What is your opinion on student loan forgiveness?

[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]

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.

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]

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

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.]

[lightning]

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

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.]

Oh, yeah. I wasn't even thinking about my friends who hold massive student loan debt from medical school. Some of them work for public university hospitals, with some of them even holding an academic rank, even though they barely spend any time with students compared to those of us who have to hold down a 2/2. I'm guessing that they are hoping for forgiveness, too, even though they take much nicer vacations than I do.

[downer]

I've never seen a sophisticated defense of the forgiveness. I'd want to see that it makes sense to forgive loans rather than to fund new students now.

I'm very much in favor of tax payers funding higher ed. But it seems it would make more sense to encourage more students to go to college in ways that will help the economy rather than rewarding people who made bad choices.

[Wahoo Redux]

Do it.

My opinion is very self-serving in this instance.

[dr_evil]

I'm very much in favor of tax payers funding higher ed. But it seems it would make more sense to encourage more students to go to college in ways that will help the economy rather than rewarding people who made bad choices.

I would tend to agree.  I would like to see more funding available in the form of grants and scholarships - and by that I mean academic scholarships, not sports. Wouldn't knowing what to expect in advance help people plan more than betting on forgiveness in the future? Why not go back to the days (before my time) when states funded higher ed?

[Anselm]

I struggled to pay back my loans and I still support some forgiveness program.  Some people can't pay back their loans and their lives are ruined.  The loans should never have been made in the first place.   They were sold a bill of good about all of those wonderful job opportunities waiting for them.   

[dismalist]

I struggled to pay back my loans and I still support some forgiveness program.  Some people can't pay back their loans and their lives are ruined.  The loans should never have been made in the first place.   They were sold a bill of good about all of those wonderful job opportunities waiting for them.

1. About lives being ruined, student loans can't be discharged in bankruptcy. Who thought of that moronicity?

2. Sold a bill of good ... . Why did anyone buy?

[financeguy]

This is the only thing that could ever get me off the couch to vote Democrat. If they can't do this, they never get my support. I agree with people paying their own way, but as long as we have a system of bailouts, I want mine a d I'm not really concerned about the ideology. Gimme me freebie or I might as well vote GOP for good. I know a lot of people younger than me who think the same.

[pgher]

I struggled to pay back my loans and I still support some forgiveness program.  Some people can't pay back their loans and their lives are ruined.  The loans should never have been made in the first place.   They were sold a bill of good about all of those wonderful job opportunities waiting for them.

1. About lives being ruined, student loans can't be discharged in bankruptcy. Who thought of that moronicity?

2. Sold a bill of good ... . Why did anyone buy?

To #1: Amen. Totally a lenders lobby win.

To #2: There is tremendous information asymmetry in higher ed, as well as extremely long timelines. OK, the cost of student loan debt is similar to a new car. But if you decide to buy a car, there is a ton of very good information you can use to decide what to buy. The best thing going in higher ed is USN&WR rankings, which are terrible. If you buy a car that turns out to be a poor fit for you, you can sell it--good luck selling the education that doesn't fit you.

[Anon1787]

The car analogy doesn't quite fit since you get a complete car. By contrast, many students end up with student loan debt without getting a degree. If there was a bill of goods sold, it was sold by society and politicians saying "everyone should go to college in order to achieve the American Dream" when only a minority of the population is realistically capable of graduating from college.

I'm not a fan of debt forgiveness, but I would want it to be means-tested.

[dismalist]

 

There is tremendous information asymmetry in higher ed,

There is a lot of propaganda aimed at influencing the uninformed.

The source of the propaganda is the education establishment -- us.

Lies, lies, lies.