So let’s say, there is an excellent student in high school, top 10% of class, kid has no money and parents are from low SES, what that kid is suppose to pick from following 2 options.
ONe option could be to make the loans dischargeable in bankruptcy (with all the penalties that includes). Someone who really needed the forgiveness would have a way out, but most would pay the loans, or do what they do now, just keep deferring them.
I do not think forgiving the loans will stimulate the economy. Right now there are borrowers in default or paying so little they will never pay off the loans they have because they don’t have the money to make payments. Forgiving the loans will not suddenly give these people money to spend to stimulate the economy - they don’t have the money! Forgiving the loans doesn’t give them more cash.
For those who are paying, forgiving their loans does give them more cash, but it is unlikely that will change things that much. I have one daughter in the ‘is paying’ group. If she has $150 more per month, she’s not going to buy jeans or eat out more. She’s going to save it or pay it toward her mortgage which doesn’t put more money into the economy; she’d just be paying different debt. My other daughter is in the ‘it really hurts to pay this student loan’ group. She would probably spend her extra money on other things, but what she really wants to do is go back to school and would have to borrow more for that (probably).
Not a good fix.
Infact Mortgage is one of big, if not the biggest, expense for any home owner so to say it is not contributing to economy is fallacy.
Well, I don’t agree with loan forgiveness, but my kids pay $1000 a month, so more than a pair of jeans.
Some student loan borrowers are at trade schools/community/technical colleges.
Regardless of institution type, whether or not a degree is completed, some borrowers are still struggling.
I think forgiveness (and admittedly I don’t have a spreadsheet to know exactly what form that should take) would be a step toward removing barriers to wealth building.
My D was able to buy a home on her own primarily because she doesn’t have student debt. She was able to take advantage of employer paid home buying benefits that some one saddled by huge student loans can’t. Sure, some students are able to land jobs that they can do both.
But my guess is a person that was underemployed after graduation, had debts in default, wasn’t able to save co-op earnings for a down payment because some one else was paying for their education will always be behind, no matter what kind of decisions they make.
Admittedly, loan forgiveness alone won’t end these systemic issues, but it is a way to start.
Not sure if you had shared it before, wonder what kind of study/degree your kids did?
I think that there are many more options than that:
Go to trade school, learn an in-demand trade. Start your own company. Build wealth.
Join the Air Force, become an air traffic controller, after 4 years move to an air traffic control position in the FAA and immediately enter the middle class. Go to college after you save some money (that’s what I did 
)
If you feel that college is your only choice, understand what debt you will be saddled with and make sure you pursue a course of study that will allow you to pay off your debt.
I can think of many more,…
But if it was forgiven, would they buy $1000 of stuff and put that money out into the economy?
Forgiving the loans is not supposed to help your kids, who are paying. It is supposed to help those with $40k in loans who can’t pay, so aren’t paying. They aren’t going to buy $1000 in jeans either because they don’t actually have the $1000. They aren’t currently paying anything so no money is re-entering the economy.
One of the proposals last year by Warren was that only those in default or who were on one of the IBR plans would qualify for forgiveness. THAT, to me, is so unfair as there are many who really are struggling to make the payments but who haven’t actually defaulted or entered a different repayment play. So we were only going to reward those who defaulted, not those who paid, even though it was tough to pay?
My daughter MA accounting, was able to delay her start date and get her CPA as quickly as possible, my son was a finance major and is working for a valuations firm (both remotely). His roommates (frat brothers) are graduating so he didn’t re-sign his lease and will move back home to save money (his high school friends lease local office space so he will work from there and just sleep here). My daughter chose to couch surf before the pandemic but has been living with her boyfriend and his mom since March. She is and always has been crazy frugal.
I think the only answer is to somehow stop lending students this money. It reminds me of the housing crisis when folks were able to borrow way more then they should, home prices rising. My daughter was looking at a financial letter from a college, she saw the $5500 and thought it was actual money given. Public universities should be affordable so that loans aren’t needed.
That line of thinking has always bothered me. I grew up black and poor in an inner-city neighborhood and I knew that I could not afford college. But even as a 16 year old, I had mapped out that I would join the military, do a tour of duty, and then go to school while being in the reserves. But I ended up not needing to join the military due to receiving a full merit scholarship. A lot of folks declare that it is either loans or don’t go to college, but I never considered either of those options tenable. And I have met students even in 2020 who have found ways to overcome challenging financial circumstances to go to college with little loan help. What I find more often is that people are not always willing to make the sacrifices necessary upfront to overcome a challenging circumstance.
Remember for low SES, few of these options may not work as they may require to borrow one way the other.
I am sure there are plenty more options, my questions was more to point out the fact that loans are necessary evil for low SES.
atleast they have degrees those are in demand and able to afford pay it off. In a typical family, one sibling is always like that, generally the younger one. For me real loans are not even started, as younger one is still on pre-med track and picture will be clear in next 2 years if he goes to med school or not, otherwise unsure what a neuroscience degree can earn you. His elder brother is already taking care of his college expenses by virtue of campus work and summer internship, I like to call it keep the ship floating until he makes splash with MS CS degree. He is so fragile that I can’t think of him doing any trade job.
They were told to major in something with a good chance of employment. My 19 year old is graduating a year early and go to a 3 year dpt program (she just took the GRE pretty cold and her score was about the average accepted into top programs and plans to study and take it again in the summer), one of my seniors wants to go into actuarial science and the other is unsure so will start with business. Underwater basket weaving is not an option.
I have heard of PSLF (Public Service Loan Forgiveness) for medicine field. If it expands it can help out so many students, area that lacks services and no one is on the hook as they have provided services. Win-win for everybody…
But let’s call that what it actually is: A taxpayer funded subsidy for areas that are unable to attract doctors for what the hospitals are willing to pay.
With programs like this, you have to watch out for unintended consequences. It is one thing to help out areas that are too economically distressed to fund medical care, as we want everyone to have access to medical care.
But if the program expands, it incents areas that have a sufficiently strong economy that they could pay doctors enough, to cut back their pay and let taxpayers cover the shortfall.
I meant to say to expand programs (not to strong economy areas) that covers more degrees, not just medicine, as economically distressed areas need other services too, like education.
Our kids took the Direct Loans. Our graduation gift to them was repayment of their undergrad loans. We have paid all of these off…and in less time than the repayment schedule.
One kid had some grad loans…and those have also been fully repaid by him…on an accelerated schedule he determined he could do. He is NOT in a high paying field.
Second kid has loans for professional school. Even though payment is not required right now, and interest not accruing, that kid is making payments anyway. Goal is to pay off those loans ASAP…not drag out the repayment.
Both would love some kind of gold star for actually doing what they were supposed to do…repay their loans. They find it ironic that those who haven’t paid off their loans have the potential for a financial “reward” but they won’t because they paid their bills.
What number is affordable? Some people with $0 in income and assets couldn’t afford any schools, while other can afford to pay twice the COA.
I agree with that sentiment, provided those beneficiaries are vacationing in Hawaii and driving Cadillac. Problem is that most people are honest and do their best to payoff loans like others, your and my kids.
So many are so much boxed in that debt mountain that rest of life for them is nothing but to pay loans. It defeats the purpose of life, any motivation to get out of that bubble. It is like if you are running a business, all your profit is eaten by credit card interest, feels like you work for somebody else only, there is nothing for you.