It may produce some desired affect in the short term, but in time creates a massive liability for everyone, not just those who took out the debt.
It's completely unfair that mine went away and people that are upside down and have been "playing the game" are still in the slog, but it by a wide margin the most fortuitous thing that has ever happened to me.
https://www.forbes.com/sites/zackfriedman/2017/07/18/5-billi...
Or could a bunch of former students band together and do this in a cooperative type corporation? Buy defaulted student debt, then forgive it?
You know, a distributed ledger of defaulted US student debt might actually be a useful use for a blockchain.
(I say this as a NZer whose student debt was held by the govt. and had capped fees etc.)
> If you file bankruptcy in Canada a federally guaranteed student loan is only automatically discharged if the date of your bankruptcy is more than seven years from when you ceased to be a student. This rule was created to prevent student from incurring huge student loans, and then graduating and immediately going bankruptcy.
[1] https://bankruptcy-canada.com/bankruptcy-blog/bankruptcy-can...
I guess that system is possible because all loans are provided by the Student Loans Company which is ran by the government - and tuition is capped at 10k/year, so it doesn't matter what or where you study - the cost is exactly the same.
>The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
[1] https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancell...
Also worth noting that loans can still be sold off by the SLC (though remain managed by the SLC, so probably makes little if any difference to the individual), and government ownership hasn't completely stopped the use of questionable tactics (e.g. debt collection letters purporting to be from "Smith Lawson & Company").
And a %5 tax increase sounds like a pretty good deal. For most people it's going to be $25-$50k total, and you have no bill due when your unemployed.
If I could just cut out student loan payments the money would go towards paying down any outstanding debt or towards buying a house/condo which would help me not need support in retirement. The tax advantaged retirement funds are nice but many people with student loan debt it's like telling them they have won't have to pay taxes on any yachts they buy. Technically nice, but practically useless
Also, many (most?) student debts are less than $25k, and unpayable huge debts should never have been approved in the first place. The latter clause is the whole point of this anyway.
That's something that a large percentage of people do anyway. What a strange and poorly-thought-out suggestion.
What good could possibly come from intentionally banning someone from saving for retirement?
Why don't we just do that for everyone, and make higher education free. This works for the absolute majority of students. Provide an opt-out for the few that can pony up the cash up front.
One of the reasons I'm happy to be European. Education is free in most countries. It makes no sense to burden young people with a load of debt when starting out.
According to https://nces.ed.gov/fastfacts/display.asp?id=75, in the 2014–2015 school year U.S. colleges & universities spent $536 billion; the 2014 defense budget was $526.6 billion[0]. We could spend our entire defense budget and still not cover our higher education bill.
[0] http://comptroller.defense.gov/Portals/45/Documents/defbudge...
I'm not sure this is the best number to use. This is what is currently spent, it is not how much we would need to provide a free higher level education option. The entire department of education budget is 70 billion [0]. Using Pennsylvania as a baseline, they have approximately 185 million planned for public education[1]. Let's round that to 200mil and multiply it by 50. This gives us a ballpark spending of 100 billion at the state level. So let's approximate 170 billion spent on K-12 and higher education last year.
We were able to fund our entire K-12 system and give money to public universities for under half that 536 billion figure. So yes, we may not be able to cover our current higher education bill with the defense budget. However, what we are currently doing is not the best or cheapest system. Someone could definitely come up with a free higher education proposal for half of that 536 billion figure. The system needs reformed badly. Everyone knows the costs of higher education are out of control. Using it as the baseline isn't fair IMO.
[0] https://www2.ed.gov/about/overview/budget/index.html [1] https://www.governor.pa.gov/governor-wolf-reaffirm-commitmen...
Europe can afford free education because it isn’t American-style education.
And if, like now, the government backed the loans and they were dischargeable, it would create a death spiral of companies encouraging loans to no end with tons of students accepting them, knowing that they can just file bankruptcy right after graduating.
There's an even better side effect of this. There is no real and inherent reason that university prices have skyrocketed out of control. It's mostly a consequence of government removing all economic concerns for students. That of course sounds nice, but they also simultaneously removed all economic concerns from universities who can, and do, charge arbitrarily large sums and justify it by increasingly reckless spending. This a recurring problem when messing with the market - we create unforeseen problems, though in this case this should have been very foreseeable!
By returning to market forces universities would be obligated to themselves also take economic matters into consideration with their decisions. Too high of tuition and fees are unlikely to get paid off, thus unlikely to produce much in the way of loans, and thus generally not economically viable. Similarly there would be less of an incentive to grow programs that do not substantially improve the ability of students to create a comfortable life for themselves.
Basically we would start on a path back towards the world some baby boomers seem to think we still live in where somebody with a bit of hard work could put themselves through college with a part time job graduating not only debt free but with a enough of a nest egg put aside to have a nice down payment for their first place.
Because it's debt to get a degree. I don't agree necessarily but the idea is that students would get large loans, go to schools, get a degree, then declare bankruptcy.
I think the GP comments makes a good point that large loans would be harder to get if all of the sudden they knew bankruptcy option is going to considered after graduation.
But my original point (I wrote the top-level comment to which you're responding) was this: Taking away ALL risk from the .edus and the lenders took away a really important part of downward tuition-price pressure. Easy student loan money means escalating student fees.
Who should "pay" if a schoolteacher can't pay her Salem State College loans? Good question. The college who charged so much ought to be on the hook, at least partly. The same goes for the lender, taxpayers in the community where she teaches, and she herself.
Who should pay if an investment banker can't pay his Harvard Business School student loans? Is it a different kind of question? That is hard to know in general.
Without the ability to bring student loans to bankruptcy court, there's no legal way to address these questions of fairness. That is not sustainable for student debtors, colleges, or the society at large.
What's often left out of these amateur discussions we have is that education loans are non-collateralized debt. There's no asset of any value to repossess, and except for a few specialized programs where you owe a few years in the military or troubled school or free health clinic, not even a pledge of the very thing this loan is supposed to return value on, i.e. the person's own labor productivity. (And even in those cases, if the person reneges and suddenly becomes liable for the cost of their education again, they're still probably eligible for the same kind of forbearance and forgiveness programs being pushed for the more general student-loan indebted population.)
That's a (if not the) key reason this kind of debt isn't dischargeable.
Unfortunately that might make our entire economy collapse as we've let the student debt bubble get so large. We'll likely have to all shoulder some of the pain, regardless of how fair it is
Why not? You totally can. It's not some fundamental law of nature that regulation can't be changed after some time. The loans were made under the assumption that they are not dischargeable, at that time someone could attempt to estimate what's the probability that the laws would be repealed or modified in some time horizon. That probability is going to be > 0. Is that risk large enough to change the business case for making the loan in the first place?
Non-bankruptable student loans aren't "regulations" they are specific contracts between students, lenders, and the US government.
[1] https://www2.ed.gov/about/reports/annual/2017report/fsa-repo...
Too bad it won't happen, because it's cruel to not provide students the opportunity to acquire hundreds of thousands of debt.
If the funding was cut, the schools may have to make due with only 100 million dollars for the ice hockey stadium.
As so nicely represented by the explosion in student debt:
Remember that I knew a few people who managed to both work and go to school at the same time and pay the tuition with the salary. So they took longer to graduate (5-6 years) but graduated debt free. It was a state school in mid West not a fancy private school or anything like that.
Eh, no. College tuition increases have always far, far outstripped wage and inflation increases: http://toughmoneylove.com/2008/12/08/the-college-student-deb...
I will say that the slope of the curve gets a bit steeper after 2000, so perhaps you’re on to something to a degree, but to say that college costs weren’t increasing at unsustainable rates prior to Bush is laughable. And with everything, perspective is key. I started school in 2000, and what you consider reasonable my dad balked at (because it was roughly 3-4x what he paid 25 years prior).
> As so nicely represented by the explosion in student debt:
There is more to this than just the raw tuition value to consider: far more people are attending college than in years past (far more than should really be doing so, honestly). A graph that normalizes against student population would be much more interesting (otherwise your graph doesn’t tell what portion of the increase is due to tuition explosion versus student population explosion).
From the 1940s to 1960s, college costs were rising some, and from 1985 to 2003 costs also increased some. But the rate of increase after 2003 definitely is higher.
Both sources are blaming things other than student loans for rising costs. I will say the second link is intriguing, in that it postulates that state education budget cuts play a responsibility in rising costs. This might go hand in hand with the student loan balloon: basically, the cost of college is shifting heavily to the individual student, but in a very poor manner if the end goal is an attempt at meritocracy via education. I agree that demand might play a role too (the first link sort of implies this).
It would be interesting to compare tuition cost history in the United States to other countries, which as far as I know do not follow our funding model. (For some reasons this was not easy to quickly Google.)
[1] http://www.nasfaa.org/news-item/4565/Myths_and_Realities_abo... [2] https://www.cbpp.org/research/state-budget-and-tax/years-of-...
Thanks, Bush 43, for your legacy in this when you "reformed" the bankruptcy laws to make it impossible to discharge student loans in bankruptcy. That set educational institutions free to raise their rates to ludicrous levels: it took away the incentive for student lenders to push back.
It took away lenders' incentive to say such things as "$126,000 is too much debt for a special education teacher. She'll never be able to pay it back. We won't lend it to her to give it to you. Reduce your tuition, and cut your administrative overhead."
Institutions with some cachet, like Westminster, will get rescued. Others will just collapse.
This bursting bubble is going to hurt.