I agree that a one time grant of debt forgiveness, whether it’s 10K or 50K, does nothing to reform the system and is not targeted to help those who need it most. I’d like to see, among other things, (1) a reform of the bankruptcy laws to make it more realistic to be able to get them discharged in bankruptcy, and (2) widening the options for qualifying for student loan forgiveness without incurring a huge “tax bomb” of debt forgiveness at the end of the road. Here’s an article summarizing the history of bankruptcy treatment of student loan debt and a proposal to modify the bankruptcy laws to provide more relief for student loans: The Student Borrower Bankruptcy Relief Act of 2019 proposed by Sens. Durbin and Warren, and Reps. Nadler & Katko. https://studentloanhero.com/featured/discharging-student-loans-bankruptcy/
Bankruptcy, after willingly taking on the debt, is really no elegant solution.
Other than issues for the ‘35%,’ we need to fill the other jobs people do that aren’t earning big bucks. (I admire a kid able to pay 1k/month. But that’s got to be either a large salary or living at home with severe belt tightening.)
We need people in the economy filling many different roles. Not all of which pay big.
Who in their right mind would loan to an 18 year old kid with no assets or job if they can discharge it with bankruptcy. It would be common practice to borrow loads of money then just file before you earn decent money.
My daughter makes a decent starting salary, started out couch surfing until covid, now lives with her boyfriend’s mom’s house (who loves having her), my son is making more but pays rent so his payment is $750 a month (he has 2 roommates). Fortunately we set the bar low, never had new vehicles (and drove the used ones into the ground), not a lot of vacations, rarely ate out, I just gave my husband a new iPhone 5se to replace his old 5… Not all young adults have student debt because they lived the high life, my kids started working at 14/15 (needed working papers) and worked summers and part time during the school year. The NE is just so damn expensive.
Agree that reforming bankruptcy laws to treat student loans as dischargeable debt is a necessary step. This should result in schools and lenders approving loan amounts in a more judicious manner.
Yes, the needed bankruptcy reform needs to strike a balance where discharge isn’t too easy – or otherwise private lending to student borrowers will dry up or charge credit card level interest rates. At the same time it shouldn’t be near impossible to get a discharge, which is how it has been up until now. There are already provisions in the bankruptcy code for means testing for bankruptcy relief and directing consumer debtors into Chapter 13, but at present getting a discharge of student loan debt is very difficult.
Student loan debt should be dischargeable as any other consumer debt under the bankruptcy laws. If not, then why should schools and lenders be more careful in approving loan amounts & loans ?
Bankruptcy has severe consequences for many in addition to its impact upon one’s credit score. Declaring bankruptcy may impact one’s professional license as well as the ability for one to be granted security clearances.
Perhaps it would be helpful–in addition to amending the bankruptcy treatment of student loans–to make all student loan repayments tax deductible in addition to (above and beyond) any standard deduction taken by a taxpayer.
Tax deductibility of student loan payments would be most helpful to those with the largest student loan amounts such as medical practitioners & attorneys. This might encourage many to make larger payments than just the minimum.
Hopefully, the widespread use of remote online learning will reduce the cost of higher education in the US.
I agree with @MYOS1634: Why not frame it as a tax cut for college grads? We do tax cuts for every other population segment that the parties think will look favorably upon them at the voting booth.
I also agree that it is unlikely to turbocharge the economy (but most of the tax cuts for the 1% don’t either). I think $50k is too much, but maybe there’s a way to tier it based on income or something.
No matter what, it does not fix underlying problems like no discharge in bankruptcy.
I worked through college in the '80s, had scholarships and loans, graduated with $12.5k in loan debt, got a well-paying job within two years, and STILL was paying that sucker off 10 years later. I did stupid things like forbearances because I was struggling with a mortgage I couldn’t afford. I was in my 20s. I was stupid. Most kids are stupid about money.
I am broken-hearted for kids today who are simply screwed in every direction. Yes, college costs need to drop, but this single bankruptcy law started the gravy train for the financial and higher education industries and it is a travesty.
It has GOT to be rolled back. Then you won’t see the private loan industry working to suck in uninformed folks who have almost no chance of knowing better, because, sorry, not everyone is glued to a computer sucking up information 24/7, they’re working two jobs and believing the smooth talker at the local bank has their best interests at heart.
The stock market was doing well. That’s not the economy. Corporations get massive breaks all the time. Not much of an outcry parsing which corporations are getting it, who will pay for it, will corporations get it in the future, and can they sue if they don’t get it. Same with massive tax breaks for the 1% – these same questions are not applied.
Remote online learning is widely seen as impractical on a large scale though - witness this year.
It works if it includes face-to-face labs and small sections AND includes lots of support, which end up making it more expensive for universities that do it well.
And bankruptcy, while a solution in dire case, doesn’t really help enough right now.
While a one-time decision on student debt won’t fix the system, it’d help people right now. People are hurting right now and need something immediately - you can’t make better the enemy of good enough. A one-time fix doesn’t mean the system cannot be fixed, too, with varying measures meant to last.
Free CC with mandatory internships and guaranteed pathway to a public university is also a promising idea for the HS class of 2022 and on.
I agree with you, but we also need to ask how can we allow predatory lending where an 18 year old is loaned money for a degree that won’t make them enough to pay off the loan? The current system is close to indentured servitude.
Debt forgiveness is dodging the real issue. We need to force colleges to cut the cost of tuition and make the rest of the costs optional.
There are hs school to work programs that seem to work well. But it relies heavily on creative thinking among those admins and dedication to finding a wealth of opportunities. It’s not just a job, but a resume foundation.
And not all kids are ready for both the college challenge and working an internship. To me, some of the disjoint comes from the expectation they go straight from hs to college.
I’d like to see remedial or precollege opportunities at low/no cost. Not just sending them off with debt accruing. If they can’t continue, the debt is still there.
But back to the issue of who pays for debt forgiveness. As a nation, we already pay for things that don’t affect us individually.
Eg, every time there’s fire, drought, flooding, etc, fed funds come from us all, regardless of whether our own areas are not affected.
The simple truth is that “debt forgiveness” fixes nothing.
I agree with @Gatormama about Biden being one of the architects of the 2005 law that made it even harder to discharge student loans.
I disagree with the contention that debt forgiveness “fixes nothing.” It is not, by itself, the “cure” but it is a tool. Take law school as an example. According to a July 2020 survey by the ABA, the median loan debt of new law school graduates is 160K. Average Law School Debt: How Much Lawyers Owe - NerdWallet. Average salaries for entry level public defenders and district attorneys is in the 50K-60K range. PSLF makes it possible for law school graduates to choose these important careers that make our justice system function. Debt forgiveness can be used as a way to encourage public service that benefits society as a whole.
Count me as one who is against cancelling Student Loan Debt forgiveness for any amount until we come up with solutions for the underlying problem of the current costs of higher education. I have personally liked more creative payment solutions like having the federal government forgive or pay down debt for volunteer service in our communities, but the costs have gotten to the point where no creative ideas will work without finding ways to freeze/slow down the rampant inflation that has made getting an education so expensive.
I see a couple of issues that people do not like to talk about (too many students going to college out of high school and too many jobs that request college degrees when they are not really necessary). Our higher education system will collapse at some point as multi-generational loan debt will cripple those in less fortunate families and lower paying professions. My kids ended up on the college path with school being essentially free, but I also talked to them about possible less expensive alternatives to college beforehand (the military, picking up trades like carpentry, or working towards a real estate license etc.) because crippling debt was never going to be a part of our family’s story.
I think programs like PSLF make sense because they are basically an employment benefit to secure talent in some key areas. Some private companies (Fidelity, Nvidia, PwC, etc) provide loan repayment support to help attract the diverse talent they are looking for. What these programs have in common is a job. I prefer these over blind give aways.
MODERATOR NOTE:
Please avoid bringing politics into this discussion.
Just a reminder. Feel free to talk about loan forgiveness but leave all the politics out of the conversation.