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What is your opinion on student loan forgiveness?

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lightning:
What is your opinion on student loan forgiveness?

I was all for it in principle (the semi-dysfunctional public service program that exists now and also the proposed blanket forgiveness that was promised back in 2020), but then I've been slowly seeing some of my successful and solidly middle class colleagues getting their student loans forgiven. I'm talking about colleagues, who already came from a privileged background even before entering college, who were living the good life with a stable TT position right after graduation, nice cars, a nice house, annual vacations, college fund for kids, happy family, etc.

I was shocked to find out that some of them had been holding massive 6-figure student loan debt, but they never really made an effort to pay them back beyond the bare minimum, even though they had the capacity to do so, and instead using their earnings for the good life. I'm not even sure how they managed to pull this off because I thought IBR would assure that everyone pays their fair share.




marshwiggle:

--- Quote from: lightning on April 20, 2022, 11:09:55 AM ---What is your opinion on student loan forgiveness?

I was all for it in principle (the semi-dysfunctional public service program that exists now and also the proposed blanket forgiveness that was promised back in 2020), but then I've been slowly seeing some of my successful and solidly middle class colleagues getting their student loans forgiven. I'm talking about colleagues, who already came from a privileged background even before entering college, who were living the good life with a stable TT position right after graduation, nice cars, a nice house, annual vacations, college fund for kids, happy family, etc.

I was shocked to find out that some of them had been holding massive 6-figure student loan debt, but they never really made an effort to pay them back beyond the bare minimum, even though they had the capacity to do so, and instead using their earnings for the good life. I'm not even sure how they managed to pull this off because I thought IBR would assure that everyone pays their fair share.

--- End quote ---

This is one of the major problems with retroactively changing the rules on anything. It rewards people who ignored the rules, while identifying people who valiantly struggled to follow the rules as chumps.

EdnaMode:
I'm very much against it. The average student loan debt (less than $40K) is less than the cost of a new car which, according to our friend google, is around $47K. I took out some loans, paid them all back by myself, and made paying them off a priority over spending every dollar I made on other things. If someone makes bad choices on either the school they attend, the amount of debt they choose to take on, or the degree they pursued that won't get them a job, it should be on them fully to deal with the consequences. Even if those consequences land them hundreds of thousands of dollars in debt.

bio-nonymous:
My opinion is the same as Marshwiggle's. However, if there was to be a massive forgiveness, my personal opinion is that requiring principal payback but forgiving accrued interest would be the fairest way to do it (if it could be consider "fair" in any way). This still penalizes those who scraped and paid for their loans, and those who paid them off long ago, but it is the interest that is tough. If you borrow $4000 dollars as a freshman and then accrue $4000 in interest before you start paying back...this way at least the original money loaned would get returned (minus all the inflation of course!).

Perhaps also only allow forgiveness of Federal loans but not private loans (this way tax payer money is not flowing out to private lenders, yet borrowers get5 some relief?)?

IDK--the whole thing is super-complicated. If tax payer money is used, is it fair to take the money from people who did not go to college to pay for the college experience of people who did? Just erasing the balance sheet on money long spent is one thing (though the income from the loss of loan payback would be substantial) but spending taxpayer $$$ (or printing money) to pay private loans is another...

I hope one of you finance gurus ways in on this!

dismalist:

--- Quote --- It rewards people who ignored the rules, while identifying people who valiantly struggled to follow the rules as chumps.
--- End quote ---

Not only that: Loan forgiveness now engenders expectation of and political pressure for loan forgiveness in the future. This means more loans than otherwise, on the expectation they paid for by somebody else.

But that's not the end. Colleges and universities will expect forgiveness, too. So tuition will be raised. In the short run, the full amount of forgiveness [less in the long run]!

And of course, it's regressive. The largest absolute amounts of debt are in the hands of doctors and lawyers. [I know of a married couple, both doctors, with a combined income well in excess of half a million who are bitching and moaning about their student loans.]
 

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