What do folks here think about the student loan cancellation plan just announced by the Biden administration?

Did they do too much, just right, or too little too late?

If you work in a college or university, does it make you want to jack up the price tags some more? If you still have student loan or on the hook to financially support a student, does it make you want to go out and borrow even more? If you have paid off your loan, does it make you wish you had not?

I think what is missing would be a limit on % rates. That's what's causing much of the problem with graduates with decent jobs and large loans. The high interest rates make it extremely hard to even start paying down the loan amount. Many see the loan amount grow over time, even while paying thousands back regularly.

The current plan, as I understand it, is aimed at those stuck in the middle with some loans, but often not the degree...

Bad policy, bad politics. A symptom-level treatment that will make the underlying problem worse.


Best bet is to make student loans dischargeable in bankruptcy and end the federal guarantee.

quote:

Originally posted by jon-nyc:

… make student loans dischargeable in bankruptcy and end the federal guarantee.

These two ideas, I support.

quote:

id they do too much, just right, or too little too late?

I haven't read the details closely, but I think they could have done more -- i.e. forgive more than $10,000.

quote:

If you work in a college or university, does it make you want to jack up the price tags some more? If you still have student loan or on the hook to financially support a student, does it make you want to go out and borrow even more? If you have paid off your loan, does it make you wish you had not?

No to all of those and I think some of the reactions to the idea of loan forgiveness or the worried about it are just silly.

quote:

Bad policy, bad politics.

Jon, can you say more about this?

You're in favor of allowing loans to be discharged in bankruptcy, but I'm curious about how many people this would actually help. That sai, I don't know a lot, or really anything, about how an individual declares bankruptcy, what the drawbacks might be etc. So with that as a caveat, it seems pretty extreme as a way to address the student loan problem.

What am I missing?

Also what is the federal guarantee you refer to?

I totally agree that something should have been done to address interest rates. From my perspective, having an educated population is a good thing for the overall societal well-being, and should be subsidized in some way. One way would be to offer student loans at reduced interest rates. Right now the fed subsidized loan interest rate for undergraduates is 4.99%. Direct unsubsidized loans (for grads and professional students) is 6.54%. PLUS loans are 7.54%.

The piece that's missing here is that the total amount offered to a student via one of these types of loans is capped by FAFSA, and often is only a percentage of the total cost to attend school. Students will often make up the difference by adding in private student loans, and there are various companies that specialize in these private student loans (College Avenue, Lend Key, etc.). These loan interest rates can range from around 3% to as high as 14%-ish, depending on the lender and the student's credit rating, amount of loan, etc.

I would have liked to see more of a stairstep for forgiveness. To me, $10K for someone making < $125K a year is pretty generous, since I view $125K annual salary as pretty well paid. [Yes, I know it's not much if you live in San Francisco, New York, etc.), but it's waaay above the median income of $80K-ish. So perhaps it would have been possible to forgive $20K if you earn < $80K a year, $10K if you earn between $81K and $125K, or some other type of amount that's indexed to income in a more graded way.

quote:

Originally posted by Axtremus:

quote:

Originally posted by jon-nyc:

… make student loans dischargeable in bankruptcy and end the federal guarantee.

These two ideas, I support.

Me, too.

But I don't have a problem with the current plan to help people who got their loans while the situation was getting out of hand, with tuition costs spiraling upward faster than the salaries most people could hope to make.

Student loans were sold to people as "good debt." I think this was probably true enough when we were young, but that label has gotten harder to justify as the years have gone by. I do think that a college education is almost necessary for a middle-class life these days, so if debt is the only way to get there, then I guess you could squint and call it "good," but it's hard to justify shackling an eighteen-year-old to decades of debt under the current terms.

Actually, I would have been seventeen when I was taking out loans, if I'd had them, and Quirt would have been sixteen. That's too young to sign your financial life away.

quote:

Originally posted by Mary Anna:

Actually, I would have been seventeen when I was taking out loans, if I'd had them, and Quirt would have been sixteen. That's too young to sign your financial life away.

I believe your parents would have to sign until you reached 18.

Part of me really is looking at the private loan companies, who operate much like any other loaning agency (think mortgage, for example). Rates vary, eligibility criteria vary, you should shop around, etc. We know that there were cases of predatory loan companies taking advantage of naive students. We also know that the "financial aid" package you get from a university can often be confusing, as it lists out "total financial aid" but it's a combination of grants (gifts, not to be paid back) and loans (must be paid back). Yes, everyone should do their due diligence but I think it's arguable that student loans are more of a "good" loan than other types. Arguable, to be sure. They're currently still operating in the wild west, with almost no oversight.

I was really lucky to be able to pay for college with grants (including BEOG, which turned into Pell), scholarships, and money I earned working summers in an Alaskan salmon cannery. Because I didn’t live at home during the summer, I was independent of my parents, which brought my income level way way down.

I don’t begrudge the loan forgiveness. I’m just grateful I had no loans, and neither did our kids. Such a gift to begin adult life without that burden.

I think this is wonderful. I work amongst folks who are low income, have Pell grants...They don't even dream of owning their own home, let alone a car or moving out of their family home..They cannot imagine it.

Someone I know just bought their first place (thanks to a family gift (someone died), otherwise, impossible) ..The numbers worked as far as rent vs mortgage..but when I pointed out tax deductions for interest and real estate taxes, they were completely unaware. Sadly, their agent didn't educate them either.

Turns out their new place is even MORE affordable with the tax deductions they never experienced in their family history. (Perhaps they could have had a place of their own sooner, had they known!) .and now they will get loan relief...life changing..I am so happy for them...It took till age 40 for them to get there.

Rising tides lift all boats...

Those of us who had parents who helped, had family historical knowledge on how to navigate finances, have no idea how some low income folks are left out. This is life changing for so many and I am happy to put my tax dollars to this.

But this is just the beginning...not the end. Ridiculous interest rates, hoops to jump through and unforgivable college costs all have to be addressed.

quote:

Originally posted by BeeLady:
I think this is wonderful. I work amongst folks who are low income, have Pell grants...They don't even dream of owning their own home, let alone a car or moving out of their family home..They cannot imagine it.

Someone I know just bought their first place (thanks to a family gift (someone died), otherwise, impossible) ..The numbers worked as far as rent vs mortgage..but when I pointed out tax deductions for interest and real estate taxes, they were completely unaware. Sadly, their agent didn't educate them either.

Turns out their new place is even MORE affordable with the tax deductions they never experienced in their family history. (Perhaps they could have had a place of their own sooner, had they known!) .and now they will get loan relief...life changing..I am so happy for them...It took till age 40 for them to get there.

Rising tides lift all boats...

Those of us who had parents who helped, had family historical knowledge on how to navigate finances, have no idea how some low income folks are left out. This is life changing for so many and I am happy to put my tax dollars to this.

But this is just the beginning...not the end. Ridiculous interest rates, hoops to jump through and unforgivable college costs all have to be addressed.

That is so wonderful for those first time homeowners!

My parents told me they couldn’t pay for me to go to college. My older brother lived at home and went to Portland State. I wanted OUT!

The “This you?” meme in Twittersphere:

https://www.theguardian.com/me...-forgiveness-twitter

Basically it goes like this:

1. A critic (usually a politician) of student loan forgiveness tweets something about why loan forgiveness is bad (e.g., it may encourage more irresponsible borrowings, it is unfair to get the tax payers to foot the bills, etc.)

2. Then some other Twitterite would respond with a screenshot/news clipping of said critic having taking advantage of loan forgiveness in the past asking “This you?” (E.g., the critic has previously taken a PPP loan or a farm-related loan that has since been forgiven.)

quote:

Originally posted by ShiroKuro:

quote:

Bad policy, bad politics.

Jon, can you say more about this?

Sure.

Bad Policy:
There really is no policy here at all, in the forward looking sense. This was nothing more than a gift to a political constituency. (akin in that regard to GOP tax breaks on upper income folks). The underlying problems (college affordability, some students taking on unmanageable amounts of debt) are not addressed at all. In fact they are both made worse at the margin by this move and the expectation that it could happen again.

It's poorly targeted, and on-net probably regressive. Note that anyone who made less than the cutoff amount in either 2020 or 2021 is eligible, which would include a 2020 Harvard Law grad who today is a third year associate at Skadden Arps making north of 300k.

Oh, and its probably illegal.


Bad Politics:

Why help these folks and not the tradesman who took on debt to buy his F150 or tools? This will be asked over and over by working class people who the democrats will need in purple states. Notice how many Dems running for office are distancing themselves from this.

quote:

Originally posted by ShiroKuro:

You're in favor of allowing loans to be discharged in bankruptcy, but I'm curious about how many people this would actually help. That sai, I don't know a lot, or really anything, about how an individual declares bankruptcy, what the drawbacks might be etc. So with that as a caveat, it seems pretty extreme as a way to address the student loan problem.

It gets the targeting right. By definition it would help those who can't bear the burden of the debt. And wouldn't be limited to 10k or even 50k. I know a struggling single mom with nearly 100k of debt she will quite literally never pay off. Yes lots of bad decisions were made along the way. But bankruptcy would allow her debt to be canceled. I mean really canceled, not the lying-by-euphemism kind of "cancelation" in the current program. (Nobody's debt is getting canceled by Biden, it's just that the bill will be sent to someone else.)

Drawbacks (to some, though I consider it a feature) is that the demand curve for education will shift dramatically to the left. But that's the mechanism that will address the main problem, which is skyrocketing education costs.


The above costs the government literally nothing (moving forward anyway, probably can't take the guarantee off of existing loans).

Then maybe we could subsidize college education rather than college loans. (we have the same problem in housing, by and large we don't subsidize home ownership, we subsidize home "borrowership")

Imagine making community colleges free or nearly so. Give subsidies for state schools to set up hybrid degree programs (mixing online and in person) on the stipulation that they cost no more than $x per year (some states have done this kind of thing).

And frankly subsidize trade schools too. We are probably overweight university and underweight trade schools as a culture.

He deregulated Wall Street and also made it impossible to discharge student loans in bankruptcy.

What a pittance of a gesture.

He also just pissed off Democrats and Republicans.

Bad policy. Bad politics.

quote:

Originally posted by jon-nyc:
…
Imagine making community colleges free or nearly so. Give subsidies for state schools to set up hybrid degree programs (mixing online and in person) on the stipulation that they cost no more than $x per year (some states have done this kind of thing).

And frankly subsidize trade schools too. We are probably overweight university and underweight trade schools as a culture.

All good points that I agree with.

Liz and Bernie and even Biden’s old Build Back Better plan have ideas on making college/community college free or partially free, but Joe and Kyrsten and the entire GOP were not too enthused about those ideas.

Just out of curiostiy (I wanted to know if a loan made under known legal restrictions that it cannot be discharged in backruptcy can be retroactive made dischargeable afterwards without running into other legal issues), I Googled “student loan discharge in bankruptcy” and found this:

https://www.consumerfinance.go...ivate-student-loans/

The CFPB article says some student loans can indeed be discharged in bankruptcy, just that the bar is higher with an extra step in bankgruptcy proceeding.

I suppose I can modify my position a bit and say that I support making student loans as easily dischargable as other types of unsecured loans in backruptcy proceedings.