of burden.
Also, the idea of taxing "teachers, parents, and professors who lied to you" is absurd at face value.
Why is the idea of taxing the people who created the problem absurd? One, they’re the ones with wealth to tax. Two, their ignorantly optimistic mindset is responsible for the education bubble. Both generations prior and this current generation realized the value of working instead of pursuing higher education. Three, they benefited from it. The vast apparatus of higher education, professors, administrators, etc., aren’t staffed with millenials.
I'm not sure what you mean by "taxing the people who created the problem". Do we just tax people based on their age, and assume that anyone over 50 probably had their hand in this? Or do we test people to see if they ever gave bad advice to children, and give them fines? Who, exactly, will be paying the tax, and how do we identify these people?
Maybe I'm missing something, because this seems a bit too obviously absurd.
You wouldn’t literally tax people based in advice they gave; instead it’s a matter of using different funding mechanisms that are incident disproportionately on different groups. Funding stuff with debt is a de facto tax on future generations. Instead, you can e.g. tax 401k withdrawals above a certain amount, higher property taxes, taxes on pension withdrawals, etc.
You can say that not everyone who draws on a 401k contributed to the problem, but that’s besides the point. If you forgive the debt, then nobody who is going to bear the cost will have had anything to do with creating the bubble.
I think we're having parallel discussions here. It's painfully obvious that simply forgiving $1.3 trillion in debt without figuring out where the money should come from is not a good solution. So I guess what I'm saying is I don't think I hold the viewpoint you're arguing against.
I guess I misinterpreted your argument for taxing the "teachers, parents, and professors who lied to you".
But not the lenders? They didn't have anything to do with convincing people to take their loans? They have to be subsidized with favorable bankruptcy laws?
More than 90% of student loan debt is federal, either direct or through private lenders where the lending decision is made by the government. The “favorable bankruptcy laws” were adopted primarily to protect these loans, because they are issued, by law, at set interest rates and without regard to credit risk.
> It doesn't matter as much which degree you get as an undergraduate.
In my experience this is a very US-middle-class-upward-centric idea. The working class people I know who went to college were all rationally concerned about picking a degree with good employment prospects, as were most of the people I know from outside the US (where the "broad liberal education" is less valorized, or even non-existent).
I must have been hanging out with different working-class people. Economic capital is only one form of capital, and my friends were concerned with building their social and cultural capital as well. These things give you access to better support networks, which in turn give you more freedom to get a better job if that's what you want. It all seemed based a very continental philosophy to me, but that's probably due to the particular school I went to.
> Except now, college is something like 5x as expensive as it was for your parents, teachers, and advisors, adjusted for inflation
When did this hypothetical 18 year old graduate? At least in 2000, the increase in college costs and difference in post-graduate pay was already widely covered in the media. From personal experience, one didn't need to look in order to hear about it.
I can imagine that it might not have been clear in 1990 or maybe even 1995, but pre-1995 high school graduates have probably paid off or discharged debt.
I was thinking about people who went to college circa early 2000s, which is the population which graduated into the 2007-2008 financial crisis. Despite the fact that you couldn't avoid hearing the truth about your financial prospects, you also couldn't avoid hearing outright falsehoods from well-intentioned friends and family members. I know plenty of baby boomers who were basically kicked out of the house at 18, paid for college + rent + food + books with a part-time job, and thought that the best way for their children to have the same chance at life was to take on student loans.
Hello it's me, guy who graduated in December of 2008. I made the pragmatic choice to do computer science at a cheap in state school. Graduated with a job offer right out of school. Paid off my loans around age 26ish. I worked part time which paid for my housing and food. I had some financial help from family, but not to the point where my loans would have taken more than another year or two to pay down, even less if I had paid more than minimum payments. I also had some cash saved from working every summer since I was 12, as well as part time for a few years in high school.
I think people pitching college as a magic "you go then you get a job" is pretty bad for sure. Mostly because it leaves out the part where you need to make sure the juice is worth the squeeze monetarily.
It's definitely doable and it's definitely worth it if you choose a path that actually supports the future you envision for yourself.
The really gross thing here is the insane moral hazard that universities represent in this feedback loop.
Universities, particularly through the media, exercise strong influence over public discourse about education spending. They also benefit massively from that spending. Canceling student debt without penalizing that feedback loop likely accomplishes nothing or a negative.
Whether you forgive student debt or not, universities keep their huge gains that they've pumped into infrastructure, administrators, and influence.
No, this is just plain stupid. You (wherever student debt is so common) must prioritize early school education about personal finance and loan consequences.
People always bring morality into these discussions which then makes discussion difficult, since it becomes about how we all feel about it.
Rather than thinking about how much it's 'right' or 'wrong' to forgive debt, let's try to keep focus on the effect it would have on society. Positive? Negative? And, if it truly is deeply immoral to forgive debt, what effect would this have on society? Would the problems introduced thereby outweigh the benefits?
I'm OK with cancelling anyone's student debt, IF they also get their degree CANCELLED as well. As in, when an employer calls to verify their resume, the institution will have to say they DO NOT have what they claimed.
Otherwise, what about the many people like me who didn't do something so stupid? We can't go back in time. They end up with a free degree for being stupid, we end up with nothing for being responsible?
I find it difficult to understand how taking money from people who earned it, even if used to "forgive" loans borrowed with expectation of repayment, is a means to increase economic activity. How is this different than the broken window fallacy? The students, loans forgiven, are now going to spend their former loan payments, sure, but the former recipients of those payments will not be spending them. Sounds like zero-sum game with a feel good motive.
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It is the result of deliberate policy decisions, such as excluding student debt from being cleared through personal bankruptcy.
These deliberate policy decisions magnify the advantage that accumulated wealth has on success. Deserving outsiders are thwarted from fulfilling their potential in the so-called "meritocracy", so that by and large social mobility is stilled and American "meritocracy" becomes a first-order approximation of aristocracy.
When the policy decisions which have led to this crisis are so vast and immoral, why not consider an action as dramatic as forgiving all student debt?
As someone who would like to see public education be free for future students, I’ll give you 3 great reasons why rewriting the past is an awful idea:
1. It would treat someone who worked throughout college (and possibly learned less and earned worse grades because of it) in order to borrow less - and someone who didn’t even attend because they couldn’t service the debt - the same as someone who borrowed heavily. It rewards a poor decision, one that others handled better.
2. It would treat someone who took on $30k/year in debt for a mediocre private school the same as someone who took on $10k/year to go to an in-state school (or nothing because they worked), or $30k/year to go to a top private school. At least 1 of those choices is a low-return decision.
3. There’s a lender on the other side of every transaction and they may not have had anything to do with the policy decisions you disagree with.
Finally, the paper covers many possible implementations. If by “forgiveness” you mean that the government should negotiate a payment to lenders (so taxpayers are paying off everyone’s loans), here’s why that shouldn’t happen. There’s a much stronger argument that future education from public universities should be free. Until that happens, given finite resources, any money that would go towards debt should go towards future students, not retroactively rewarding what may well have then been a poor decision. Pay/fund public colleges, not lenders.
Basically, any retroactive move rewards a lot of people who made what were then poor choices, and penalizes those who didn’t. Focus on making (public or otherwise verifiably cost-effective) education cheaper or free for future students.
Also, here’s a deep link to the paper PDF: http://www.levyinstitute.org/pubs/rpr_2_6.pdf
That was arguably the point of the NY Mag article, but the paper that the article is based on goes a lot deeper, and doesn't claim that student loan debt is destroying the economy.
> Is it really worth it to hold back everyone else just so you can finger wag at people that wern't responsible?
The last part of my comment addresses that. If you believe that (at least cost-effective) college education can have a net positive impact on the nation's economy, as I also believe, then put the money one would put into eliminating debt into making future public college free (or subsidized in whatever way maximizes impact for the subsidy).
Since they're both very expensive changes, the chances that both can happen is unlikely. Moreover, until at least some college is free, future students would still need to borrow. They'd re-create the same debt problem.
(Less important: it's not "finger-wagging" to not want to change the game underneath someone. It's trying to create a set of circumstances that reward good choices. Large swaths of our society exist to try to make incentives reward good choices.)
Part of the argument was the government owns 90% of outstanding student loan debt. Don't know how true this figure is but that's their claim.
One would think if this were a viable plan Helicopter Ben would've done it when things were really bad since they were giving away money left and right to "kickstart" the economy -- I personally got like $4200 for nothing due to the way I was discharged from the reserves.
At least according to http://money.cnn.com/2017/01/18/pf/college/navient-sallie-ma..., by borrower count, roughly 50% are federally backed and 50% are private.
However, even for the federal loans where taxpayers are the lender[1], there's still a choice whether to retire the debt or leave the debt as-is and fund something else (like tuition for future students).
[1]: More on federal loan funding, ie, which government entities are actually the lenders: https://www.loan.com/student-loans/where-does-funding-for-fe...
Do you believe this about health care as well?
Some people exercise and eat healthy every day yet they share the same scarce medical resources as someone who smokes and is overweight. Those people may be in the same insurance pool and may pay the same for those services.
Aren't we rewarding the poor decision? Why does the guy working his ass off in the gym every morning have to pay for obese people? These questions sound the same to the ones you're asking, except in this case, it's just money and education instead of public health which is far more grave.
Basically, making changes for the future (a shared healthcare pool, subsidized tuition, or anything else) is different than retroactively adjusting an arbitrary subset (only outstanding debt, only from tuition) of the past.
Before the HEA, loans were dischargeable, but only after being in repayment for 7 years. As a practical matter, young pre-family college graduates in the workforce couldn't discharge loans in bankruptcy.
What about folks who couldn't afford college because they actually had to work to make money? The ones who were busting their ass 60 hours/week while their better off (and less financially responsible) peers partied on cheap government money in college? If you don't think there is already a huge amount of resentment in a sizable minority of the "working underclass" on this point you are mistaken.
As one of those guys who had to forego college in favor of starting a career I'd be absolutely livid. A relatively spoon-feed population gets yet another handout? The below market rate debt that you could only get due to taxpayer guarantee wasn't enough? That's what the optics will look like to the vast majority of the country. Most of the country will never have the privilege that a kid with a 4 year college degree already has had in their life - debt or not.
Talk about creating winners and losers. Reading comments like this on HN (and other places with similar demographics) makes me realize how utterly socially disconnected as a society we are. It's downright scary at this point.
For example, I eat healthy and exercise every day. I could complain that virtually nobody else does yet I'm effectively stuck in the same insurance pool as them. And I could use this to forever resent a single-payer system as well. But that's just silly.
Or something like "Ugh, I didn't eat pizzas every night because I had no health insurance. It's unfair if everyone gets healthcare for free! Think of all those pizzas I missed out on!"
Since this proposal is debt-specific and retroactive, the analogy would be something like: "It's unfair if everyone gets all debt for prior health expenses repaid. Not their actual health expenses (however they were paid for), nor a reasonable health expense, but instead, whatever part of their health expenses are currently outstanding as debt."
We're fighting over crumbs. The meaningful wealth transfer in this country hasn't gone to the subpopulation with student debt, but to those well above them. I'd be equally supportive of dramatic action which benefits people who did not attend college.
But do you believe me when I say that?
Lots of people who were the intended beneficiaries of Obamacare think it wasn't for them.
> Reading comments like this on HN (and other places with similar demographics) makes me realize how utterly socially disconnected as a society we are.
Right back at you.
> It's downright scary at this point.
Agreed. But it's been scary for out-groups since forever.
After person graduates, they must use x percent of their income to pay student debt. In this way the student avoids the debt trap in the case of unemployment, or personal difficulties. Some may be able to pay the debt, some may not, but it's the government that shares the risk and has stake in seeing people getting the education they need.
Implementation can happen trough government either guarantees for the loan or direct loans from the government.
I think Sweden has this kind of system.
Political argumentation using moralizing negative or positive use cases without any attempt to quantify them can be very harmful.
The real question is if positives outweigh the negatives.
For example, is 2 to 5 ratio of misuse's vs. honestly can't pay too much? If we prevent two cases of misuse but five people have their life ruined because various unseen reasons, is it a good deal?
Seriously what the hell is wrong with HN?
Do you really think the vast majority people are this greedy and short sighted at their own expense?
A fairer option for all would be a flat graduate tax where all graduates pay x% of their earnings over a threshol.
You must take into account the potential capital income they lost and paying the risk of not getting well paying job from their own purse. If the government substituted loan has little lower rate than market rate, the choice between taking a loan versus paying it beforehand can be neutral or close to neutral.
>Anyone who can afford to pay them back early (high earning graduates) end up saving.
Isn't that a good thing? Aligning the incentives of the lender and the borrower.
Sweden also has free tuition, and small living stipends for all (in my time it basically covered rent and nothing else), so your student debt is only for living expenses. I had classmates who took on no student debt by working all summer and living frugally.
One alternative, is to securitize student obligations. they have avalue which is non-zero. And allow them to be traded in an exchange. It would provide the reverse incentive that certain majors or career paths would obtain better terms.
But an even better option is to simply allow for direct corporate sponsorship at the undergrad level. If Apple needs 300 extra kernel hackers by 2022. They should begin recruiting right at the high school level. Offering full tuition, stipend and guaranteed employment upon successful graduation.
In other words, transfer education "risk" away from students. And provide some insurance mechanism in case of failure.
It's hard for me to express, but I really don't like this idea. It turns education into training.
Also it wouldn't be taxpayer expense, if it were a privately given loan.
To summarize, it wouldn't be about purposefully defrauding the taxpayers. It's just that that thought would never even come up.
If a college actually prepares a student for the job market they would be insane to do this; if it doesn't they may have no recourse.
Very few forms of debt are excluded from bankruptcy. IMO it's far from humane to make college, of all things, in that category. Should those who pay huge $$$ for American degrees and then can't get jobs be forced to pay the bloated costs despite having to go back to a retail job where they can barely survive? The original act takes a civil liberty, which most people enjoy, from a vulnerable group. Young people just starting out who may have made a huge investment that didn't pan out... being unable to declare bankruptcy prevents such young people from getting back on sound financial ground for potentially decades. It's embarrassing that the Clintons haven't taken more heat for this, arguably nothing but an act of crony capitalism.
(A PhD in those fields could make one a professor, but a BA does nothing)
Higher education is a public good. It used to be the case that tuition was around 1/3 the cost of running a university. Now it’s north of 50%. It’s not good for society to have some many people in a lot of debt in their 20s. The so called greatest generation in American history, at least partly, got their greatness from free higher education.
Maybe this isn’t the best option but something needs to be done because the current system isn’t sustainable.
Also: why is it particularly bad for 20-somethings to carry debt? They’re 40 years from retirement.
Yes, it was not a great argument for spending a trillion dollars on student loan forgiveness. Mostly I was pointing out how out of whack the moral priorities of the U.S. are. There is very little debate or angst over spending a trillion dollars on a useless war. But somehow spending a trillion dollars on student loan forgiveness makes everyone think about moral hazard. You mentioned morality and so I took things a bit further than what you did.
I don't see how advocates for this policy can escape that logic without declaring math irrelevant.
If we want to improve access to and financing of higher education in the US, we should radically expand Pell Grants, not write a 12-figure check to wealthy families.
Opportunity cost. Not making that risky but high upside potential career move at 26 because you have a $1k/mo debt payment to make is going to severely impact your total earnings far more than any other time of your life.
The advantage of youth is mobility, flexibility, and ability to take on risk. You give a lot of that up with a high debt load at that age.
Besides, in the U.S. a great generational theft has occurred. The older folks benefitted from much higher public support for their higher education. Now they vote to defund higher education and this has led to penury for large numbers of recently graduated college students.
It would have to follow some sort of extremely firm commitment to overfund future pensions though (future residents getting a rebate from previous taxpayers is way less hazardous than future residents getting taxed for current services).
Cliff notes are military spending is ~$550 billion a year. Halving that gives us ~$275 billion a year ($2.75T over ten years) to direct towards unfunded municipal pensions that need bailing out and student loan debt forgiveness (along with other policies such as reducing the interest on student loans to zero in the interim to give borrowers relief). I also assume that social security tax thresholds are removed, preventing the need for general fund transfers to top up Social Security.
My apologies if I made it sound like we could write a single check and this is all fixed. It’s more the thought that we have ample resources to resolve both issues in a controlled, orderly fashion if orchestrated by competent government representation (a guy can dream).
Edit: we spent $2.4 trillion on Middle East wars
We’ll need a way to retask redundant military employees and defense contractors, otherwise we’re trading one inefficiency for the other.
If halving military spending is a hill too far, less reduction can occur and still accomplish a student loan and pension obligation debt “wipe” (~$1.5T in total is needed).
Somewhat unrelated: rolling VA spending into Medicare and implementing universal healthcare would extract enormous cost savings, further reducing DoD spending.
Appreciate you asking me to show my work. I think I’m going to run for office now.
Other countries spend orders of magnitude less than the US on their military, and remain conflict free.
Our current path is unsustainable structurally, and we must switch course.
And your qualifications for making that assessment would be?
> Other countries spend orders of magnitude less than the US on their military, and remain conflict free.
Those "other countries" are, in almost every case, under the defense umbrella of a country that does have an adequate military.
The military budget is set by those who actually do have expertise in the area, not me. I don't need to show expertise to accept the judgment of experts. The OP is disputing those experts, and thus does need to show expertise.
Do you seriously not see the problem with that?
Do you seriously not see the problem with not questioning that? We can’t afford universal education and healthcare, but we can afford aircraft carriers that are obsolete for force projection (inexpensive surface cruise missiles from China) and F35s that can’t fly, kill their pilots, and are generally speaking not fit for purpose? [2].
[1] https://www.theguardian.com/world/2007/feb/08/usa.iraq1
[2] https://www.thedailybeast.com/military-admits-billion-dollar...
Countries can exist without universal education and health care.
They cannot exist without national defense (whether provided on their own or through an ally). Sorry, that is simply a fact.
Also, national defense is a clearly enumerated function of the federal government per the Constitution. Neither of the other two is.
Our student loan system is fine. Under PAY-E, you’re payments are capped at 10-15% of your income, and high interest rates means you recover some extra from high income people that can be used to defray the costs to lower income people. It needs tweaking to make sure it stays in the black, but that’s it.
If you're making $50k a year you net $3,350/mo. 10% of that is $335. So each month you're paying $335 against the $1500 in interest that your $250k loan demands. How is this in any way helping? At the end of the 25 years[0] your balance is written off, right? But then it may become _taxable income_[1]. So suddenly you're writing off $1,000,000 plus your salary, and that hits you with a $487,000 tax bill[2]. Hopefully you've been doing a great job with your savings, because if you can't pay that tax bill the IRS charges interest daily on your outstanding tax bill and associated penalties[4], not to mention they'll demand that you sell off any meaningful assets[3]. Then, of course, this causes another economic crises because 25 years from now, we suddenly have a whole slew of people who are 50 and no longer have their life savings, and may not have their house, depending on how the IRS is operating 25 years from now.
It looks to me like PAY-E is _exactly_ like a student loan in the first place -- a great vehicle for pushing your debt responsibilities into the future with the hopes that some other program will save you. And in this scenario, how are you supposed to attract a mate, have a family, a home, or any sort of hope for the future? Sure, you made a screwed-up decision when you were young and you should be punished for it, I totally agree. My question is, does the punishment fit the crime?
[0]https://studentaid.ed.gov/sa/repay-loans/understand/plans/in... [1]https://studentaid.ed.gov/sa/repay-loans/understand/plans/in... [2]https://pocketsense.com/taxes-1-million-dollars-8063543.html [3]https://turbotax.intuit.com/tax-tips/tax-payments/what-is-th... [4]https://www.irs.gov/businesses/small-businesses-self-employe...
At this stage, it's about damage control.
http://www.ideaeconomics.org/a-modern-jubilee/
The borrower that took the loan--you signed it, right, and you were 18+ years old ? --makes a calculated decision on whether to file for bankruptcy or not. It has costs for the filer, at least for 7 years, and possibly for life (some jobs will ask if you ever filed for bankruptcy).
Other than that, who cares: you are a big bank...sometimes you win, sometimes you lose. You should treat a bank like it treats you, if you can get away with it, of course.
Which, the above happened in the late 70's and early 80, as bankruptcy protections were whittled away for everyone, because of a small percentage of bad actors.
The doctor issue seemed simple: a judge has to approve the bankruptcy. And they can make a determination that it was happening to ignore scholastic debt and cancel the doctor's license. But I guess the "applies to every american" was much more profitable.
This is one of things, like corporations being able to sue governments, that sounds horrific but has relatively clear benefits because if the risk is too high the business deal won't happen. A classic prisoner's dilemma, and the answer to that is always to change the rules of the game to try to make cooperation pay for both parties.
Not that both systems couldn't be improved.
In bankruptcy court they are protections, you cannot have $2 mil in the bank or a $250k salary and try to get out of paying $92k in student loans.
Imagine that you're 18, and everyone you know tells you that you need to go to school to get a good job. People are competing to get into better schools, and you get admitted to a relatively nice private college with a beautiful campus. Your parents went to a similar college, graduated, got jobs, started a family, and are encouraging you to do the same thing.
Except now, college is something like 5x as expensive as it was for your parents, teachers, and advisors, adjusted for inflation. Your job prospects after college are worse, too. Maybe you manage to pull in $15/hr and you think it's pretty good, but meanwhile rent is 50% higher than it was for your parents and teachers.
You feel like you were lied to, betrayed, and you feel trapped. As a society, we created this problem. I'm not trying to take away agency from the people who chose to take out loans and study whatever they felt like, but we did send an army of teachers and academic advisers after our children telling them that college is what you need, and loans are how you pay for it.
The idea of a "non-economically practical degree" is a bit of a red herring, here. It doesn't matter as much which degree you get as an undergraduate. Sure, there are a few high-paying degrees like geology but in many fields you can get work with a range of degrees. Based on what I was majoring in, people would ask me if I was going to go into teaching, as if that were the only option for someone in my field. Yet here I am, working in industry.
The US has trillions (!!!) of dollars in liabilities that will need to be paid and we're still inacting tax cuts “because taxes are too high”.
http://www.usdebtclock.org/
Also, the idea of taxing "teachers, parents, and professors who lied to you" is absurd at face value.
Maybe I'm missing something, because this seems a bit too obviously absurd.
You can say that not everyone who draws on a 401k contributed to the problem, but that’s besides the point. If you forgive the debt, then nobody who is going to bear the cost will have had anything to do with creating the bubble.
I guess I misinterpreted your argument for taxing the "teachers, parents, and professors who lied to you".
Yes, exactly. Them. Nice racket!
In my experience this is a very US-middle-class-upward-centric idea. The working class people I know who went to college were all rationally concerned about picking a degree with good employment prospects, as were most of the people I know from outside the US (where the "broad liberal education" is less valorized, or even non-existent).
When did this hypothetical 18 year old graduate? At least in 2000, the increase in college costs and difference in post-graduate pay was already widely covered in the media. From personal experience, one didn't need to look in order to hear about it.
I can imagine that it might not have been clear in 1990 or maybe even 1995, but pre-1995 high school graduates have probably paid off or discharged debt.
https://nces.ed.gov/pubs2003/2003030.pdf (1999 data, 2003 publication) has interesting data. Doesn't really make the case either way, just informative.
I think people pitching college as a magic "you go then you get a job" is pretty bad for sure. Mostly because it leaves out the part where you need to make sure the juice is worth the squeeze monetarily.
It's definitely doable and it's definitely worth it if you choose a path that actually supports the future you envision for yourself.
Universities, particularly through the media, exercise strong influence over public discourse about education spending. They also benefit massively from that spending. Canceling student debt without penalizing that feedback loop likely accomplishes nothing or a negative.
Whether you forgive student debt or not, universities keep their huge gains that they've pumped into infrastructure, administrators, and influence.
People need to make responsible decisions, that's all.
Rather than thinking about how much it's 'right' or 'wrong' to forgive debt, let's try to keep focus on the effect it would have on society. Positive? Negative? And, if it truly is deeply immoral to forgive debt, what effect would this have on society? Would the problems introduced thereby outweigh the benefits?
Otherwise, what about the many people like me who didn't do something so stupid? We can't go back in time. They end up with a free degree for being stupid, we end up with nothing for being responsible?