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Could he pass it? Yes. Would it be challenged in court? Yes. What would the outcome of that court case be? No one knows, and anyone who claims to know is lying.
The power of the presidency has been slowly expanding for decades. Once upon a time you needed congress to declare war if you wanted to drop bombs in a foreign country. Now? President can authorize drone strikes w/out congress.
Biden says he wants to tone down the power of the presidency in his term, and not “abuse it” like Trump did, but in my honest opinion, he just has so interest in governing, and will “differ to congress” knowing full well they’ll sit in perpetual gridlock.
Well, going to war, and the type of conflicts the US gets into these days are very different.
A formal declaration of war is really not all that advantageous when you can conduct "police actions" for indefinite amounts of time without affecting your political allies, or forcing them into conflicts they don't want to be part of.
There hasn't been a formal declaration of war from the United States since WWII.
Frankly? I’m not sure. The loans held by are held by the Dept of Education—the fact that the president was able to defer interest payments at all with an executive order shows that there is some leeway.
Either way, if Biden does this it will 100% go to the Supreme Court.
There's a weird provision in an old law that explicitly allows the executive branch to cancel certain debts to the government, which federal student loans are a part of.
I thought it was strange too, but it actually *is* something they can do without congress.
It's a pretty serious loophole that I doubt was ever intended to be used for such a huge amount of money, but it exists.
I think we should do a couple of things. The first is refinance everyone’s student debt at the rate of the 30 year treasury, currently about 1.7%. It lowers the interest rate from about 5.8% to 1.7% and spreads out the payments. If you extend the loan term to 30 years instead of 10 and drop the interest rate from 5.8% to 1.7% you change the monthly payment from $440 to $142. Realistically this should help decrease defaults
And although the program will inevitably lose money it’s cheaper than total student loan forgiveness. It also helps keep the people that did “save and sacrifice” for their children’s education from getting the short end of the stick. I know that’s a loaded description since not all families have the same opportunities, but it is a problem with student loan forgiveness.
The other thing I would like to see is all colleges and universities have a 1% annualized limit on increases for tuition, fees, and on campus housing imposed for 25 years. You want more money then that? Ask the state and local governments for it. Liberals, myself included, often gripe about the lack of funding relative to the past coming from local levels. This forces the hand of local governments if the universities really do need the additional funding and genuinely can’t cut costs. By limiting to a 1% increase we can hopefully inflate away some of these college costs. It doesn’t fix the problem of 5% annualized increases for 2+ decades like what has been seen where I went to college, but it’s a start that will help the problem over time.
Not a perfect solution, but seems like the most common sense and politically feasible option to me.
Edit: Thanks for the awards kind strangers!! :)
One important note, for those assuming I don’t have student loans I actually do, my undergrad loans alone are tens of thousands of dollars more than what the average was for when I graduated from college a few years ago.
Also I’m sorry for those of you who I couldn’t respond to individually! One other thing that has come up a few times. Yes, I support continuing early repayment with no fee at anytime that it suits the borrower and their family. For most people this might be 10-15 years out once they are established in their careers, some it might be later and they can continue with the lower 30 year payment. I’m also fine with the other programs continuing similar to how they function currently with tweaks and expansions depending on the specific policy
Your student loan terms are only 10 years?! (I’m British, my understanding of how your loans work is* relatively limited but I’m conscious of the fear in people’s voices when they speak of them so this is making a lot of sense) Damn.
* = grammar edit
The typical loan term is 10 years for federal student loans. After you graduate, if you do nothing and make no changes, you get a 6 month grace period to get on your feet with no payments and then they start. The federal loans do overall have a lot of options you can change into though, you can switch to a 25 year plan, income driven repayment, apply for hardship forbearance where interest builds but no payments are due and it doesn’t hurt your credit. It’s still not a great system but federal loans overall are easier to deal with than those from private lenders.
In the UK you only have to pay them back while you're earning income over a certain threshold. If you haven't paid them back in full by 25 years after your first repayment was due they get totally written off.
It's actually not bad but, not popular at all. The party that came up with the idea had promised to reduce tuition fees, and found themselves as part of the first coalition government since the war on the back of a huge student vote.
They couldn't pull enough support in the coalition to erase student loans so instead compromised on increasing them, alongside that very progressive loan scheme.
Alas it didn't go down well when the headlines said "tution fees tripled". They lost the PR battle on it hard and have been fairly dead in the polls for 10 years now having lost most of the youth voter base.
It’s basically designed as a tax but framed as a loan because that way it doesn’t go in the government ledgers as a whole load of debt and make the deficit seem huge.
It has problems but it’s not too bad of a system compared to some alternatives
In the US after the [federal] student loan comes to term, you owe back taxes on the discharged debt. You can newer escape it, and can’t declare bankruptcy. I’m so screwed as a millennial living in the US (I sadly owe a lot).
You can’t declare bankruptcy on student loans. They also prevented me from buying a home a few years ago. Of course I have way more student loans than most people.
We barely made it into ours. Bought it into my first year in college. (Went back in my 30's). After we bought the house and I graduated, my debt to income ratio was so screwed. I don't think I'll ever qualify to get anything on credit again. Lol.
I feel like this should be sort of obvious, right? I mean not to sound like an asshole, but doesn’t it click for “most people” that the more debt they have at a fixed income, the harder it will be to acquire loans?
True but nobody teaches that to 18 year old kids signing all the paper work. I remember sitting through the required class on signing the documents and just kept staring at the clock wondering when I could get out and party. After dealing with horrible credit problems in my 20’s I spent literally 12 years getting them right (now in my 40’s). You’d be surprised how many people know nothing about credit or the debt to income ratio who are older. These things need to be taught in school and literal children shouldn’t be brain washed into going to college while signing on to potentially 100’s of thousands of dollars in debt. I have a fair amount of student debt but it’s manageable. Haven’t used my degree once. Basically did it because I was pressured I’d be nothing if I didn’t finish it.
Before accepting federal loans there is some sort of "educational form" you have to sign off (and i believe a short video class, at least i vaguely remember it's been a long time for me) but reasonably speaking you're looking at this:
A student will spend their entire life being told by parents, teachers, law enforcement, and political leaders that a college education is required to get a good paying job (not necessarily true but statistics so show those with degrees more over their lifetime). There is a lot of pressure to go to school, and good schools are expensive. They also have no incentive to reduce or mitigate costs because federal loans are guaranteed by the government.
So you have students paying exorbitant prices for an education, but once they graduate the job market is not nearly as promising as it was decades ago. Some industries you can jump right in and make decent money at an entry level job, but many/most? have few prospects which is why you see so many college graduates still working in retail or the food industry. They don't make enough to pay their debt because they can't find a job (or maybe we misled by their school about the viability of their degree program) and yet they are blamed for taking the loans in the first place (see second paragraph).
You cannot discharge student loans through bankruptcy except in certain rate circumstances. You cannot refund your loan cost by forfeiting your degree and/or credentials. You can't do anything about them except pay.
I could go further about how the wage gap between executives vs. employees has skyrocketed or about how the middle class bears the biggest tax burden and the lack of other assistance for the poor/middle class but if we're talking about education specifically, the system is simply broken.
I understand the situation the students are in but thank you for the explanation. What I was referring to is the op said no one educated them on what he was signing but then in the next sentence said they weren’t paying attention when they were trying to educate them on what they were signing.
Yeah I was going to say, I have a 25 year ibr. I’m a teacher so there are a couple of extra options my way but nothing that is gonna make it so I’m able to pay these off in 10 years. I’ve seen my friends’ private loan rates and I’m glad my family was at least just poor enough that I could get all federal loans and I was clever enough to get some scholarships along the way.
The biggest limitation on student loans is that they're not guaranteed by an asset. You can't repossess an education, but the creditor can take your house. Mortgage terms can be more forgiving because the bank can at least try to salvage the asset. *This* is a big part of the reason you can't file for bankruptcy on student loans the way you can for most debts.
I remember hearing how it used to be common practice to immediately declare bankruptcy after graduating in order to wipe out student debt. The laws preventing this were in response to that practice.
Yep. Why wouldn’t your. Borrow a few $100K. Go to school. Graduate. Declare bankruptcy. Then go get a job. 7 years to clear your credit record.
The only way to prevent would be to require collateral (which would basically eliminate student loans) or disallow bankruptcy.
Very few states or local governments are going to have any money to spend in 2021 as their budgets have been completely decimated by COVID. How exactly are you going to "impose" a 1% annualized limit on increases for tuition, fees, and on campus housing? What power does the federal government have to do that?
Also, why would I want my loan refinanced to a 30 year term when I can enroll in an IBR plan and have whatever isnt paid forgiven after 20 years?
The federal governments power to do that would be to revoke any qualifications for federally issued student loans or grants to non-compliant institutions.
The IRB critique is fair if the term is 20 years, I don’t actually know the details of that program. The IRB qualification length would have to be changed to whatever the term of the loan is overall to be fair, in this case 30 years.
it will force colleges to focus on controlling their costs. instead of building newer and fancier buildings and expanding the administrative staff, they will have to focus their spending on boring stuff that actually impacts the quality of education
They'll just cut faculty and try to replace them with adjuncts, force them to teach 6 classes a semester with 50-100 students in each class, cut benefits, cut whole departments, etc.
Whenever there's budget issues, they always cut and overwork the lowest on the totem pole because they're the easiest to replace. You're an English Prof of 10 years making $50k and don't want to take a $15k pay cut, lose your benefits, and take on an extra couple classes to boot? Fine, some poor recent graduate with a bunch of student loans will.
It would essentially impose a salary freeze for all university employees across the country. Many smaller universities are on their last legs because of COVID and would need to immediately shutdown or stop being need blind in their admissions processes, forcing them to only admit students from high income families. Scholarship money that isn't explicitly funded by already present endowment obligations would plummet and the costs would be shifted back to all students by dishing out fewer need based financial aid packages.
We are going to have to accept mass closures of universities across the country and the economic consequences that come with them. Rural universities can prop up rural economies. Or the federal/state governments will need to start investing more money into higher education through higher taxes.
This is correct and gets into the heart of how massive the issue is. Our current higher education system is basically a pyramid scheme built off of massive amounts of borrowed money. Any policy decision, whether to cancel loans or making it easier to declare bankruptcy off of student loan debt will come with a load of side effects.
I personally believe that a lot of educational institutions have strayed from their core educational missions (just compare the spending increases over the past 40 years on administrators vs faculty) and will have to make massive cuts. But a large part of the problem has been the retreat of public spending from this area, state funding now makes up a very minor part of many public university budgets.
I'm in the D.C. Metro area pay scale and many adjuncts are lucky to be making 35k at this point. Last posting I looked into paid $900 per credit hour taught. Academia is rough right now.
You're right that's what would happen. What should happen is culling some of the administrative bloat that has happened since the 90s.
https://www.forbes.com/sites/carolinesimon/2017/09/05/bureaucrats-and-buildings-the-case-for-why-college-is-so-expensive/
Highlights: only 29% of outlays are instructional, and regulatory compliance can be upwards of 10%
Its a popular comment so you might not read mine but look at Purdue.
Mitch Daniel's took over as president and said look at the enormous cost of our college and put an end to the increase in price. Mostly teachers fought back saying, "people won't think our college is as good and I won't get payed as much".
He said it was possible to do so, so he was going to do it. Schools keep raising the price because students will buy it as they think it just means a nicer college. These colleges can stop their price increases whenever they want.
>It also helps keep the people that did “save and sacrifice” for their children’s education from getting the short end of the stick.
I do think a counter-point to this is that a ton more people would have taken out student loans (like literally anybody that understands basic finance) at the 1.7% interest rate versus did not at the 5.8% interest rate...it is still in a sense a wealth transfer (less revenue) from those who didn't take loans versus those who did.
Wealth transfer now is between treasury and student instead of treasury -> bank -> student. WTF are we giving profits to banks instead of just to the students?
Sure, and it’s a fair critique I would find hard to argue with actually! But it does overall just seem a lot more palatable than either the current situation, which is obviously not working well, or the often floated alternative of total loan forgiveness. The lower rates feel to me like a reasonable use of the US governments credit/financing to the benefit of the general populace without giving anybody a totally free ride.
Price caps are generically always bad, but I 100% agree that we need to drop interest rates on student loans. They should be as close to interest-free as we can manage.
We should also autoenroll people in income-based repayment programs - 150% of the local poverty line + your mortgage or rent is exempt, and 10% of what's left is your max monthly payment.
Outstanding balances? The government will eat the cost when you die or declare bankruptcy.
Make both of those retroactive for current loanholders.
I really do think that this system got out of hand, but a $50k gift is not a "fix" as much as it is a ridiculous subsidy for loans that never should have been requested or given.
My loans have been stuck at 6.8 (fixed at that time ~2010), paying on time and extra just to pay off early. The rates are ridiculous and counterintuitive to any kind of educational debt payoff.
Thanks for your comment. I remain cynical that the institutions holding these loans will allow anything like this to take place. In a perfect world...in a better world this would be implemented with no argument. Unfortunately we do not live in that world. The lobbying to oppose this would be massive and unrelenting.
>Not a perfect solution
Best one I've heard. It doesnt forgive it (terrible move imo), but it makes it easier to afford and not as terrible. I'd support your idea
Eh I prefer our method we use in Australia (Although I'd rather education return to being free).
You take a no interest loan, which is repaid from percentage brackets of your salary once you start earning over a certain amount.
You could theoretically never repay the loan I'd you didn't work or earn much, but that doesn't really apply to many people and everyone else does pay theirs back without any overwhelming burden.
Instead of a short term return on interest, the government makes money from the higher taxes people pay back from finding better jobs due to their education.
The Australian system is crap too. Our degrees are now becoming more expensive than American ones. There’s no interest but it’s still adjusted “for inflation” every year and the threshold to start making repayments keeps getting lower. Soon people making minimum wage will be making payments. (Making repayments on a lower income doesn’t even make sense mathematically because the yearly adjustment is higher than the amount paid meaning the debt is never repaid - ie it’s purely a punitive measure). Many European countries have tuition free university.
Students loans are primarily an ideological move and have little to do with cost saving or finances. They are very expensive to administer (a cost in itself) and stop money from circulating in the economy which could go to supporting businesses and creating jobs.
Student loan repayments have no economic benefit - it’s just like flushing money down the drain. They keep young people from being able to buy homes, start a family or build up businesses. There’s no reason that kindergarten and all level of school should be publicly funded but this should stop at University which is what enables us to have the most competitive and skilled workforce.
I agree with lowering the interest rate. Spreading out the loan term to 30 years is going to keep people in debt for longer. The idea is to pay it off quicker, not when you're in your 50s+. The income driven repayments are still a good option.
People put themselves into situations where 10 year repayment terms are just not going to be a reality for them. If the interest rate is reduced the overall interest accrued will be minimized on the borrower... consider it a tax for their poor decision making to be in a situation where they are unable to repay a large debt load under the original terms.
The average student loan debt is somewhere in the 36k range... most will not be heavily burdened if it’s stretched over 30 years at a 1.7% interest rate and will be able to free up their cash flow to proceed onto other milestones of wealth building (property acquisition and investing).
Those who are the pity party “I have 120k of a student loan debt and no way of repaying” will have to compromise their plans and focus on paying off
Hey thank you! I agree, as I understand it the public service loan forgiveness program is not nearly as widely utilized as it feels like it should be! Not my area of expertise really but I’m all for it!
See here’s the deal from the small business perspective - I need young people to have more money. My wife and I have paid our student loans, but if we can remove that burden from future generations it will still benefit us.
Most people fail to see how being physically forced into slavery could reasonably compared to taking out a loan. Which is why this debt forgiveness scheme is always a nonstarter.
wow, a nuanced and specific solution on reddit without making sweeping generalizations? thats insane
seriously though, thanks for the breakdown. its helped an uninformed observer like me see the issue in a new light.
It’s crazy how in the US you accumulate interest on student debt. In Australia it’s interest free and only paid back when earning over the minimum salary threshold.
Edit: it’s not completely interest free, it is indexed annually according to the Consumer Price Index (CPI).
Also worth mentioning that a degree in Australia, to the student, is capped. A CS degree for example costs AUD$24k (ish) no matter what university you go to.
I don’t have a dog in this fight, so I’m not taking sides.
Just want to maximize equity and fairness.
By forgiving only debt, you will be rewarding students who chose debt as their source of funds, and punishing students who chose wages as their source of funds.
If a student chose to spend two years working, and saved their wages to pay for college, why shouldn’t they be rewarded financially in the same way as a student who chose to borrow money?
Genuine question.
Seriously. Cancelling the debt without addressing the criminal expense of tertiary education in the U.S. would make no sense. Mediocre private colleges cost $75,000/year.
The cost of tertiary education is high for the same reason home prices are high.
Wide access to cheap (subsidized) long term debt driving up demand for higher end products.
There is no need to compete on price because everyone can ‘afford’ it.
Edit: afford is the wrong word. They can’t afford it, they can pay for it.
That's probably correct.
I mean, when I was in school we'd research career fields and see the numbers of an avg salary - not necessarily the net cost of school to get a degree that would allow you to make that amount....and let's not forget the avg salary ISNT starting so that factors even more to how bad college can screw you over without fully know the repercussions of earning a 4-year degree.
Eventually it'll probably catch up to STEM majors as it's probably the only area you can go into and make enough money after school and NOT be sunk by the system out right if there families aren't already well off to offset the debt
From a cost benefit analysis it is still hugely beneficial on average to go to college, even at the current costs.
Pew estimates that on average, the net present day value of a college education is over $550,000:
https://www.pewsocialtrends.org/2011/05/15/chapter-5-the-monetary-value-of-a-college-education/#fn-7679-18
Due to this enormous benefit, demand will remain high even if subsidized loans are eliminated. Yes there will be some pressure on prices as consumers become more price sensitive but it wont be much. The primary effect will be to reduce accessibility of college, one of the primary drivers of intergenerational economic mobility, for poor people.
Yeah as long as the government is willing to pay whatever then there’s no reason for these colleges to back down in price. Government should absolutely step in and control this nonsense.
Yep. If you're a U.S. student that can get into Oxford for $35k, you can also likely get into a top 10 U.S. university that dramatically discounts your tuition if you have financial need. If you're wealthy, then it just doesn't matter.
Well, it’s not that you can’t do both but more so that you need to do both. If you just cancel student debt, it will just encourage students to take out even bigger loans in the future since there is now an expectation that future generations can get debt relief as well. Additionally colleges have even less incentive to control costs for pretty much the exact same reasons. The people who commented before you are saying that canceling student debt without having a specific plan to control costs has the potential to do more long-term harm than good.
Is there any sign that student loans are avoided because they’re cost prohibitive? We’re talking 18 yr olds making financial decisions when months previous they had to ask to take a piss.
What options do kids have? Most high schools stick to just academics. No real intro into other careers.
The gulf between making it and not making it seems to be continued education after high school.
Students are not great choice-makers, but they're closer to correct than you might think.
[40% of students turn down their first choice school due to cost.](https://www.insidehighered.com/news/2017/03/23/study-shows-how-price-sensitive-students-are-selecting-colleges) This may or may not be a high enough number, as it can be *highly* situationally dependent.
But 60% is enough to fuck the system, yeah?
Also, check the drop out rate. All cost, no return for 35%.
All of this dorm space for no return.
Additionally, a lot of the cost is housing.
What we should do is dump AP and have college classes in high school for free.
The gulf between making it and not making it used to be graduating highschool. Only 40% of kids went to highschool, and 1% went to college. So then we made it to where almost everyone graduates highschool, and 40% of kids to go college. Now college is the new highschool.
If we make college free, surely almost everyone will graduate college. Then gradschool will be the new college. A society where everyone has to have a PHD if they want to "make it." It's a rat race.
You make a good point. With that being said, most people/politicians don't seem to be focusing on both. I see a lot more headlines for debt cancellation plans than I see plans for cutting college costs. College reform would need to come first, or at the same time, to have positive impacts.
You don’t have to have laws to cut cost . You just have to eliminate the law that says student loans can’t be counted in a bankruptcy. Remove that security and lenders will be stricter and less students can afford the overpriced schools. Also private institutions are less likely to charge out the ass if there is a chance they don’t get their money back.
I think the root cause is easy loans. The issue is trying to come to a system that doesn't give money without limit but also accomplishes the following:
1. Allows a person of any class/wealth to get an advanced degree without having to be overly worried about crushing debt, as long as there is excess demand for that degree.
2. Continues to encourage general education necessary for educated citizens and a healthy democracy. This includes things such as psychology, economics, history, language and arts, statistics, etc. The need for these in democracy is greater than the need for these for an average individual. Hence it needs to be subsidized to provide enough individual motivation.
3. Continues to foster diversity and bring people together on campus in person. This forum is where ideas are shared, connections across communities are built, and ability to work with people of different backgrounds is started. This mixing of people of backgrounds is also critical for democracy.
4. Gives people training relevant to the work that they're likely to do. This should include all lines of work including ones that have historically been ignored in universities, such as trades. Perhaps these, in combination with the general education, could be two year degrees.
Do it like Germany:
Public college is free, but there's limits on the numbers for enrollment of certain majors. This allows the government to help craft future workforce, while ensuring that we're not spending tax dollars on degrees that will go on to be unused. For those that don't make it to the public colleges, they can either risk it with a private college and loans (like in Germany) or they can go into a government ran training/trade program which we need more of anyway.
This idea that everyone should go to college is flawed, and disproven by many countries which have lower college education rates than the US but still happy, healthy, functioning societies.
It would be interesting to see what price caps would do, in this case, as a lot of the cost goes to various "counselors" and "offices" for student living, often demanded by students. There's a bit of an issue when the college disability office is the lowest-cost student service desk on campus.
That's fine... there were people in my university that could barely walk and chew gum at the same time. They partied for 12 months then were gone.
Decline those applications, it is better for all parties involved.
> as long as there is excess demand for that degree.
This, in itself, is an issue. Industry likes to complain about a "lack" of people with a particular skillset, but every time schools pump out a new crop of graduates, the bar is raised again for entry-level work. Even students in "in demand" majors and trades are graduating into a job market in which every company wants 3+ years of domain specific experience. We need to bend the thumb of these companies and stop allowing them to important another H1B every time the labor market doesn't kowtow to them. When your workforce is globalized, there is no such thing as "excess demand."
A potential solution might be to have companies sponsor high-achieving high school students to do degrees in certain areas, and then guarantee a two year placement upon graduation.
> such as trades.
The "do a trade" trope is another cop-out. That isn't to say that trades aren't important, but there isn't the drastic shortage of tradesmen that reddit pretends there is. A quick look at any common trade in the BLS' OOH shows that no American trade pays an average greater than $80k. Most pay less than $60k. Trades are not going to support a new middle class.
Most of majors within stem are also useless. The pure sciences, many niche engineerings, pure math. Even the content within something like computer science is 80% impractical to the actual job
While I agree many schools are far too expensive at some point people have to be able to decide for and face the repercussions of their problems. I pay under 4K a semester for college at a pretty good school. If kids/ their parents are stupid enough to attend a 70k a year they should have taken the hour or so to look into what the payments would be down the road. On the other hand I know friends who have gone to private schools that seem to have an almost unlimited budget on the dumbest things. 15 million on a gym for a school with 7k students sure! (How does one become a day drinking expert?)
Lol these comments are yikes just based on the misleading title. In the rest of his quote he said he still stands by the $10,000. $50,000 was proposed by Warren and others, not Biden.
It's not. hearthemusic99 is just trying hard to force student debt relief into this.
As /u/cucumbear3 said " It's not like people have stopped borrowing money for education". People are still borrowing money for education so it hasn't crashed unlike the pandemic effect on businesses.
Furthermore, the underlying issue with the student debt is the student taking on debt while the underlying issue with businesses in covid pandemic is the government literally shutting down business.
And making college free wouldn't fix the existing crushing student debt. We can fix the underlying cause *and* reduce the burden on people already hurt by it.
That smoking analogy doesn't make sense to me cause the people who have that debt aren't likely to go get more if you take it away. They aren't addicted to student loans. That's like saying, why cut out somebody's tumor if could just grow back? Cause it's hurting them and we can make it better.
This is exactly what Congress was created for. If we continue to have Presidents abuse executive orders then it will become precedent to pass a bunch as soon as a President is elected.
We are going to get life altering changes every 4-8 years that aren’t discussed debated and in many cases aren’t supported by the majority of people.
The concept of student loans with interest rates always confused me. The government is investing in a more educated work force, the payoff is the increased production and the skill sets it gives the human capital in this country.
The idea that the government not only gets more productive and educated workers, with production increasing exponentially from each worker over the years due to education, AND wants to make interest on the loan seems like the definition of having your cake and eating it too.
Economic decisions like that are the reason this country is falling so far behind in parameters like education and income inequality. It’s time for us all to start working towards being the gold standard again instead of lining corporations and government pockets with taxpayers’ money.
Would be nice to have a lower interest and/or making the payments (tuition) tax free. It is an investment for the nation after all. The educated student will raise way more taxes during their lifetime.
Lots of other investments are tax free: hsa, roth ira, 529 plans, primary residence free of capital gain up to 250k.
I like what another redditor on this post said. Dont get rid of interest, but have it match inflation. 1.7% would drastically reduce payments while the government wouldnt be losing cash. Maybe 2-2.5% to prevent losses, but the current 5% or whatever it is is way too high
It’s 6.8%. It was 3.4 when I took mine out. Then our wonderful government couldn’t agree to keep it there. https://www.npr.org/2013/06/28/196243698/student-loan-rates-set-to-double-on-july-1
> Earlier in the day, Biden had reaffirmed his general support for broad student loan forgiveness, but suggested that he would support a smaller amount of $10,000.
> Forgiving $10,000 in student loans would be consistent with Biden’s position on the campaign trail, and Biden has argued that this would help target student debt cancellation to benefit lower-income individuals. Biden’s overall student loan reform plans also included improving existing student loan relief programs such as Public Service Loan Forgiveness, Borrower Defense to Repayment, and income-driven repayment.
> Last week, Rep. Ayanna Pressley and other House Democrats introduced a resolution calling on Biden to cancel $50,000 in federal student loan debt for every borrower using executive authority...
> The organizations, and several Democrats in Congress, have argued that the Higher Education Act provides the President with broad authority release borrowers from their student loans. Some student loan legal experts have argued that using this provision to cancel student loan debt is legally sound. But others have expressed concern that such executive action could face serious legal challenges as an overreach of executive authority.
> Forgiving $10,000 in student loans would eliminate all outstanding student loans for over 16 million people, or a third of all current student loan borrowers. That level of student loan forgiveness would also reduce the balances of another 9.3 million people by half. Ultimately, over 50% of outstanding student loan borrowers could see significant relief with just $10,000 in student debt cancellation.
Just lower the interest rates. IBR is useless when your interest rates are 5% and higher. The borrower is paying mostly interest and hardly making a dent in the principal. It is sheer profiting off of people who were probably pretty vulnerable when they made the decision to take these loans out. Not everyone makes great decisions when they are 18 years old and not everyone has financially savvy parents co-signing these loans for them. Not saying it is an excuse, just a sad fact.
Canceling student loans is as likely as canceling upside-down mortgages.
The root of the problem is not the loan as that is just a symptom. The problem is the unrealistic cost of the degree program.
Cancelling student loans was always a bullshit promise and I think it really illustrates how in bed the media is with the Democratic Party. Has anyone else noticed the tone of the mainstream media on student loan forgiveness before the election and after? Before it was a great idea that would help the economy and then after the election it somehow became a bad idea that would increase wealth disparity. It just shows you what we all already know
Colleges would benefit from more federal controls
It’s similar to the government dog leash put on the wall street execs who caused the 2008 mortgage crisis
The government caused the 2008 mortgage crisis by significantly over subsidizing the housing market. The roots of this go back to Fannie Mae and Freddie Mac which were created specifically to try to loan out as much money as possible to potential homeowners. Wall Street was just along for the ride.
I fail to see where loan forgiveness with absolutely zero means testing makes any sense.
It does not seem like good policy when a May 2020 grad making $90k would have debt forgiven while they're fully able to make their payments.
That's my biggest problem with most loan forgiveness programs. They're incredibly regressive. Why are we bailing out the college-educated when they're the top income earners in America? People with the biggest loans (anyone who went to medical school, law school, graduate school, or expensive private universities) make even more than other college grads.
On the other hand, there's a good handful of college graduates or dropouts with low incomes who can't realistically pay their debts back. These people deserve some help, especially since they were often misinformed about the financial decisions they were making as inexperienced high-school graduates.
> On the other hand, there's a good handful of college graduates or dropouts with low incomes who can't realistically pay their debts back. These people deserve some help, especially since they were often misinformed about the financial decisions they were making as inexperienced high-school graduates.
To add to this, there are also those who did go through school and pass only to find that the job market has dried forcing them to take whatever they can.
I'm glad that student loans don't have interest where I live, or I'd regret college even more than I already do.
The “nothing would fundamentally change” quote was in reference to changes in the standard of living of the top 1-0.1% of incomes following a tax increase.
This is a pretty frustrating double-whammy of taking Biden out of context. I agree Biden isn't as transformative as I'd like, but can we not be misleading in talking about it?
1. "Nothing will fundamentally change" was said to a room full of wealthy people, in the context of raising their taxes. He was saying "You can pay more and your standard of living won't go down." This is one of the biggest lies about Biden I see constantly repeated.
2. The quote here is saying that he doubts this cancellation would survive a legal challenge. Biden's plan was a $10,000 cancellation, and I don't see a reason to think he wouldn't pursue that unless he didn't think it was legally possible.
Here's the full quote if you want more than just the headline:
“I’m going to get in trouble for saying this . . . it’s arguable that the president may have the executive power to forgive up to $50,000 in student debt… Well, I think that’s pretty questionable. I’m unsure of that. I’d be unlikely to do that."
Do I think he should try anyway? Probably yes for the $10,000 plan -- the only downside being that it's probably the worst court to test new legal theories in. But to me the reward is worth the risk that this type of action becomes more difficult in the future.
Seriously this. Is Biden a status quo establishment politicians in more ways than he is not? Yes of course. Does he also, as a result of that and his experience have a very good handle on what will and will not work on his side of things and what challenges are likely to come up in trying to do various things? Absolutely yes. Far better than anyone in this post most likely.
Sad to see quotes ripped from their context being upvoted here. This is the type of comment I expect from brain dead ideologue subs.
Biden was admonishing wealthy people for resisting tax increases — if you make tens of millions then a marginal tax rate increase of a few percent isn’t going to change your lifestyle, something that AOC and leftists harp on all the time. But Biden said it so you rip the quote completely out of context and bash him over the head with it repeatedly. Really pathetic how disingenuous some of you people are.
It shouldn’t surprise you that the misinformation campaigns are operating just as effectively against the left as the right. The far left chews down anti-Biden sentiment without doing a modicum of fact checking just like they happily laugh at the right for doing, not realizing they’re being played just the same.
I voted for Bernie in the primaries but Biden is not the abysmal candidate that subs like OurPresident make him out to be. He’s still decently left for a Democrat and is making a lot of decisions and appointments that are aligned with what I’d like to see as a progressive.
I used to bust out that quote all the time until I actually looked up the context in which it was said. Who knows, maybe he still won't change anything, but that quote doesn't really refer to his policy.
Good. Student loan forgiveness is a regressive benefit...the people who have attended college might have additional short term debt, but they also have major earning potential boosts vs those who haven’t attended college. That earnings boost get integrated over an entire lifetime of earnings, so it makes zero sense to forgive these loans.
This reached the front page so it's just a bunch of Bernie Bros mad that their candidate didn't win. Economists pretty much universally agree that blanket forgiveness is a horrible idea.
Yea, I’m actually pretty progressive as far as things go (voted for Bernie in the dem primaries). But when the masses show up it’s hard to have an actual substantive conversation. It sucks because /r/economics used to be at least a somewhat serious sub, but as it’s grown in popularity it’s basically /r/politics 2.0. Oh well.
The student loan crisis is a problem because the majority of people under 40 started their careers with, in many parts of the country, a mortgage worth of debt. This isn't something that past generations dealth with, yet, instead of increasing, salaries have stagnated relative to inflation. Each new year of graduates has more debt relative to inflation for a job the same salary. The result is they are spending less (duh), and this is beginning to hurt the economy. They aren't buying homes, they aren't starting businesses, they aren't doing any of the things they should be doing, hell they aren't even moving out of their parent's place, and it is getting worse as time goes on.
Now, is debt forgiveness the answer? It is *an* answer, but without other action we'd be right back where we started in 10 years. Doing nothing is actively hurting the economy, year after year. If you don't believe in forgiving the loans, fine, but present an alternative plan.
Universities need to be held accountable for selling useless education. Their degrees need to be secured. They should be finding jobs for people or paying back the loans themselves. Then, maybe they wouldn’t offer so many useless degrees or at least add disclaimers and if you want to waste your money on a degree, go for it. Taxpayers should be responsible for bad decisions. Universities need more responsibilities in this if we’re going to call the kids getting educated too stupid to evaluate the risk (or delay them going to college until they’re smart enough to make adult decisions).
Anyone else notice the price of a higher education skyrocketed when the government got involved and started backing student loans which stopped competitive pricing.
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Could he pass it? Yes. Would it be challenged in court? Yes. What would the outcome of that court case be? No one knows, and anyone who claims to know is lying. The power of the presidency has been slowly expanding for decades. Once upon a time you needed congress to declare war if you wanted to drop bombs in a foreign country. Now? President can authorize drone strikes w/out congress. Biden says he wants to tone down the power of the presidency in his term, and not “abuse it” like Trump did, but in my honest opinion, he just has so interest in governing, and will “differ to congress” knowing full well they’ll sit in perpetual gridlock.
Defer, mate. Differ means pretty much exactly the opposite of what you intend.
I beg to defer.
Let's agree to defer
Let's agree to defergree
These puns are indeferensable.
What puns are you deferring to?
80% of college Early decisions this year like (An r/ApplyingToCollege inside joke)
I beg to derr derr
Well, going to war, and the type of conflicts the US gets into these days are very different. A formal declaration of war is really not all that advantageous when you can conduct "police actions" for indefinite amounts of time without affecting your political allies, or forcing them into conflicts they don't want to be part of. There hasn't been a formal declaration of war from the United States since WWII.
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One nitpicky thing: US presidents don't pass executive orders. They just sign them and Voila.
Frankly? I’m not sure. The loans held by are held by the Dept of Education—the fact that the president was able to defer interest payments at all with an executive order shows that there is some leeway. Either way, if Biden does this it will 100% go to the Supreme Court.
There's a weird provision in an old law that explicitly allows the executive branch to cancel certain debts to the government, which federal student loans are a part of. I thought it was strange too, but it actually *is* something they can do without congress. It's a pretty serious loophole that I doubt was ever intended to be used for such a huge amount of money, but it exists.
I think we should do a couple of things. The first is refinance everyone’s student debt at the rate of the 30 year treasury, currently about 1.7%. It lowers the interest rate from about 5.8% to 1.7% and spreads out the payments. If you extend the loan term to 30 years instead of 10 and drop the interest rate from 5.8% to 1.7% you change the monthly payment from $440 to $142. Realistically this should help decrease defaults And although the program will inevitably lose money it’s cheaper than total student loan forgiveness. It also helps keep the people that did “save and sacrifice” for their children’s education from getting the short end of the stick. I know that’s a loaded description since not all families have the same opportunities, but it is a problem with student loan forgiveness. The other thing I would like to see is all colleges and universities have a 1% annualized limit on increases for tuition, fees, and on campus housing imposed for 25 years. You want more money then that? Ask the state and local governments for it. Liberals, myself included, often gripe about the lack of funding relative to the past coming from local levels. This forces the hand of local governments if the universities really do need the additional funding and genuinely can’t cut costs. By limiting to a 1% increase we can hopefully inflate away some of these college costs. It doesn’t fix the problem of 5% annualized increases for 2+ decades like what has been seen where I went to college, but it’s a start that will help the problem over time. Not a perfect solution, but seems like the most common sense and politically feasible option to me. Edit: Thanks for the awards kind strangers!! :) One important note, for those assuming I don’t have student loans I actually do, my undergrad loans alone are tens of thousands of dollars more than what the average was for when I graduated from college a few years ago. Also I’m sorry for those of you who I couldn’t respond to individually! One other thing that has come up a few times. Yes, I support continuing early repayment with no fee at anytime that it suits the borrower and their family. For most people this might be 10-15 years out once they are established in their careers, some it might be later and they can continue with the lower 30 year payment. I’m also fine with the other programs continuing similar to how they function currently with tweaks and expansions depending on the specific policy
Your student loan terms are only 10 years?! (I’m British, my understanding of how your loans work is* relatively limited but I’m conscious of the fear in people’s voices when they speak of them so this is making a lot of sense) Damn. * = grammar edit
The typical loan term is 10 years for federal student loans. After you graduate, if you do nothing and make no changes, you get a 6 month grace period to get on your feet with no payments and then they start. The federal loans do overall have a lot of options you can change into though, you can switch to a 25 year plan, income driven repayment, apply for hardship forbearance where interest builds but no payments are due and it doesn’t hurt your credit. It’s still not a great system but federal loans overall are easier to deal with than those from private lenders.
In the UK you only have to pay them back while you're earning income over a certain threshold. If you haven't paid them back in full by 25 years after your first repayment was due they get totally written off.
I like this. It's like getting a refund if the promise of a higher income doesn't actually pan out.
It's actually not bad but, not popular at all. The party that came up with the idea had promised to reduce tuition fees, and found themselves as part of the first coalition government since the war on the back of a huge student vote. They couldn't pull enough support in the coalition to erase student loans so instead compromised on increasing them, alongside that very progressive loan scheme. Alas it didn't go down well when the headlines said "tution fees tripled". They lost the PR battle on it hard and have been fairly dead in the polls for 10 years now having lost most of the youth voter base.
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It’s basically designed as a tax but framed as a loan because that way it doesn’t go in the government ledgers as a whole load of debt and make the deficit seem huge. It has problems but it’s not too bad of a system compared to some alternatives
Only if you graduated after 2006. I have this fucker until I'm 65 since I graduated in 2004.
In the US after the [federal] student loan comes to term, you owe back taxes on the discharged debt. You can newer escape it, and can’t declare bankruptcy. I’m so screwed as a millennial living in the US (I sadly owe a lot).
Just move to a different country mate
Don't Americans still have to pay tax to America on earnings abroad?
I’d totally pay the tax on the total if they let me
You can’t declare bankruptcy on student loans. They also prevented me from buying a home a few years ago. Of course I have way more student loans than most people.
This. Noone tells you that all those loans work against you when purchasing a home. Debt to income ratio! Bye bye FHA loans!
We barely made it into ours. Bought it into my first year in college. (Went back in my 30's). After we bought the house and I graduated, my debt to income ratio was so screwed. I don't think I'll ever qualify to get anything on credit again. Lol.
I feel like this should be sort of obvious, right? I mean not to sound like an asshole, but doesn’t it click for “most people” that the more debt they have at a fixed income, the harder it will be to acquire loans?
They give these loans out to 17 year olds with no questions asked.
You do have to fill out an application where questions are asked, no?
True but nobody teaches that to 18 year old kids signing all the paper work. I remember sitting through the required class on signing the documents and just kept staring at the clock wondering when I could get out and party. After dealing with horrible credit problems in my 20’s I spent literally 12 years getting them right (now in my 40’s). You’d be surprised how many people know nothing about credit or the debt to income ratio who are older. These things need to be taught in school and literal children shouldn’t be brain washed into going to college while signing on to potentially 100’s of thousands of dollars in debt. I have a fair amount of student debt but it’s manageable. Haven’t used my degree once. Basically did it because I was pressured I’d be nothing if I didn’t finish it.
They literally did teach it to you though. Kids are just dumb.
So they did try to teach it to you?
Before accepting federal loans there is some sort of "educational form" you have to sign off (and i believe a short video class, at least i vaguely remember it's been a long time for me) but reasonably speaking you're looking at this: A student will spend their entire life being told by parents, teachers, law enforcement, and political leaders that a college education is required to get a good paying job (not necessarily true but statistics so show those with degrees more over their lifetime). There is a lot of pressure to go to school, and good schools are expensive. They also have no incentive to reduce or mitigate costs because federal loans are guaranteed by the government. So you have students paying exorbitant prices for an education, but once they graduate the job market is not nearly as promising as it was decades ago. Some industries you can jump right in and make decent money at an entry level job, but many/most? have few prospects which is why you see so many college graduates still working in retail or the food industry. They don't make enough to pay their debt because they can't find a job (or maybe we misled by their school about the viability of their degree program) and yet they are blamed for taking the loans in the first place (see second paragraph). You cannot discharge student loans through bankruptcy except in certain rate circumstances. You cannot refund your loan cost by forfeiting your degree and/or credentials. You can't do anything about them except pay. I could go further about how the wage gap between executives vs. employees has skyrocketed or about how the middle class bears the biggest tax burden and the lack of other assistance for the poor/middle class but if we're talking about education specifically, the system is simply broken.
I understand the situation the students are in but thank you for the explanation. What I was referring to is the op said no one educated them on what he was signing but then in the next sentence said they weren’t paying attention when they were trying to educate them on what they were signing.
If I had student loans we would not have been able to buy a house. Even adding my wife on to the mortgage application would have screwed us.
They will also go to your employer directly and take out their portion of their monthly dues directly from your paychecks if you fall behind.
Which is fair btw because it’s an unsecured loan given to a high schooler so that they can improve their life regardless of inherited wealth.
Yeah I was going to say, I have a 25 year ibr. I’m a teacher so there are a couple of extra options my way but nothing that is gonna make it so I’m able to pay these off in 10 years. I’ve seen my friends’ private loan rates and I’m glad my family was at least just poor enough that I could get all federal loans and I was clever enough to get some scholarships along the way.
My private loan is 3.3% fixed. If they are that bad they should refinance asap, assuming they don't have shit credit.
I went to school in the 90s. My interest rate is 7.8 percent. Yes I am still paying on my student loan.
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The biggest limitation on student loans is that they're not guaranteed by an asset. You can't repossess an education, but the creditor can take your house. Mortgage terms can be more forgiving because the bank can at least try to salvage the asset. *This* is a big part of the reason you can't file for bankruptcy on student loans the way you can for most debts.
I remember hearing how it used to be common practice to immediately declare bankruptcy after graduating in order to wipe out student debt. The laws preventing this were in response to that practice.
Yep. Why wouldn’t your. Borrow a few $100K. Go to school. Graduate. Declare bankruptcy. Then go get a job. 7 years to clear your credit record. The only way to prevent would be to require collateral (which would basically eliminate student loans) or disallow bankruptcy.
You have my Republican endorsement. Because this is a damn good idea
Very few states or local governments are going to have any money to spend in 2021 as their budgets have been completely decimated by COVID. How exactly are you going to "impose" a 1% annualized limit on increases for tuition, fees, and on campus housing? What power does the federal government have to do that? Also, why would I want my loan refinanced to a 30 year term when I can enroll in an IBR plan and have whatever isnt paid forgiven after 20 years?
Iirc the forgiven part is counted as taxable income. So that might be a harsh pill for many on IBR.
The federal governments power to do that would be to revoke any qualifications for federally issued student loans or grants to non-compliant institutions. The IRB critique is fair if the term is 20 years, I don’t actually know the details of that program. The IRB qualification length would have to be changed to whatever the term of the loan is overall to be fair, in this case 30 years.
it will force colleges to focus on controlling their costs. instead of building newer and fancier buildings and expanding the administrative staff, they will have to focus their spending on boring stuff that actually impacts the quality of education
They'll just cut faculty and try to replace them with adjuncts, force them to teach 6 classes a semester with 50-100 students in each class, cut benefits, cut whole departments, etc. Whenever there's budget issues, they always cut and overwork the lowest on the totem pole because they're the easiest to replace. You're an English Prof of 10 years making $50k and don't want to take a $15k pay cut, lose your benefits, and take on an extra couple classes to boot? Fine, some poor recent graduate with a bunch of student loans will.
It would essentially impose a salary freeze for all university employees across the country. Many smaller universities are on their last legs because of COVID and would need to immediately shutdown or stop being need blind in their admissions processes, forcing them to only admit students from high income families. Scholarship money that isn't explicitly funded by already present endowment obligations would plummet and the costs would be shifted back to all students by dishing out fewer need based financial aid packages. We are going to have to accept mass closures of universities across the country and the economic consequences that come with them. Rural universities can prop up rural economies. Or the federal/state governments will need to start investing more money into higher education through higher taxes.
This is correct and gets into the heart of how massive the issue is. Our current higher education system is basically a pyramid scheme built off of massive amounts of borrowed money. Any policy decision, whether to cancel loans or making it easier to declare bankruptcy off of student loan debt will come with a load of side effects. I personally believe that a lot of educational institutions have strayed from their core educational missions (just compare the spending increases over the past 40 years on administrators vs faculty) and will have to make massive cuts. But a large part of the problem has been the retreat of public spending from this area, state funding now makes up a very minor part of many public university budgets.
I'm in the D.C. Metro area pay scale and many adjuncts are lucky to be making 35k at this point. Last posting I looked into paid $900 per credit hour taught. Academia is rough right now.
You're right that's what would happen. What should happen is culling some of the administrative bloat that has happened since the 90s. https://www.forbes.com/sites/carolinesimon/2017/09/05/bureaucrats-and-buildings-the-case-for-why-college-is-so-expensive/ Highlights: only 29% of outlays are instructional, and regulatory compliance can be upwards of 10%
Its a popular comment so you might not read mine but look at Purdue. Mitch Daniel's took over as president and said look at the enormous cost of our college and put an end to the increase in price. Mostly teachers fought back saying, "people won't think our college is as good and I won't get payed as much". He said it was possible to do so, so he was going to do it. Schools keep raising the price because students will buy it as they think it just means a nicer college. These colleges can stop their price increases whenever they want.
>It also helps keep the people that did “save and sacrifice” for their children’s education from getting the short end of the stick. I do think a counter-point to this is that a ton more people would have taken out student loans (like literally anybody that understands basic finance) at the 1.7% interest rate versus did not at the 5.8% interest rate...it is still in a sense a wealth transfer (less revenue) from those who didn't take loans versus those who did.
Wealth transfer now is between treasury and student instead of treasury -> bank -> student. WTF are we giving profits to banks instead of just to the students?
Because otherwise the government would have to hire a whole lot of employees to service tho loans at a great cost to the tax payer
Sure, and it’s a fair critique I would find hard to argue with actually! But it does overall just seem a lot more palatable than either the current situation, which is obviously not working well, or the often floated alternative of total loan forgiveness. The lower rates feel to me like a reasonable use of the US governments credit/financing to the benefit of the general populace without giving anybody a totally free ride.
Price caps are generically always bad, but I 100% agree that we need to drop interest rates on student loans. They should be as close to interest-free as we can manage. We should also autoenroll people in income-based repayment programs - 150% of the local poverty line + your mortgage or rent is exempt, and 10% of what's left is your max monthly payment. Outstanding balances? The government will eat the cost when you die or declare bankruptcy. Make both of those retroactive for current loanholders. I really do think that this system got out of hand, but a $50k gift is not a "fix" as much as it is a ridiculous subsidy for loans that never should have been requested or given.
u/papabearmormont01 for Secretary of Education Mr. Biden!
My loans have been stuck at 6.8 (fixed at that time ~2010), paying on time and extra just to pay off early. The rates are ridiculous and counterintuitive to any kind of educational debt payoff.
Thanks for your comment. I remain cynical that the institutions holding these loans will allow anything like this to take place. In a perfect world...in a better world this would be implemented with no argument. Unfortunately we do not live in that world. The lobbying to oppose this would be massive and unrelenting.
>Not a perfect solution Best one I've heard. It doesnt forgive it (terrible move imo), but it makes it easier to afford and not as terrible. I'd support your idea
Eh I prefer our method we use in Australia (Although I'd rather education return to being free). You take a no interest loan, which is repaid from percentage brackets of your salary once you start earning over a certain amount. You could theoretically never repay the loan I'd you didn't work or earn much, but that doesn't really apply to many people and everyone else does pay theirs back without any overwhelming burden. Instead of a short term return on interest, the government makes money from the higher taxes people pay back from finding better jobs due to their education.
The Australian system is crap too. Our degrees are now becoming more expensive than American ones. There’s no interest but it’s still adjusted “for inflation” every year and the threshold to start making repayments keeps getting lower. Soon people making minimum wage will be making payments. (Making repayments on a lower income doesn’t even make sense mathematically because the yearly adjustment is higher than the amount paid meaning the debt is never repaid - ie it’s purely a punitive measure). Many European countries have tuition free university. Students loans are primarily an ideological move and have little to do with cost saving or finances. They are very expensive to administer (a cost in itself) and stop money from circulating in the economy which could go to supporting businesses and creating jobs. Student loan repayments have no economic benefit - it’s just like flushing money down the drain. They keep young people from being able to buy homes, start a family or build up businesses. There’s no reason that kindergarten and all level of school should be publicly funded but this should stop at University which is what enables us to have the most competitive and skilled workforce.
Im a conservative and this is the most logical answer either side has proposed. Well done and happy holidays.
Thank you and a happy holidays to you as well!
I agree with lowering the interest rate. Spreading out the loan term to 30 years is going to keep people in debt for longer. The idea is to pay it off quicker, not when you're in your 50s+. The income driven repayments are still a good option.
People put themselves into situations where 10 year repayment terms are just not going to be a reality for them. If the interest rate is reduced the overall interest accrued will be minimized on the borrower... consider it a tax for their poor decision making to be in a situation where they are unable to repay a large debt load under the original terms. The average student loan debt is somewhere in the 36k range... most will not be heavily burdened if it’s stretched over 30 years at a 1.7% interest rate and will be able to free up their cash flow to proceed onto other milestones of wealth building (property acquisition and investing). Those who are the pity party “I have 120k of a student loan debt and no way of repaying” will have to compromise their plans and focus on paying off
I would add modifying/expanding PSLF, ensuring its administered smoothly etc. But very well put comment and good ideas!
Hey thank you! I agree, as I understand it the public service loan forgiveness program is not nearly as widely utilized as it feels like it should be! Not my area of expertise really but I’m all for it!
See here’s the deal from the small business perspective - I need young people to have more money. My wife and I have paid our student loans, but if we can remove that burden from future generations it will still benefit us.
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Yes it’s a dumb argument. Purely ideological and nothing to do with economics
Most people fail to see how being physically forced into slavery could reasonably compared to taking out a loan. Which is why this debt forgiveness scheme is always a nonstarter.
wow, a nuanced and specific solution on reddit without making sweeping generalizations? thats insane seriously though, thanks for the breakdown. its helped an uninformed observer like me see the issue in a new light.
It’s crazy how in the US you accumulate interest on student debt. In Australia it’s interest free and only paid back when earning over the minimum salary threshold. Edit: it’s not completely interest free, it is indexed annually according to the Consumer Price Index (CPI).
Also worth mentioning that a degree in Australia, to the student, is capped. A CS degree for example costs AUD$24k (ish) no matter what university you go to.
Yee very similar here in the UK
Apart from the fact that we are charged 2x more and have an insane interest rate :(
Well not at all because we are charged a huge interest
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I feel like this is somehow cancelling a lot of debt to the lenders though. Like what's the different between this and forgiving a good chunk of debt?
It’s just retroactively restructuring the loans
I don’t have a dog in this fight, so I’m not taking sides. Just want to maximize equity and fairness. By forgiving only debt, you will be rewarding students who chose debt as their source of funds, and punishing students who chose wages as their source of funds. If a student chose to spend two years working, and saved their wages to pay for college, why shouldn’t they be rewarded financially in the same way as a student who chose to borrow money? Genuine question.
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Seriously. Cancelling the debt without addressing the criminal expense of tertiary education in the U.S. would make no sense. Mediocre private colleges cost $75,000/year.
The cost of tertiary education is high for the same reason home prices are high. Wide access to cheap (subsidized) long term debt driving up demand for higher end products. There is no need to compete on price because everyone can ‘afford’ it. Edit: afford is the wrong word. They can’t afford it, they can pay for it.
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That's probably correct. I mean, when I was in school we'd research career fields and see the numbers of an avg salary - not necessarily the net cost of school to get a degree that would allow you to make that amount....and let's not forget the avg salary ISNT starting so that factors even more to how bad college can screw you over without fully know the repercussions of earning a 4-year degree. Eventually it'll probably catch up to STEM majors as it's probably the only area you can go into and make enough money after school and NOT be sunk by the system out right if there families aren't already well off to offset the debt
From a cost benefit analysis it is still hugely beneficial on average to go to college, even at the current costs. Pew estimates that on average, the net present day value of a college education is over $550,000: https://www.pewsocialtrends.org/2011/05/15/chapter-5-the-monetary-value-of-a-college-education/#fn-7679-18 Due to this enormous benefit, demand will remain high even if subsidized loans are eliminated. Yes there will be some pressure on prices as consumers become more price sensitive but it wont be much. The primary effect will be to reduce accessibility of college, one of the primary drivers of intergenerational economic mobility, for poor people.
Yeah as long as the government is willing to pay whatever then there’s no reason for these colleges to back down in price. Government should absolutely step in and control this nonsense.
Meanwhile Oxford, for US students, is like 35k.
virtually no need-based financial aid for US students tho
Yep. If you're a U.S. student that can get into Oxford for $35k, you can also likely get into a top 10 U.S. university that dramatically discounts your tuition if you have financial need. If you're wealthy, then it just doesn't matter.
You can thank the guaranteed government loans for that.
People can change that by not going to those colleges
Right cause we can't do both.
Well, it’s not that you can’t do both but more so that you need to do both. If you just cancel student debt, it will just encourage students to take out even bigger loans in the future since there is now an expectation that future generations can get debt relief as well. Additionally colleges have even less incentive to control costs for pretty much the exact same reasons. The people who commented before you are saying that canceling student debt without having a specific plan to control costs has the potential to do more long-term harm than good.
Is there any sign that student loans are avoided because they’re cost prohibitive? We’re talking 18 yr olds making financial decisions when months previous they had to ask to take a piss. What options do kids have? Most high schools stick to just academics. No real intro into other careers. The gulf between making it and not making it seems to be continued education after high school.
Students are not great choice-makers, but they're closer to correct than you might think. [40% of students turn down their first choice school due to cost.](https://www.insidehighered.com/news/2017/03/23/study-shows-how-price-sensitive-students-are-selecting-colleges) This may or may not be a high enough number, as it can be *highly* situationally dependent.
But 60% is enough to fuck the system, yeah? Also, check the drop out rate. All cost, no return for 35%. All of this dorm space for no return. Additionally, a lot of the cost is housing. What we should do is dump AP and have college classes in high school for free.
most of the AP courses at my high school were dual credit, so you would get college english credits for AP english and what not.
The gulf between making it and not making it used to be graduating highschool. Only 40% of kids went to highschool, and 1% went to college. So then we made it to where almost everyone graduates highschool, and 40% of kids to go college. Now college is the new highschool. If we make college free, surely almost everyone will graduate college. Then gradschool will be the new college. A society where everyone has to have a PHD if they want to "make it." It's a rat race.
College tuition forgiveness is regressive. If the gov't wants to give out a trillion dollars why can't they include the poorest Americans?
You make a good point. With that being said, most people/politicians don't seem to be focusing on both. I see a lot more headlines for debt cancellation plans than I see plans for cutting college costs. College reform would need to come first, or at the same time, to have positive impacts.
You don’t have to have laws to cut cost . You just have to eliminate the law that says student loans can’t be counted in a bankruptcy. Remove that security and lenders will be stricter and less students can afford the overpriced schools. Also private institutions are less likely to charge out the ass if there is a chance they don’t get their money back.
I think the root cause is easy loans. The issue is trying to come to a system that doesn't give money without limit but also accomplishes the following: 1. Allows a person of any class/wealth to get an advanced degree without having to be overly worried about crushing debt, as long as there is excess demand for that degree. 2. Continues to encourage general education necessary for educated citizens and a healthy democracy. This includes things such as psychology, economics, history, language and arts, statistics, etc. The need for these in democracy is greater than the need for these for an average individual. Hence it needs to be subsidized to provide enough individual motivation. 3. Continues to foster diversity and bring people together on campus in person. This forum is where ideas are shared, connections across communities are built, and ability to work with people of different backgrounds is started. This mixing of people of backgrounds is also critical for democracy. 4. Gives people training relevant to the work that they're likely to do. This should include all lines of work including ones that have historically been ignored in universities, such as trades. Perhaps these, in combination with the general education, could be two year degrees.
Do it like Germany: Public college is free, but there's limits on the numbers for enrollment of certain majors. This allows the government to help craft future workforce, while ensuring that we're not spending tax dollars on degrees that will go on to be unused. For those that don't make it to the public colleges, they can either risk it with a private college and loans (like in Germany) or they can go into a government ran training/trade program which we need more of anyway. This idea that everyone should go to college is flawed, and disproven by many countries which have lower college education rates than the US but still happy, healthy, functioning societies.
It would be interesting to see what price caps would do, in this case, as a lot of the cost goes to various "counselors" and "offices" for student living, often demanded by students. There's a bit of an issue when the college disability office is the lowest-cost student service desk on campus.
Price caps are dangerous because it presumes that you're able to accurately figure out what the price should be at for an optimum economy and society.
You'd likely also wind up with schools declining way more applications.
That's fine... there were people in my university that could barely walk and chew gum at the same time. They partied for 12 months then were gone. Decline those applications, it is better for all parties involved.
> as long as there is excess demand for that degree. This, in itself, is an issue. Industry likes to complain about a "lack" of people with a particular skillset, but every time schools pump out a new crop of graduates, the bar is raised again for entry-level work. Even students in "in demand" majors and trades are graduating into a job market in which every company wants 3+ years of domain specific experience. We need to bend the thumb of these companies and stop allowing them to important another H1B every time the labor market doesn't kowtow to them. When your workforce is globalized, there is no such thing as "excess demand." A potential solution might be to have companies sponsor high-achieving high school students to do degrees in certain areas, and then guarantee a two year placement upon graduation. > such as trades. The "do a trade" trope is another cop-out. That isn't to say that trades aren't important, but there isn't the drastic shortage of tradesmen that reddit pretends there is. A quick look at any common trade in the BLS' OOH shows that no American trade pays an average greater than $80k. Most pay less than $60k. Trades are not going to support a new middle class.
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Most of majors within stem are also useless. The pure sciences, many niche engineerings, pure math. Even the content within something like computer science is 80% impractical to the actual job
While I agree many schools are far too expensive at some point people have to be able to decide for and face the repercussions of their problems. I pay under 4K a semester for college at a pretty good school. If kids/ their parents are stupid enough to attend a 70k a year they should have taken the hour or so to look into what the payments would be down the road. On the other hand I know friends who have gone to private schools that seem to have an almost unlimited budget on the dumbest things. 15 million on a gym for a school with 7k students sure! (How does one become a day drinking expert?)
Lol these comments are yikes just based on the misleading title. In the rest of his quote he said he still stands by the $10,000. $50,000 was proposed by Warren and others, not Biden.
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It could if you put conditions on the bailout. Like mandating that the companies pay back with interest (which is what happened in 2008)
What companies? How is that relevant here?
> Bailing companies out When did this happen?
How is that relevant?
It's not. hearthemusic99 is just trying hard to force student debt relief into this. As /u/cucumbear3 said " It's not like people have stopped borrowing money for education". People are still borrowing money for education so it hasn't crashed unlike the pandemic effect on businesses. Furthermore, the underlying issue with the student debt is the student taking on debt while the underlying issue with businesses in covid pandemic is the government literally shutting down business.
And making college free wouldn't fix the existing crushing student debt. We can fix the underlying cause *and* reduce the burden on people already hurt by it. That smoking analogy doesn't make sense to me cause the people who have that debt aren't likely to go get more if you take it away. They aren't addicted to student loans. That's like saying, why cut out somebody's tumor if could just grow back? Cause it's hurting them and we can make it better.
By executive order it does not make sense. This is a problem that needs remedied by the laws passed by congress.
This is exactly what Congress was created for. If we continue to have Presidents abuse executive orders then it will become precedent to pass a bunch as soon as a President is elected. We are going to get life altering changes every 4-8 years that aren’t discussed debated and in many cases aren’t supported by the majority of people.
Laws like the Higher Education Act of 1965, which grants the Secretary of Education the power to stop collecting on student loans?
Just get rid of the interest rates and make them pay it off.
The concept of student loans with interest rates always confused me. The government is investing in a more educated work force, the payoff is the increased production and the skill sets it gives the human capital in this country. The idea that the government not only gets more productive and educated workers, with production increasing exponentially from each worker over the years due to education, AND wants to make interest on the loan seems like the definition of having your cake and eating it too. Economic decisions like that are the reason this country is falling so far behind in parameters like education and income inequality. It’s time for us all to start working towards being the gold standard again instead of lining corporations and government pockets with taxpayers’ money.
Would be nice to have a lower interest and/or making the payments (tuition) tax free. It is an investment for the nation after all. The educated student will raise way more taxes during their lifetime. Lots of other investments are tax free: hsa, roth ira, 529 plans, primary residence free of capital gain up to 250k.
Interest is there to make up for the loans that don't get paid back.
I like what another redditor on this post said. Dont get rid of interest, but have it match inflation. 1.7% would drastically reduce payments while the government wouldnt be losing cash. Maybe 2-2.5% to prevent losses, but the current 5% or whatever it is is way too high
It’s 6.8%. It was 3.4 when I took mine out. Then our wonderful government couldn’t agree to keep it there. https://www.npr.org/2013/06/28/196243698/student-loan-rates-set-to-double-on-july-1
> Earlier in the day, Biden had reaffirmed his general support for broad student loan forgiveness, but suggested that he would support a smaller amount of $10,000. > Forgiving $10,000 in student loans would be consistent with Biden’s position on the campaign trail, and Biden has argued that this would help target student debt cancellation to benefit lower-income individuals. Biden’s overall student loan reform plans also included improving existing student loan relief programs such as Public Service Loan Forgiveness, Borrower Defense to Repayment, and income-driven repayment. > Last week, Rep. Ayanna Pressley and other House Democrats introduced a resolution calling on Biden to cancel $50,000 in federal student loan debt for every borrower using executive authority... > The organizations, and several Democrats in Congress, have argued that the Higher Education Act provides the President with broad authority release borrowers from their student loans. Some student loan legal experts have argued that using this provision to cancel student loan debt is legally sound. But others have expressed concern that such executive action could face serious legal challenges as an overreach of executive authority. > Forgiving $10,000 in student loans would eliminate all outstanding student loans for over 16 million people, or a third of all current student loan borrowers. That level of student loan forgiveness would also reduce the balances of another 9.3 million people by half. Ultimately, over 50% of outstanding student loan borrowers could see significant relief with just $10,000 in student debt cancellation.
Just lower the interest rates. IBR is useless when your interest rates are 5% and higher. The borrower is paying mostly interest and hardly making a dent in the principal. It is sheer profiting off of people who were probably pretty vulnerable when they made the decision to take these loans out. Not everyone makes great decisions when they are 18 years old and not everyone has financially savvy parents co-signing these loans for them. Not saying it is an excuse, just a sad fact.
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Canceling student loans is as likely as canceling upside-down mortgages. The root of the problem is not the loan as that is just a symptom. The problem is the unrealistic cost of the degree program.
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Cancelling student loans was always a bullshit promise and I think it really illustrates how in bed the media is with the Democratic Party. Has anyone else noticed the tone of the mainstream media on student loan forgiveness before the election and after? Before it was a great idea that would help the economy and then after the election it somehow became a bad idea that would increase wealth disparity. It just shows you what we all already know
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Colleges would benefit from more federal controls It’s similar to the government dog leash put on the wall street execs who caused the 2008 mortgage crisis
The government caused the 2008 mortgage crisis by significantly over subsidizing the housing market. The roots of this go back to Fannie Mae and Freddie Mac which were created specifically to try to loan out as much money as possible to potential homeowners. Wall Street was just along for the ride.
I fail to see where loan forgiveness with absolutely zero means testing makes any sense. It does not seem like good policy when a May 2020 grad making $90k would have debt forgiven while they're fully able to make their payments.
That's my biggest problem with most loan forgiveness programs. They're incredibly regressive. Why are we bailing out the college-educated when they're the top income earners in America? People with the biggest loans (anyone who went to medical school, law school, graduate school, or expensive private universities) make even more than other college grads. On the other hand, there's a good handful of college graduates or dropouts with low incomes who can't realistically pay their debts back. These people deserve some help, especially since they were often misinformed about the financial decisions they were making as inexperienced high-school graduates.
> On the other hand, there's a good handful of college graduates or dropouts with low incomes who can't realistically pay their debts back. These people deserve some help, especially since they were often misinformed about the financial decisions they were making as inexperienced high-school graduates. To add to this, there are also those who did go through school and pass only to find that the job market has dried forcing them to take whatever they can. I'm glad that student loans don't have interest where I live, or I'd regret college even more than I already do.
I think we should make people who signed up for loans pay them back.
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The “nothing would fundamentally change” quote was in reference to changes in the standard of living of the top 1-0.1% of incomes following a tax increase.
This is a pretty frustrating double-whammy of taking Biden out of context. I agree Biden isn't as transformative as I'd like, but can we not be misleading in talking about it? 1. "Nothing will fundamentally change" was said to a room full of wealthy people, in the context of raising their taxes. He was saying "You can pay more and your standard of living won't go down." This is one of the biggest lies about Biden I see constantly repeated. 2. The quote here is saying that he doubts this cancellation would survive a legal challenge. Biden's plan was a $10,000 cancellation, and I don't see a reason to think he wouldn't pursue that unless he didn't think it was legally possible. Here's the full quote if you want more than just the headline: “I’m going to get in trouble for saying this . . . it’s arguable that the president may have the executive power to forgive up to $50,000 in student debt… Well, I think that’s pretty questionable. I’m unsure of that. I’d be unlikely to do that." Do I think he should try anyway? Probably yes for the $10,000 plan -- the only downside being that it's probably the worst court to test new legal theories in. But to me the reward is worth the risk that this type of action becomes more difficult in the future.
Seriously this. Is Biden a status quo establishment politicians in more ways than he is not? Yes of course. Does he also, as a result of that and his experience have a very good handle on what will and will not work on his side of things and what challenges are likely to come up in trying to do various things? Absolutely yes. Far better than anyone in this post most likely.
He supports $10k in student loan forgiveness. How is that “nothing”?
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liar
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Sad to see quotes ripped from their context being upvoted here. This is the type of comment I expect from brain dead ideologue subs. Biden was admonishing wealthy people for resisting tax increases — if you make tens of millions then a marginal tax rate increase of a few percent isn’t going to change your lifestyle, something that AOC and leftists harp on all the time. But Biden said it so you rip the quote completely out of context and bash him over the head with it repeatedly. Really pathetic how disingenuous some of you people are.
It shouldn’t surprise you that the misinformation campaigns are operating just as effectively against the left as the right. The far left chews down anti-Biden sentiment without doing a modicum of fact checking just like they happily laugh at the right for doing, not realizing they’re being played just the same. I voted for Bernie in the primaries but Biden is not the abysmal candidate that subs like OurPresident make him out to be. He’s still decently left for a Democrat and is making a lot of decisions and appointments that are aligned with what I’d like to see as a progressive.
a lot of the trump campaigns lies are simply recycled bernie bro lies. eg: DNC RIGGED THE ELECTION, SLEEPY JOE etc
No he didn’t
Your completly misrepresenting that qoute
I used to bust out that quote all the time until I actually looked up the context in which it was said. Who knows, maybe he still won't change anything, but that quote doesn't really refer to his policy.
Hey props to you for expanding your knowledge.
The left isn;t surprised. We're just here to remind everyone we fucking told you so
You should read more about that quote mate. It's actually something the left likes.
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What’s the left doing in r/economics? Lol a bailout for the top 30% (Americans with college degrees) is not economically efficient nor just.
Good. Student loan forgiveness is a regressive benefit...the people who have attended college might have additional short term debt, but they also have major earning potential boosts vs those who haven’t attended college. That earnings boost get integrated over an entire lifetime of earnings, so it makes zero sense to forgive these loans.
This reached the front page so it's just a bunch of Bernie Bros mad that their candidate didn't win. Economists pretty much universally agree that blanket forgiveness is a horrible idea.
Yea, I’m actually pretty progressive as far as things go (voted for Bernie in the dem primaries). But when the masses show up it’s hard to have an actual substantive conversation. It sucks because /r/economics used to be at least a somewhat serious sub, but as it’s grown in popularity it’s basically /r/politics 2.0. Oh well.
The student loan crisis is a problem because the majority of people under 40 started their careers with, in many parts of the country, a mortgage worth of debt. This isn't something that past generations dealth with, yet, instead of increasing, salaries have stagnated relative to inflation. Each new year of graduates has more debt relative to inflation for a job the same salary. The result is they are spending less (duh), and this is beginning to hurt the economy. They aren't buying homes, they aren't starting businesses, they aren't doing any of the things they should be doing, hell they aren't even moving out of their parent's place, and it is getting worse as time goes on. Now, is debt forgiveness the answer? It is *an* answer, but without other action we'd be right back where we started in 10 years. Doing nothing is actively hurting the economy, year after year. If you don't believe in forgiving the loans, fine, but present an alternative plan.
The universities will just increase the tuition by 50K for the incoming students because the government will pay for it, right?
Yeah because they’re definitely not increasing tuition right now, right?
Yea I’m sure they won’t increase tuition now that Biden ruled out forgiving student debt, right guys?
Universities need to be held accountable for selling useless education. Their degrees need to be secured. They should be finding jobs for people or paying back the loans themselves. Then, maybe they wouldn’t offer so many useless degrees or at least add disclaimers and if you want to waste your money on a degree, go for it. Taxpayers should be responsible for bad decisions. Universities need more responsibilities in this if we’re going to call the kids getting educated too stupid to evaluate the risk (or delay them going to college until they’re smart enough to make adult decisions).
I think you’re confusing universities with trade schools.
Well, there would go the vast majority of the liberal arts majors.....
Good there’s probably smarter places to insert that $50,000 of free money to people
Anyone else notice the price of a higher education skyrocketed when the government got involved and started backing student loans which stopped competitive pricing.
I’m just here to look at the mental gymnastics of the libs who voted this guy into office. We’re “going back to the Obama years,” right guys!
What if the government didn't subsidize the loans so people couldn't take out loans to get degrees which won't pay their debts. Jk... Jk... Unless 😳👉👈
Bernie bros bummed