The linked article doesn't even attempt to explain how such a plan would work, or could feasibly work. But it does link to at least one more thorough source[1] that tries to rationalize the economics. I'm still not sure I understand how such a plan overcomes the obvious objections, but that source is a bit better.
The political problem is there’s no constituency or patronage group here. Speaking again just from a political perspective, this is flushing money down the toilet. You’re helping everyone horizontally, not some group that will help you get re-elected or build up political capital you can use later.
As opposed to something like canceling student debt which is a more obvious patronage play for Democrats- college grads vote Dem and people with student debt skew younger (more Dems). Debt as a general category is too diffuse.
To be clear I’m not opposed but there’s not gonna be a political will to make it happen.
There is a possible structure that could work. But it would not be a simple add-on. It would require a restructuring. No loans. Medical should be profit free but with investment, and justice, well that needs a complete rethink doesn't it.
Its worse than that, its a lottery. Those graduates who have already paid off their debt, lose. Those soon-to-be students who have to pay high tuition, also lose.
Indeed, since colleges will see loan forgiveness as an option, tuitions will rise.
> Those soon-to-be students who have to pay high tuition, also lose.
There's a significant number who would not afford tuition and not apply. Universities would lose a lot students unless they changed fees significantly.
If it's a proper reset on the debts, we can't expect everything to continue working as before.
Right, I paid off a balance of 260k dollars in student loans. Former classmates, who make exactly the same amount of money, who instead used their salaries to buy a house get a windfall?
How is that good policy?
Our current system already allows for cancellation for low income individuals.
This is subsidy for the upper half of the middle class.
I couldn't agree more. I'm in the same bucket. My wife and I worked hard, scrimped and saved, lived way below our means, and paid off our student debt ~15 years early.
But now people want us to have to pay everyone else's debt too, through our taxes?
The only way this could possibly be fair is if they offer some kind of credit for loans already paid.
That's still not fair. Let's say I worked two jobs to put myself through college. I only could attend half time, so it took me eight years. I'm going to pay taxes to subsidize those who took out loans? How is that fair?
Or, I never went to college. I just started working right after high school. I make less than those who went to college. I'm going to pay taxes for this? How is that fair?
I think you are misunderstanding what people mean by "cancelling debt". They don't mean they will force lenders to suffer a loss, they mean that government will cover the debt.
If the gov actually decided that the current situation is not sustainable and it's better for everyone to cut the losses and cover everything... why would it guarantee another loan like that the next day?
The companies themselves could be interested in that loans of course, but without the previous guarantee the risk would be too high.
What you say makes sense, but the people proposing student loan cancellation do not talk about rolling back government guarantees on student loans. If they did, that would be totally different discussion.
Many do not, mainly concentrating on the post-covid impact. But at least two links from this article talk about limiting the ability for student debt collection, which would significantly limit the number and/or size of the student loans given.
Yeah this is my issue with the idea too. In 20 years, you're going to have the same problem again with new borrowers unless you make some fundamental changes to college to stop predatory student loans from being given out.
To be fair, I find this thread to be a bit misguided. Everyone here is talking about canceling 100% of student loan debt but I've only ever heard suggestions where the amount of loans above 100k or above 50k are forgiven. Conceivably, those loans were never really going to be paid off so money isn't really being lost.
Maybe it’s time to pursue that extra degree and borrow the money regardless of need if you already have borrowed the 50/100k limit … free money. I’m sure that the schools will love raking in the cash and raising tuitions due to the increased demand.
> Historians sometimes refer to it as “jubilee,” a term used for household debt forgiveness decrees in ancient Israel that were similar to debt forgiveness in ancient Egypt, Babylon, and elsewhere. The widespread existence of this type of debt forgiveness in antiquity profoundly attests to the universality and persistence of this debt accumulation issue.
It's important to note that Jubilee was not at all the same as "debt forgiveness" or "restructuring". It came in regular intervals and people knew when the next Jubilee was going to be when they entered the loan. This significantly changes the types of loans even offered.
At least in the Jewish version the law also said you can't take into account the nearness of the the jubilee to not make a loan. I'm not sure if/how much that was respected though.
I read my bible as a Christian, so I know what it says. However I'm not immersed in the culture as it actually played out in practice.
From a reading of the law there seems to be nothing, but I suspect there is something I'm missing. I'm not sure if there is something about who/how you can ask for a loan (thus meaning such a loan couldn't be requested just anytime), or if the culture allowed you to refuse to make big loans then even though the law said you couldn't.
You actually did take in to account the nearness of the year of Jubilee when buying or selling. The Year of Jubilee was more in the realm of property bought and sold between the Jewish people. Specifically that of productive land, family land, and indentured fellow Israelites. What you are looking for is mentioned in the Bible in Leviticus chapter 25.
The responsibility for making a fair purchase/sale was actually on both parties (buyer and seller). This is conjunction with the sale of property actually being considered the right of receiving the profits the sale of the goods the property produced would have prevented pretty much all short term purchasing. A landowner would not give up their land post seeding and prior to harvest because they have already invested in it, and a purchaser is not going to purchase land after a harvest in the year before the Year of Jubilee because there is no way for them to make a profit while still keeping the land.
EDIT: That being said, there isn't really a comparison here because the leaders of the Jewish people would never had made these kind of loans to the general populace and then expect other members general populace to pay for them.
Right now we have around 1.5T in outstanding student debt. If all of this debt were to be cancelled, who would be left holding the bag? What would that do to the economy? IMO if we cancel all student debt, this would seriously rock our economy because we suddenly decided to take 1.5T in debt assets out of the economy.
Would it though? The government paid for my college then wrote down I own them. They want me to give them that money back eventually. Are they using my promise to borrow money somewhere else? Or is it just an expense for a budget year that gets added as income years later?
Also how much interest have we paid collectively on that 1.5 trillion? If we've paid that much already then what? Can't we just consider it an investment with a negative adjusted return and move on?
In other words macroeconomics doesn't make sense to me in a lot of ways.
Well it would result in deflation because $1,500,000,000 disappears from the economy overnight. This means that the money supply shrinks and that kicks of a deflationary cycle.
I would argue this would actually cause inflation: all of those folks who have to pay for those student loans will start buying more goods, houses and services, increasing demand, which could increase prices in turn.
Well you would be wrong. Inflation doesn't just happen because people are buying more things. Inflation occurs when more money is brought into the system but the amount of goods remains constant.
There are two scenarios. In the first, the government simply prints the $1.5T. That's newly created money. $1.5T has been added to the economy overnight. It's been created, not destroyed.
The second scenario is where the government takes the money from somewhere else (maybe taxes). The money is removed from somewhere (someone's assets), but the exact same amount of debt is also removed. The net is zero - neither creation or destruction, just rearrangement.
If you went to school before 2011 this likely isn't how it worked. Instead you actually got a loan from a private lender which was guaranteed by the federal government. The ACA changed this so that the federal government now actually originates and owns the loan.
> Prior to the Affordable Care Act, a majority of student loans originated with a private lender but were guaranteed by the government, meaning taxpayers foot the bill if student borrowers default. In 2010, the Congressional Budget Office (CBO) estimated 55% of loans fell into this category. Between 2011 and 2016, the share of privately originated student loans fell by nearly 90%.
They aren't really in the economy. Private assets are, but aren't public loans held by the US gov? You'd lose the income from I guess interest or payments, but I wonder where that's going in the fed budget?
It wouldn't be quite 1.5T though right? You're simply shifting money around the economy because 1.5T is freed up for borrowers to spend/invest elsewhere.
The terminology of "cancelling" the debt is the most dishonest, twisted abuse of the English language.
There is no "cancelling" debt. There's only forcing other people to pay.
The incentives here are entirely backwards. All the people who made good decisions around cost-benefit of their education, all the people who made frugal choices, all the people who worked hard for the delayed gratification of their long-term planning get penalized and have to pick up the tab for the people who spent 4 years partying without any concern about cost of their education or lifestyle.
This is just so evil, it's insane that people have been tricked by the terminology making it sound it's a morally good choice. Imagine if we instead cancelled car loans or mortgages- everybody who's driving a honda or renting an apartment now (through taxes) shares the burden of paying off the Ferrarri's and mansions, but they're still driving their junker while the people who had chosen to load themselves with debt get to enjoy their sports cars and houses.
That's a lot of supposition. Who has to pick up the tab? Unless you're a large loan conglomerate, I'm not sure you're picking up any tab.
In a rational economic system those arguments should hold water. We have nothing like that now. Paying attention to the last 20 years of egregious hoarding of wealth should make that clear.
Ignoring the strawmen, the systems at issue (school debt, medical debt and government debt) are nothing like a free market. They are so highly regulated, the abuses so entrenched, its reasonable to consider changing them.
My retirement is invested into a large collection of companies, some of which own these loans. I fully expect that this will cost me. If I had instead not invested for my future and just partied hard I'd be better off.
20-ish years from now the average amount of money in a retirement account ought to be in steep decline, year over year. So the good news is they won't be a very attractive target. The bad news is we're going to have a retirement crisis on top of whatever crisis 20 more years of healthcare cost increases causes (assuming we don't fix that between now and then—call it 50/50 odds, because I'm an optimist).
The proponents might respond that it was only partially bad decisions, but much more a degenerate exploitative system that caused people to take on these kinds of debt.
I am not a proponent. I happily make my payments every month while I enjoy my student-loan-enabled job. And yes, I made some decisions that would not appear to be the most intelligent when it comes to loan amounts.
> The terminology of "cancelling" the debt is the most dishonest, twisted abuse of the English language.
This kind of hyperbole is, itself, an example of "dishonest, twisted" language.
> There is no "cancelling" debt. There's only forcing other people to pay.
If I declare a banana to cost $1,000,000 but you can get it for the low price of $1 with a loan of $999,999 today and that loan gets canceled, does that mean someone else has to pay me the remaining sum?
> The incentives here are entirely backwards. All the people who made good decisions around cost-benefit of their education, all the people who made frugal choices, all the people who worked hard for the delayed gratification of their long-term planning get penalized and have to pick up the tab for the people who spent 4 years partying without any concern about cost of their education or lifestyle.
This kind of moralizing about making the right decisions stigmatizes people who couldn't make it through college for financial reasons and weren't able to find a job afterward and pay off their debt. It stigmatizes grad students who started off with good intentions but couldn't make it through the meat grinder. It stigmatizes first generation college students who had to return home after a year or two. All of these people now face student debts that can't be discharged by bankruptcy.
If we agree as a society to invest in war, but we can't invest in our people, then we will reap what we sow.
>If I declare a banana to cost $1,000,000 but you can get it for the low price of $1 with a loan of $999,999 today and that loan gets canceled, does that mean someone else has to pay me the remaining sum?
The contract would likely be ruled invalid for being unconscionable, because the fair market value of a banana is like 50 cents. However, if it was something like 10 cents upfront but $10 later that would likely be upheld.
> If I declare a banana to cost $1,000,000 but you can get it for the low price of $1 with a loan of $999,999 today and that loan gets canceled, does that mean someone else has to pay me the remaining sum?
In this case you are the merchant (university) and the lender, which is not the case with student debt.
Before you make the case that a student can get a gov't backed loan and attend a state university, the other $999,999 has already been disbursed to banana suppliers, equipment, leases, ect. So yes, someone else would have to pay the remaining sum.
The frugal little wouldn't lose anything. They'd gain less, which is not the same. Every single day there are people taking really stupid risks and winning due to luck. Do you feel penalised because you took less risks?
If cancelling student debt solves real problems for the population on average, but makes a few idiots multimillionaires by accident... I'm all for it.
I'm out of my depth here; if I'm wrong I would love to be educated.
My assumption is that the debt holders would be the ones losing. I don't know about you, but I don't hold any person's medical or education debt. In my estimation, these are ultimately all held by the rich and powerful fat cats- owners of banks, etc.
The vast majority of student loan debt in the US is owned by the federal government. The "fat cats" who will be stuck holding the bag are the taxpayers.
No. We all end up paying, because the student loan debt they are talking about cancelling is ultimately held by the federal government.
We'd be taking things from the bucket of "the people who borrowed have to pay it back" and putting it into the bucket of "we all have to pay it back through increased taxes."
What if the deal for debt cancellation was a 5% tax increase for those whose debt was cancelled for the remainder of their lives? Whenever you calculate tax, forgiven debtors pay 5% more.
It's solely U.S. government. Any discussed debt cancellation never included private loans. And if it did, the U.S. government would pay off the holder of the private loan, not just cancel the debt.
Indirectly from taxes. However the context here / the premise of the article is that the one off payment is worth it in exchange for long-term boost in the economy and freeing people from obligations holding them back.
>Every single day there are people taking really stupid risks and winning due to luck. Do you feel penalised because you took less risks?
Yes, actually. If people were YOLOing away their savings on DOGE and meme stocks and the government picked up the tab, but the responsible passive investors like me got no assistance because I didn't experience any losses, I'd be pretty mad.
All cancelling student loans does is transfer money from the college educated to the non-college educated.
And student loans can already be put on thirty year plan, or setup for income based repayment. No one is starving because of their student loans, they're just having to purchase a house a little later in life than if they didn't borrow a bunch of money.
> all the people who worked hard for the delayed gratification of their long-term planning get penalized and have to pick up the tab for the people who spent 4 years partying without any concern about cost of their education or lifestyle
Are you sure you're not getting these two groups backwards? All the people that I know of who "worked hard and delayed gratification" are precisely the people who are getting penalized by having to jump through hoops that the "partying" type does not seem to have to worry about.
> There is no "cancelling" debt. There's only forcing other people to pay.
Not really, given that in the US, the central bank could just take over those public loans, not collect on them, and likely not much would happen. They’ve already proven that during Covid with corporate bonds.
The real issue with cancelling student loans is that it doesn’t fix the tuition cost for the next generation. We need a 20-year tuition freeze.
This is not really helicopter money in that sense, you’re not giving out unallocated free money, you’re just doing cash flow relief.
I think there is a good argument to make that cancelling that debt, and fixing the US college system, would likely result in more innovation: folks who come from (lower) middle class backgrounds could finally take more risk and try new jobs / start startups that they can’t today because of the money they need to put into debt service.
> This is not really helicopter money in that sense, you’re not giving out unallocated free money, you’re just doing cash flow relief.
That's if you're only looking at the repayment stage of the loan in isolation. The way loans work is that:
1. you get money upfront in exchange for nothing
2. you pay it back
If you take out the second step ("cash flow relief"), then all you have left is "you get money upfront in exchange for nothing" which is the definition of helicopter money.
Yes, we do both and yes honest working poor people think about it often. All debt cancellation is regressive. Only wealthy people and children (who are still used to having wealthy parents) support corporate and other “million dollar” bailouts.
If it’s not “million dollar”, just $10-20k or something it wouldn’t require a bailout.
> There is no "cancelling" debt. There's only forcing other people to pay.
No, there is actually cancelling debt.
There is also forcing someone else to pay, but that’s a different thing.
Its probably the case that only some (such as government-held portion) of the debt at issue could Constitutionally be cancelled, in the strict sense, though.
> The incentives here are entirely backwards.
Because its not (unlike, say, bankruptcy), an ongoing thing available to people in the future, it has negligible incentive effect. Even as precedent, the expectation “if a set of debts across society becomes sufficiently onerous, they may be cancelled for everyone” creates very little incentive for anyone.
To mitigate the social harms resulting from the current debt load that have accumulated over decades as part of a process that includes development of policies to prevent getting back to the same state.
(Some of which actually may already have been adopted, as all of the debt areas at issue have seen policy reforms over the last decades that could be part of that, though most cancellation advocates would argue—and I would agree, even though I don't necessarily agree with “cancel it all”—that further work remains to be done.)
For policies that have already been put in place, the 2016 revision (partially undone by the 2019 revision) of the Borrower Defense rules are an example.
For not-yet-implemented rules that have been proposed, rules imposing total cost limits on programs accepting federal loans, or imposing other cost and quality requirements on such programs, are common. As are simpler reforms like making income contingent plans the default repayment plan, and other rules governing direct loan servicing (an issue with the student debt crisis haa been servicers active directing borrowers into deferment rather than income contingent plans.)
Yeah, but the most likely outcome is removing the current debt load without making the changes that prevent things getting back to the same state. The result will be that everybody rushes gleefully back into the same state, expecting to be rescued again.
At least, that's what seems "most likely" to me...
I think the difference is this: If you owe me money, I can cancel your debt. But if I won't cancel it, you could also end the debt by forcing dragonwriter to pay me. That's different because there's a third party involved.
My main concern is really just to lower college tuition. I don't know how people keep putting up with it, but we are essentially enslaving an entire generation with debt as soon as they actually gain some agency.
Maybe instead of paying the debts with tax dollars, we force universities to eat the cost, or at least some of it? If you could declare bankruptcy on your college debt, it might make universities think twice about charging such high tuition. Or it would just make them selective, I don't know.
> The incentives here are entirely backwards. All the people who made good decisions…
This was the political talking point that has repeatedly been brought up in the media in the last 2 years with all the student loan talk and it has successfully gotten Biden to back off cancellation of up to $50k for every loan.
There is just something very “Karen” about wanting someone else to suffer because you did, especially premised on the basis that you did everything right and they did everything wrong.
Corporations get cancelable million dollar Covid loans that they used to buy their own stock. A proposal to help people pay off their student loans is treated with shock and awe.
However, it would be more fair to simply give every taxpayer $5000 or whatever is decided (like it ever will be) that can be used to pay off loans or for whatever they please.
Bob, 35 years old, is an excellent cook (but not a great businessman). He takes out an SBA loan to start a restaurant (failure rate for restaurants: very, very high). The restaurant goes belly up. Bob is allowed to file bankruptcy and walk away from the debt.
Jim, 50 years old, watches "house-flipping" shows on cable TV and decides that he wants to be a real estate baron. He starts flipping houses using VA/FHA loans. The real estate market tanks. Jim is allowed to file bankruptcy and walk away from the debt.
Dave, 18 years old, isn't a very good student, but every authority figure in his life (parents, teachers, ministers, you name it) tells him he HAS to have a college education. He takes out government loans to get one in a field with easy classes but low employability. But unlike Bob and Jim, Dave isn't allowed to file bankruptcy and walk away from the debt.
Can you justify Dave being held to a higher standard than Bob and Jim?
I've asked this question many times, but have never seen a convincing answer.
In this scenario, Dave's degree is likely worth little or nothing, so I'm skeptical that allowing him to keep it represents any kind of real advantage.
But laws aren't made only for this scenario. If student loans were dischargeable in bankruptcy, the financially optimal decision would be to borrow as much as possible while in school, then declare bankruptcy immediately after graduation.
And if you would suggest that the bankruptcy court should consider the value of the degree, I would respond that the appropriate time for that is before lending the money.
> If student loans were dischargeable in bankruptcy, the financially optimal decision would be to borrow as much as possible while in school, then declare bankruptcy immediately after graduation.
Bankruptcies stay on your credit report for seven years. That doesn't sound particularly "financially optimal" to me, or likely to anyone else.
Can you please not fulminate on HN? The site guidelines ask you not to, and your comments unfortunately have a lot of this.
HN is supposed to be for curious conversation. If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit more to heart, we'd appreciate it.
(It's an NYT opinion piece, so straight into the garbage it goes, but it's written by Astra Taylor, who I value for her contributions to unschooling way back when, but since it's not free, I can't be bothered)
The argument is generally not that people should not be paid.
Instead the argument is that the terms of the debt are not just or that people did not enter into the debt fully voluntarily (e.g. medical debt isn't much of a choice when the alternative is death/disability, student loan debt isn't much of a choice when low skilled positions don't pay a living wage).
The proposed solution generally takes the form of canceling existing debt, reforming future debt, and reforming society so that the debt is less necessary.
And if we genuinely do the third step, so that we don't repeatedly wind up back in the same place, then we have something to talk about. Without the third step, it's going to work as an invitation to people to get into debt and expect to be bailed out. (You can say that people shouldn't take it that way, but you know that at least some will.)
The problem is, while Astra Taylor may get that, I'm not sure that Biden does. I haven't noticed the "reforming society" part in the debt forgiveness proposals that have been floated.
IMHO, we should raise voting age, precisely because of things like this. And because many entering these agreements today would be considered underage, more scrutiny would be expected.
Unlike the rest student loans are taken out by choice (you can’t accidentally be hit by a university or be mistakenly accepted to an expensive school). I don’t see why people that made bad choices should be bailed out while I made better choices yet continue to suffer.
You know, there's the local state college here that for all practical purposes has open admission. You can see the advertising up and down the highway. The local kids (black and white, but mostly black) try to get a nursing degree but 70 % fail out. There's verious reasons, crap highschool, need to work to support themselves, also stupidity. They could have failed out cheaper at their community college.
What I'm saying is, it's more complex than "choices".
The terms and conditions of the debt obligation are known up-front. If the terms of the loan were onerous the borrowers shouldn't have accepted them and declined the loan. Why is poor financial literacy and wishful thinking about future job prospects on borrowers' parts my problem to be left holding the bag for?
Perhaps. The meager amount they are currently paying on loans (if any, given deferrment options) is much offset by public and tax subsidies for low earners.
OTOH, I agree. If they are earning income and repaying, then I don't see a reason to nullify any loans of theirs. ( or mine )
Are we expecting full financial literacy from people who can't legally decide if taking a shot of whiskey is in their best interest or not? Or from the same people who often cannot even rent a car? Or people with no credit history? An entire forum of what I consider to be some of the smartest adults in the world (myself excluded lol), can't even agree on what this "debt oligation" means; and we're supposed to place this burden of understanding on people who have to raise their hand to ask to go to the bathroom?
We have controls on taking on debt for the other 99% of credit line applications, why is this one so significantly different?
I like democracy, but you see this and wonder how many people are short sighted (answer- most people).
Maybe we really do need AI overlords.
Op- you haven't attempted to think of the repercussions of such an event. If you want to weigh pros and cons, you can.
For everyone else, is today's candy of free college worth a collapse of faith in our financial system? Is it better to get rid of college debt and have people never trust investment?
My best answer is that a financial collapse might help the environment. But it would also cause incredible numbers of dead humans.
This debate confuses public debt with private debt. I doubt USA is going to tell someone else they cannot collect a debt. But as a creditor, USA has the option to call a loan of its own lending forgiven. See Public Student Loan Forgiveness for precedent.
I think student dept should be discharged in bankruptcy - but along with it you need to also discharge the education you got. I can't think of any way to do that (outside of science fiction).
Great let's do it. And of course, my parents, who paid tens of thousands of dollars for my tuition, and I, who have paid off tens of thousands of dollars of student loan debt will be reimbursed for our absolute stupidity in being financially responsible, right?
Proponents might say that its not about helping those who have helped themselves, but about helping those who still need help. If you could manage without loans, you aren't in a situation where gov intervention is required.
I'm not of that mindset. I'm content with my loans.
>If you could manage without loans, you aren't in a situation where gov intervention is required.
This assumes everyone is equally prudent, but I doubt this is the case. For instance, suppose I was frugal, eating only rice and beans so I could pay off my student loans ASAP, while my friend got takeout multiple times a week. In this case, does my friend deserve more intervention than me? If my acts of frugality and sacrifice leads me to not get intervention, what message does that send to society?
I wouldn't expect a refund for paying off my wife's student loans, or my own medical debt. That seems unfair.
I'd expect a refund and interest commensurate with the earnings I lost being unable to invest that money. Were I an amoral freeloader that's certainly what I would have done, rather than living up to my debt obligations.
On the other hand, I received free tuition at college but took out the maximum amount of subsidized Stafford loans (at the time, they were pretty close to free money) so I could have a comfier college lifestyle and only pay off the minimum each month.
I could really make out like gangbusters on this thing.
I think you’re right that they just have to stop asking for payment but I assume those payments were included in the budget. The shortfall will need to be made up somewhere. Either higher taxes or fewer services.
There is no difference in practice. Government spending is not going to change, but the amount coming in will decrease. That means either increased taxes or increased government debt.
Maybe the government should do this all the time. Housing crisis? Medical bill crisis? No problem, just have the federal government "loan" them money, then don't ask for repayment!
I can't read the article (because NYT paywall), but isn't there a second-order effect from cancelling student loans & medical debt, in that loan interest rates will suddenly jump because there's no guarantee the same won't happen again in the future?
It’s just wild to me seeing how cancelling student debt, a proposal which is effectively targeted towards the middle class and helps the poorest Americans who don’t go to college not an inch, has become seen as a key social justice issue in the same vein as medical debt or criminal justice reform. I understand the incentives, but come on, you’d expect a bit more self awareness.
The kind of moralizing about making the right decisions stigmatizes people who couldn't make it through college for financial reasons and weren't able to find a job afterward and pay off their debt. It stigmatizes grad students who started off with good intentions but couldn't make it through the meat grinder. It stigmatizes first generation college students who had to return home after a year or two. All of these people now face student debts that can't be discharged by bankruptcy.
If we agree as a society to invest in war, but we can't invest in our people, then we will reap what we sow.
It also penalizes people who lived extremely frugally after college in order to pay off their debts and delayed starting many aspects of life. I rented tiny rooms and cooked for myself and drove an old used car and skimped and saved on a LOT of things to be able to pay off my student loans quickly. In such a case I would be penalized for being responsible. Reimburse all student loan and tuition payers if you're going to pay off existing debt. Your sentiment simply does not account for individual variation in frugality and responsibility. We do not want to incentivize irresponsible behavior any more than we already do.
I re-watched Adam Curtis's All Watched Over By Machines of Loving Grace documentary again recently. It was a strong reminder that the global financier class has never, ever, ever allowed their investments to fail. The IMF or others have stepped in country after country, time after time, the whole world monetary order has been about putting countries deeply into debt to bail out very large investors when their investments when things start to go wrong. Financial stability has always meant saddling the people of a nation with the responsibility to keep the very wealthy in good positions.
The first example is of the Asian Financial Crisis, and the documentary goes on to show how the 2007 US Financial Crisis showed the same playbook in action, of incredibly poorly planned monetary investments going awry & all effort being given to shield the financiers who made these bad decisions from harm.
So, like... yeah. We have made investing in markets have no penalty, for some. Deciding to invest in the welfare & improvement of our nation seems only logical, like only a modicum of parity, given the radical ways the world has continued to spend money to protect the vast fortunes of the giant investor class.
While I can appreciate where this is coming from, I can only help but thinking that this is a very poor short term solution.
By debt cancelling I expect he means the government / the central bank will pay the lenders. (If not then we will have a massive homeless retirees problem as they are generally the lenders).
As an economist, the issue with that is that it will continue incentivize the function of the underlying economic system and the problem will re-appear even faster.
In the economic area mentioned by the author, housing, eduction, utilities, justice, it seems clear that if people need to get over-indebted to get basic services, there is a pricing issue.
The problem come mostly because usual market arbitration forces are not applying in those areas because of asymetric needs of buyers and sellers. The average renter generally cannot avoid paying or use a subtitute and is generally forced to bear a price augmentation.
If the government simply pays the sellers of those services, they have no incentive to provide them at a lower cost.
So I believe it's really a pricing issue and only its resolution will allow to resolve the symptoms, debt and poverty, that it creates.
While open to interpretation I think some of the famous lines in "The Matrix" are actually about debt.
- On modern debt servitude and having debt at the start of adult life
"That you are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind."
- On Usury and high interest credit.
"What is the matrix? Control... To turn the human body into this" * holds up a battery
The next time I make the case for accounting to be a required course in high school I'm going to reference to this thread as Exhibit A: Assets & Liabilities Illiteracy.
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[ 4.8 ms ] story [ 195 ms ] threadAlthough admitting that too willingly probably could trigger some form of crash.
[1] https://www.ineteconomics.org/perspectives/blog/its-time-for...
Sheesh, folks, as Maggie Thatcher once supposedly said, the problem with socialism is that you eventually run out of other people's money.
As opposed to something like canceling student debt which is a more obvious patronage play for Democrats- college grads vote Dem and people with student debt skew younger (more Dems). Debt as a general category is too diffuse.
To be clear I’m not opposed but there’s not gonna be a political will to make it happen.
Indeed, since colleges will see loan forgiveness as an option, tuitions will rise.
There's a significant number who would not afford tuition and not apply. Universities would lose a lot students unless they changed fees significantly.
If it's a proper reset on the debts, we can't expect everything to continue working as before.
How is that good policy?
Our current system already allows for cancellation for low income individuals.
This is subsidy for the upper half of the middle class.
But now people want us to have to pay everyone else's debt too, through our taxes?
The only way this could possibly be fair is if they offer some kind of credit for loans already paid.
Or, I never went to college. I just started working right after high school. I make less than those who went to college. I'm going to pay taxes for this? How is that fair?
The companies themselves could be interested in that loans of course, but without the previous guarantee the risk would be too high.
A lot of those taxpayers aren't college educated, and they work hard for their wages.
To be fair, I find this thread to be a bit misguided. Everyone here is talking about canceling 100% of student loan debt but I've only ever heard suggestions where the amount of loans above 100k or above 50k are forgiven. Conceivably, those loans were never really going to be paid off so money isn't really being lost.
It's important to note that Jubilee was not at all the same as "debt forgiveness" or "restructuring". It came in regular intervals and people knew when the next Jubilee was going to be when they entered the loan. This significantly changes the types of loans even offered.
What's preventing you from getting a huge loan 1 day before the jubilee?
From a reading of the law there seems to be nothing, but I suspect there is something I'm missing. I'm not sure if there is something about who/how you can ask for a loan (thus meaning such a loan couldn't be requested just anytime), or if the culture allowed you to refuse to make big loans then even though the law said you couldn't.
https://www.biblegateway.com/passage/?search=Leviticus+25&ve...
The responsibility for making a fair purchase/sale was actually on both parties (buyer and seller). This is conjunction with the sale of property actually being considered the right of receiving the profits the sale of the goods the property produced would have prevented pretty much all short term purchasing. A landowner would not give up their land post seeding and prior to harvest because they have already invested in it, and a purchaser is not going to purchase land after a harvest in the year before the Year of Jubilee because there is no way for them to make a profit while still keeping the land.
EDIT: That being said, there isn't really a comparison here because the leaders of the Jewish people would never had made these kind of loans to the general populace and then expect other members general populace to pay for them.
Also how much interest have we paid collectively on that 1.5 trillion? If we've paid that much already then what? Can't we just consider it an investment with a negative adjusted return and move on?
In other words macroeconomics doesn't make sense to me in a lot of ways.
There are two scenarios. In the first, the government simply prints the $1.5T. That's newly created money. $1.5T has been added to the economy overnight. It's been created, not destroyed.
The second scenario is where the government takes the money from somewhere else (maybe taxes). The money is removed from somewhere (someone's assets), but the exact same amount of debt is also removed. The net is zero - neither creation or destruction, just rearrangement.
> Prior to the Affordable Care Act, a majority of student loans originated with a private lender but were guaranteed by the government, meaning taxpayers foot the bill if student borrowers default. In 2010, the Congressional Budget Office (CBO) estimated 55% of loans fell into this category. Between 2011 and 2016, the share of privately originated student loans fell by nearly 90%.
There is no "cancelling" debt. There's only forcing other people to pay.
The incentives here are entirely backwards. All the people who made good decisions around cost-benefit of their education, all the people who made frugal choices, all the people who worked hard for the delayed gratification of their long-term planning get penalized and have to pick up the tab for the people who spent 4 years partying without any concern about cost of their education or lifestyle.
This is just so evil, it's insane that people have been tricked by the terminology making it sound it's a morally good choice. Imagine if we instead cancelled car loans or mortgages- everybody who's driving a honda or renting an apartment now (through taxes) shares the burden of paying off the Ferrarri's and mansions, but they're still driving their junker while the people who had chosen to load themselves with debt get to enjoy their sports cars and houses.
In a rational economic system those arguments should hold water. We have nothing like that now. Paying attention to the last 20 years of egregious hoarding of wealth should make that clear.
Ignoring the strawmen, the systems at issue (school debt, medical debt and government debt) are nothing like a free market. They are so highly regulated, the abuses so entrenched, its reasonable to consider changing them.
The real fun starts 20-ish years down the line when our elected officials decide to directly seize 401k assets in the name of "equity."
I am not a proponent. I happily make my payments every month while I enjoy my student-loan-enabled job. And yes, I made some decisions that would not appear to be the most intelligent when it comes to loan amounts.
This kind of hyperbole is, itself, an example of "dishonest, twisted" language.
> There is no "cancelling" debt. There's only forcing other people to pay.
If I declare a banana to cost $1,000,000 but you can get it for the low price of $1 with a loan of $999,999 today and that loan gets canceled, does that mean someone else has to pay me the remaining sum?
> The incentives here are entirely backwards. All the people who made good decisions around cost-benefit of their education, all the people who made frugal choices, all the people who worked hard for the delayed gratification of their long-term planning get penalized and have to pick up the tab for the people who spent 4 years partying without any concern about cost of their education or lifestyle.
This kind of moralizing about making the right decisions stigmatizes people who couldn't make it through college for financial reasons and weren't able to find a job afterward and pay off their debt. It stigmatizes grad students who started off with good intentions but couldn't make it through the meat grinder. It stigmatizes first generation college students who had to return home after a year or two. All of these people now face student debts that can't be discharged by bankruptcy.
If we agree as a society to invest in war, but we can't invest in our people, then we will reap what we sow.
The contract would likely be ruled invalid for being unconscionable, because the fair market value of a banana is like 50 cents. However, if it was something like 10 cents upfront but $10 later that would likely be upheld.
In this case you are the merchant (university) and the lender, which is not the case with student debt.
Before you make the case that a student can get a gov't backed loan and attend a state university, the other $999,999 has already been disbursed to banana suppliers, equipment, leases, ect. So yes, someone else would have to pay the remaining sum.
Try again.
If cancelling student debt solves real problems for the population on average, but makes a few idiots multimillionaires by accident... I'm all for it.
My assumption is that the debt holders would be the ones losing. I don't know about you, but I don't hold any person's medical or education debt. In my estimation, these are ultimately all held by the rich and powerful fat cats- owners of banks, etc.
We'd be taking things from the bucket of "the people who borrowed have to pay it back" and putting it into the bucket of "we all have to pay it back through increased taxes."
Yes, actually. If people were YOLOing away their savings on DOGE and meme stocks and the government picked up the tab, but the responsible passive investors like me got no assistance because I didn't experience any losses, I'd be pretty mad.
And student loans can already be put on thirty year plan, or setup for income based repayment. No one is starving because of their student loans, they're just having to purchase a house a little later in life than if they didn't borrow a bunch of money.
Are you sure you're not getting these two groups backwards? All the people that I know of who "worked hard and delayed gratification" are precisely the people who are getting penalized by having to jump through hoops that the "partying" type does not seem to have to worry about.
Not really, given that in the US, the central bank could just take over those public loans, not collect on them, and likely not much would happen. They’ve already proven that during Covid with corporate bonds.
The real issue with cancelling student loans is that it doesn’t fix the tuition cost for the next generation. We need a 20-year tuition freeze.
Isn't that just helicopter money with extra steps?
I think there is a good argument to make that cancelling that debt, and fixing the US college system, would likely result in more innovation: folks who come from (lower) middle class backgrounds could finally take more risk and try new jobs / start startups that they can’t today because of the money they need to put into debt service.
That's if you're only looking at the repayment stage of the loan in isolation. The way loans work is that:
1. you get money upfront in exchange for nothing
2. you pay it back
If you take out the second step ("cash flow relief"), then all you have left is "you get money upfront in exchange for nothing" which is the definition of helicopter money.
If it’s not “million dollar”, just $10-20k or something it wouldn’t require a bailout.
Bailouts are for rich people.
No, there is actually cancelling debt.
There is also forcing someone else to pay, but that’s a different thing.
Its probably the case that only some (such as government-held portion) of the debt at issue could Constitutionally be cancelled, in the strict sense, though.
> The incentives here are entirely backwards.
Because its not (unlike, say, bankruptcy), an ongoing thing available to people in the future, it has negligible incentive effect. Even as precedent, the expectation “if a set of debts across society becomes sufficiently onerous, they may be cancelled for everyone” creates very little incentive for anyone.
So the debt gets cancelled then banks and institutions restart their vicious cycle of predatory education price and predatory education loans?
What exactly is the goal here?
To mitigate the social harms resulting from the current debt load that have accumulated over decades as part of a process that includes development of policies to prevent getting back to the same state.
(Some of which actually may already have been adopted, as all of the debt areas at issue have seen policy reforms over the last decades that could be part of that, though most cancellation advocates would argue—and I would agree, even though I don't necessarily agree with “cancel it all”—that further work remains to be done.)
Can you give an example? I may just be out of the loop.
Considering just the educational side:
For policies that have already been put in place, the 2016 revision (partially undone by the 2019 revision) of the Borrower Defense rules are an example.
For not-yet-implemented rules that have been proposed, rules imposing total cost limits on programs accepting federal loans, or imposing other cost and quality requirements on such programs, are common. As are simpler reforms like making income contingent plans the default repayment plan, and other rules governing direct loan servicing (an issue with the student debt crisis haa been servicers active directing borrowers into deferment rather than income contingent plans.)
At least, that's what seems "most likely" to me...
How are these different things?
-Money was disbursed to the university. That money came from somewhere!
-If the loan gets canceled and the student does not pay it back, those who contributed the disbursed the money are the ones being forced to pay.
You can say I'm straw-maning, but it's hard to see your argument as anything else.
Should we tax the poor(people who didn't get a college degree) to pay off the debts of the middle class and upper middle class?
Or if we're going to hand out large sums of money why should the front of the line be college educated individuals who went to private colleges?
My main concern is really just to lower college tuition. I don't know how people keep putting up with it, but we are essentially enslaving an entire generation with debt as soon as they actually gain some agency.
Maybe instead of paying the debts with tax dollars, we force universities to eat the cost, or at least some of it? If you could declare bankruptcy on your college debt, it might make universities think twice about charging such high tuition. Or it would just make them selective, I don't know.
This was the political talking point that has repeatedly been brought up in the media in the last 2 years with all the student loan talk and it has successfully gotten Biden to back off cancellation of up to $50k for every loan.
There is just something very “Karen” about wanting someone else to suffer because you did, especially premised on the basis that you did everything right and they did everything wrong.
However, it would be more fair to simply give every taxpayer $5000 or whatever is decided (like it ever will be) that can be used to pay off loans or for whatever they please.
Jim, 50 years old, watches "house-flipping" shows on cable TV and decides that he wants to be a real estate baron. He starts flipping houses using VA/FHA loans. The real estate market tanks. Jim is allowed to file bankruptcy and walk away from the debt.
Dave, 18 years old, isn't a very good student, but every authority figure in his life (parents, teachers, ministers, you name it) tells him he HAS to have a college education. He takes out government loans to get one in a field with easy classes but low employability. But unlike Bob and Jim, Dave isn't allowed to file bankruptcy and walk away from the debt.
Can you justify Dave being held to a higher standard than Bob and Jim?
I've asked this question many times, but have never seen a convincing answer.
Dave is the only one of the three who could keep the asset after declaring bankruptcy, if that were allowed.
And if you would suggest that the bankruptcy court should consider the value of the degree, I would respond that the appropriate time for that is before lending the money.
Bankruptcies stay on your credit report for seven years. That doesn't sound particularly "financially optimal" to me, or likely to anyone else.
HN is supposed to be for curious conversation. If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit more to heart, we'd appreciate it.
(It's an NYT opinion piece, so straight into the garbage it goes, but it's written by Astra Taylor, who I value for her contributions to unschooling way back when, but since it's not free, I can't be bothered)
Instead the argument is that the terms of the debt are not just or that people did not enter into the debt fully voluntarily (e.g. medical debt isn't much of a choice when the alternative is death/disability, student loan debt isn't much of a choice when low skilled positions don't pay a living wage).
The proposed solution generally takes the form of canceling existing debt, reforming future debt, and reforming society so that the debt is less necessary.
The problem is, while Astra Taylor may get that, I'm not sure that Biden does. I haven't noticed the "reforming society" part in the debt forgiveness proposals that have been floated.
If you can vote, you can read contracts.
IMHO, we should raise voting age, precisely because of things like this. And because many entering these agreements today would be considered underage, more scrutiny would be expected.
But, until then, voting is a golden standard.
What I'm saying is, it's more complex than "choices".
I was right. They didn't listen. I'm bailing them out today.
OTOH, I agree. If they are earning income and repaying, then I don't see a reason to nullify any loans of theirs. ( or mine )
The free-flowing student loan money has created the same kind of bubble that "stated income" and "0% down" loans created in housing in 2008.
We have controls on taking on debt for the other 99% of credit line applications, why is this one so significantly different?
Maybe we really do need AI overlords.
Op- you haven't attempted to think of the repercussions of such an event. If you want to weigh pros and cons, you can.
For everyone else, is today's candy of free college worth a collapse of faith in our financial system? Is it better to get rid of college debt and have people never trust investment?
My best answer is that a financial collapse might help the environment. But it would also cause incredible numbers of dead humans.
I'm not of that mindset. I'm content with my loans.
This assumes everyone is equally prudent, but I doubt this is the case. For instance, suppose I was frugal, eating only rice and beans so I could pay off my student loans ASAP, while my friend got takeout multiple times a week. In this case, does my friend deserve more intervention than me? If my acts of frugality and sacrifice leads me to not get intervention, what message does that send to society?
You can scold a smoker as much as you want, but we all still pay for their chemo in the forms of health insurance premiums.
I'd expect a refund and interest commensurate with the earnings I lost being unable to invest that money. Were I an amoral freeloader that's certainly what I would have done, rather than living up to my debt obligations.
I could really make out like gangbusters on this thing.
I can't downvote because I use new accounts for privacy reasons.
If we agree as a society to invest in war, but we can't invest in our people, then we will reap what we sow.
The first example is of the Asian Financial Crisis, and the documentary goes on to show how the 2007 US Financial Crisis showed the same playbook in action, of incredibly poorly planned monetary investments going awry & all effort being given to shield the financiers who made these bad decisions from harm.
So, like... yeah. We have made investing in markets have no penalty, for some. Deciding to invest in the welfare & improvement of our nation seems only logical, like only a modicum of parity, given the radical ways the world has continued to spend money to protect the vast fortunes of the giant investor class.
By debt cancelling I expect he means the government / the central bank will pay the lenders. (If not then we will have a massive homeless retirees problem as they are generally the lenders).
As an economist, the issue with that is that it will continue incentivize the function of the underlying economic system and the problem will re-appear even faster.
In the economic area mentioned by the author, housing, eduction, utilities, justice, it seems clear that if people need to get over-indebted to get basic services, there is a pricing issue.
The problem come mostly because usual market arbitration forces are not applying in those areas because of asymetric needs of buyers and sellers. The average renter generally cannot avoid paying or use a subtitute and is generally forced to bear a price augmentation.
If the government simply pays the sellers of those services, they have no incentive to provide them at a lower cost.
So I believe it's really a pricing issue and only its resolution will allow to resolve the symptoms, debt and poverty, that it creates.
- On modern debt servitude and having debt at the start of adult life "That you are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind."
- On Usury and high interest credit. "What is the matrix? Control... To turn the human body into this" * holds up a battery