Who pays for forgiven school loans?

Investment Analysis Clubs Macro Economic Trends and Risks
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WSJ & Washington Post editorial boards are in agreement that this forgiveness move is a mistake

From the link:

Democrats said these plans would reduce defaults. They haven’t. Federal student debt has ballooned because many borrowers don’t make enough to cover interest and principal payments, so their balances expand. Student debt has nearly doubled since 2011 to $1.6 trillion, though the number of borrowers has increased by only 18%.

And no one asks WHY college grads can’t earn enough to pay off their college debts? There are a number of potential reasons which come to mind:

  1. They are too lazy (well, OK, that was tongue in cheek - if they managed to finish college, they had to at least show they had some ability to follow through)

  2. The jobs their degree qualified them for simply didn’t pay enough to cover the carrying costs of getting trained.

  3. The jobs their degree trained them for didn’t exist in the numbers that people were being trained

  4. They decided to “do something else” (or nothing) after graduation and THAT vocation didn’t pay. Ignorance can be cured, but stupidity can’t.

Numbers 2 and 3 above are serious problems. It is unconscionable for schools to promote degrees as well as government supply funding for degrees which have little chance of benefiting the person utilizing the student loan system.

Jeff

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62

“Relieving students of their debt grows the GDP faster while doing the right thing.”

For the past two years, students have had to PAY ZERO and have paid ZERO INTEREST on their debt.
That should have goosed the economy big time and allowed these folks to ratchet up the GDP.

As of now, there is no interest on the debt and no payment due until Jan 2023 so we should continue to see rapid expansion of the GDP, right?

No one has to pay ANYTHING right now on student debt, hasn’t had to in years, and won’t for another six months at least. Who knows after that?

t.

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nd no one asks WHY college grads can’t earn enough to pay off their college debts?

There shouldn’t be college debt in the first place and us old people could have paid for a public university without going into debt.

https://educationdata.org/average-cost-of-college-by-year has college costs going back to the 1960s.

Until 1980 you pay for tuition, fees, room, and board at a public 4 year university by working a full time summer job at minimum wage and living at home mooching off your parents. During the academic year you could spend all your time studying or work a bit for beer money. That’s what I and most of my friends did.

Until 2000 you could pay for tuition, fees, room, and board at a public 4 year university by working a full time summer job at minimum wage and then work 20 hours per week during the school year. Many people recommend working no more than 20 hours per week while in school without negatively impacting your studies and many work-study programs limit work to 20 hours per week.

Today to pay for college with a minimum wage job you have to work 50 hours per week every week of the year.

To allow students to pay for college working full-time over the summer and 20 hours per week during the school year needs a minimum wage of … $15/hour.

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UTD TUITION 2023 (University of Texas at Dallas)

Tuition $13,992 Books and fees $1300

If you work summers here, you can make $15/hr for 40 hour week job - $600 a week x 10 $6000

Live at home, commute to school.

Work 20 hours a week at $15/hr, that’s 300 week times 40 weeks o $12,000.

Pays for your commuting expenses.

Even better, you can take the first two years at Collin County Community college in a program that interfaces with them, transfer credits and only take 2 years at UTD.

Tuition at Collin County CC for 15 credit hour load is

Tuition and Fees $ 1960
Books & Supplies 1460

In addition, going CC for 2 years gives you the ‘college experience’ of learning. If you don’t like it - it’s easy to drop out or change major before making leap to other college.

Too many spend too many courses, change mid stream requiring another year or two in a new major…and who knows, might change majors again and stay in college for 8 years.

Yeah, you don’t have to ‘social life’ of going ‘away’ to college, living in dorms or a frat… but you get an education. One you can afford.

If you have to live on/near campus that doubles your yearly expenses - or more.

t.

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40% of those with loans have no 4 year degree.

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40% of those with loans have no 4 year degree.

Again, we can all list the reasons why that could happen. That said, we run into the risky position of protecting the unsuccessful at the expense of both those who succeeded and those who didn’t try. It is quite a moral dilemma.

Jeff

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Today to pay for college with a minimum wage job you have to work 50 hours per week every week of the year.

However, this trillion dollar “regressive, expensive mistake” (WaPo)

  • Does nothing for those who want to go to college now
  • Fuels inflation
  • Burdens taxpayers with other people’s obligations
  • Is unfair to those who paid their own way
  • Is regressive
  • Creates irresponsible expectations
  • Might not be constitutional

Other than that, how was the play, Mrs. Lincoln?

DB2

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Other than that, how was the play, Mrs. Lincoln?

And it does nothing to constrain costs of higher education.

DB2

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That said, we run into the risky position of protecting the unsuccessful at the expense of both those who succeeded and those who didn’t try.

That’s the story of America. We can’t tell in advance who will succeed and who will fail. So we invest in them all. It’s the same with new businesses. Most fail deeply in debt. Debtors used to go to prison. Now we allow them to declare bankruptcy. Those who succeeded pay for it and those who failed go forward without an anchor weighing them down for the rest of their lives. Some try again and succeed spectacularly, sometimes after several failures and bankruptcies. The successes more than pay for the failures and we all benefit. We should do the same for those who try to educate themselves.

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And it does nothing to constrain costs of higher education.

Yes, that’s a problem. Biden can forgive student loans on his own. Fixing the cost of higher education requires congress and we all know that won’t happen in the current environment. It’s better to help people if we can, even if imperfect, than do nothing with the empty promise of the perfect someday

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Numbers 2 and 3 above are serious problems.

Numbers 2 and 3 have always been around. Why have loans grown by so much? Has anyone looked at state funding for universities over the same period? Did state defunding of education escalate during that period?

The proposals at the Federal level to make college “affordable” or free, have one major flaw: most large universities are state owned. If the Federal government wrote checks to the states to cover the costs, I know what Michigan would do: zero out state funding, turn the universities into profit centers, and use the cash flow from DC to fund more tax cuts for the “JCs”.

Steve

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spinning: "That’s the story of America. We can’t tell in advance who will succeed and who will fail. So we invest in them all. "

Hmmm…no…remember the dot.com bust? Did you invest in Pets.com and the hundred/thousand other ghost companies with no revenue and no profits? and no assets?

It wasn’t the taxpayers (WE) who paid when investors lost their shirts and skirts when the dot.com bust happened. It was the individual investors.

spinning: "It’s the same with new businesses. Most fail deeply in debt. Debtors used to go to prison. Now we allow them to declare bankruptcy. "

Yes, but it isn’t tax payers that bail them out - it’s investors and creditors who write off the bad debt on their taxes. Not taxpayers who fork out money.

Spinning: Those who succeeded pay for it and those who failed go forward without an anchor weighing them down for the rest of their lives. "

Again, it isn’t tax payers who bail them out.

Spinning: “The successes more than pay for the failures and we all benefit. We should do the same for those who try to educate themselves.”

Hmmmm…how many of the dot.com stocks from the era of pets.com, etc, succeeded?

And, no , ‘we’ all don’t benefit from their success. You think the ‘average taxpayer’ benefits from , say , PayPal and Amazon.com , Fed Ex, and LegalZoom.dot and similar?

Since the gov’t took over the student loan business, rates have reflected lower than average interest rates for loans. No usury rates we had prior to that. That should be enough incentive to let borrows RESPONSIBLY borrow for an education that will allow them to pay back the loans and benefit society.

t.

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73

Democrats said these plans would reduce defaults. They haven’t.

Jeff and TJ,

The editorial boards do not deal in facts only opinions.

There has been a freeze on paying back the loans so how have more loans defaulted?

It is not three days since the announcement. Millions of loans had less than 10k or 20k balances on them.

I think the rich are just trying to fight another war…namely all the debt being taken up by the government and the rich paying for college in larger part from now.

Our lazy poor rich. I feel for them. All these wars on all fronts. Bezos can go back to busting unions.

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Steve,

Social has a certain purpose such as when a wealthy person has losses. Those are socialized.

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That said, we run into the risky position of protecting the unsuccessful …

Isn’t one of the functions of government to protect the powerless from the powerful?

–Peter

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Isn’t one of the functions of government to protect the powerless from the powerful?

–Peter

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LMAO. Just what protection do you need from, say,…Warren Buffet???

All citizens are to be protected from bullies, especially when the bully is the government itself.

YR

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That said, we run into the risky position of protecting the unsuccessful …

Isn’t one of the functions of government to protect the powerless from the powerful?>/b>

Hi Peter

Surely the government should protect those that are “powerless”-- in fact; not just those perceived as powerless by a political faction.

Are you implying that a lack of success means one is powerless?

If I am truly powerless (including the ability/opportunity to change my behavior), the odds of me being successful are pretty low…and I deserve some help.

Yet, I can be unsuccessful for many other reasons; I can have the “power” to change what I do and simply choose not to change…or make bad choices in my changes/decisions…or just be unlucky, or not have sufficient skills/talent to do what I am trying to do…nor the opportunity to gain the skills/education I need.

IMHO, mindset is the key to changing and becoming successful from a place of non-success; that is, it increases the odds for success…but does not guarantee it.

And the more people hear how “powerless” and “unsuccessful” they are, the more likely they are to believe it…especially when it comes in the guise of “victimhood”…and continue in the path they are in. Please note that I am talking about unsuccessful people who possess the ability to change behavior…which some truly do not possess due to circumstances that are really beyond their control.

However, of all people currently deemed “unsuccessful” because they are viewed as “powerless”, I would guess that more than 40-50% are not powerless…and have the ability to change their behavior.

Please note that Abraham Lincoln, by today’s standards, would have been considered relatively powerless and unsuccessful early in his life. He failed at almost everything he tried…until politics (and failed many times early in that field). Yet through the powers of persistence and gradually determining what was important to him and the electorate (i.e. changing behavior), he eventually was successful.

Cheers!
Murph

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It wasn’t the taxpayers (WE) who paid when investors lost their shirts and skirts when the dot.com bust happened. It was the individual investors.

Yep. The companies went bankrupt, or just closed their doors stiffing creditors, investors, sometimes employees.

Yes, but it isn’t tax payers that bail them out - it’s investors and creditors who write off the bad debt on their taxes. Not taxpayers who fork out money.

If the bad debts and investment losses are deductible (and many are) taxpayers absolutely share in the losses. Tax collections are lower because of the loss write offs.

Again, it isn’t tax payers who bail them out.

Not fully. But taxpayers share a part of the loss because of the tax deduction.

But borrowers can’t discharge student loan debt in bankruptcy. And you can’t walk away from student loan debt like a failed business.

There are only two ways out of student loan debt. Pay it or die.

When you die, guess who pays for the bad debt? Yep, we the people.

This student loan forgiveness plan isn’t perfect. But it’s better than doing nothing.

—Peter

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The student loan mess was created by corrupt congressmen who exempted student loans from the bankruptcy process. You will have to look it up because it was a giveaway to banks and lending institutions by one of the political parties.

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The student loan mess was created by corrupt congressmen who exempted student loans from the bankruptcy process. You will have to look it up because it was a giveaway to banks and lending institutions by one of the political parties.

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Well one political party has been calling the shots for some time now, how come they did not fix it??

The same political party recently received $130 million dollars in donations from many of those same benefiting educational institutions…maintaining the status quo.

Then again, educational endowments continue to grow, Educational rates/cost increases climb faster than any COLA index and they continue to give millions to political parities to keep the game going.

Hmmmmm

YR

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