Regarding the $100K grad school debt scenario, here’s a real life example based on a friend of my daughter’s. He graduated from a lower ranked law school with 155K in debt. When I first heard this my gut reaction was he was irresponsible. But then I looked deeper. He went to his local public university. His family was Pell grant eligible and his dad was on staff, so I think he also got some tuition discount. But for various reasons it took him 5 years to finish his bachelor’s (which is quite common). So he had to borrow some to finish. Then he decided to go to law school and went to his in state public law school. But law school is expensive even if you go in state. It is very common to graduate from law school with over $100K in debt unless you come from a rich family. He didn’t have the credentials to get a Big Law job. He got a job as a public defender which typically pays in the 50K-60K range. He loves his job and is very dedicated to defending the indigent. Public Service Loan Forgiveness and income driven repayment plans are his salvation. (Fortunately his loans were all federal direct.) Congress made a judgment that it’s worth having federal taxpayers subsidize a program that provides loan forgiveness for people who go into low paying public service careers. I’d like to see this type of opportunity expanded. It would be a path to earning forgiveness as opposed to cancellation.
The majority of families don’t have $100k per kid either. My eldest kid’s dream school was the local SUNY. Tuition and fees when they started was ~$7k/year, so out-of-pocket costs for four years was ~$28k. Their first job out of college paid 3x that. But not everyone can commute or lives in a state with such reasonable costs, so instead of forgiving loans I’d like to see grants increased so low income students can attend school. Free cc would be a good start.
Our flagship is Rutgers, about $15,000 a year tuition and fees, to commute, no school comes close to $7000. If you are a family of 4 making $100,000 here, you are probably struggling, but not considered low income elsewhere.
Median household income in New Jersey is about $83k, according to https://www.census.gov/quickfacts/NJ . So if $100k income is “probably struggling”, that suggests that the “lower income class” has grown to more than half of the population.
The $5500 federal student loan + $3k summer work earnings leaves about $7k for parents. That sounds like a great deal for students who are close enough to commute.
Very interesting conversation. But some here have opinions without ever being on the “otherside” of this discussion… Well, I have been.
Single parent, public aid, food stamps, white.
So I went to community college my first year since I didn’t have a choice in suburb of Detroit. Approx 1979 . Most of my friends went to Michigan State or Michigan. Few went to Harvard, Yale but their families had money.
Community College enabled me to get my groove and GPA up. Also the exact professors taught the same classes at the cc mostly. They told me to save the money and I did. I was on full government money to pay for it all but I also worked to pay off what they didn’t cover.
I went to Wayne State which is local regional college and lived at home. I spent many, many weekends at the above Michigan schools visiting friends and girlfriend (now my wife), also going to Michigan on government money.
Got into medical school a year early. Don’t ask and I wasn’t going to refuse. Maybe they had an empty seat to fill… Who knows.
That cost me $100,000. My mother Co signed which if I wasn’t successful, she loses her house. She didn’t have anything else. I didn’t have a choice. Either taking out the loans or I am working a low pay job.
My wife had $150,000 loans so yes $250,000 total. Why couldn’t I of found someone wealthy 
.
So, it wasn’t the loans. It was the constant forbearance and having to delay payment on the loans that built up. The payments kicked in like right after finishing college and I made like $9,000/year which barely cut it with an apartment studio and like food even when I ate most meals at the hospital…
If it was just the loans. I don’t remember the amount but a lot of interest and paying for years and never hitting the principal. That needs to change. I promised to pay it all back but not like double… You do the right thing with years of never making a dent. That is wrong and just not right. How does that motivate anyone to pay off their loans.
Luckily we bought our house (and practice first), on a no money down deal. Yes, watched lots of cable TV. Got a book and guess what… It actually worked.
Our equity in Chicago since I bought somehow in 1992. 10 years later we had at least $300,000 equity. It went up much higher since our area took off over another 10 year period.
So we just paid off the whole damn thing.
I knew many people that tried to get out of paying their loans. Claiming disability or things like that. Complete crap or maybe I am the stupid one?
So sure if you sign for them then you should pay them back… Hmmm… Today is a different day. I don’t think there should be just money given to everyone. I think they really need to see where people are coming from. Does someone that parents make over a certain amount… Let’s just say $500, 000 year really need the help? Let’s focus on people that need the help.
Both of my kids are waiting and will love to have that money but they really don’t need it. They can handle what they have to pay back. If they got the free money they would be gladly to pay off those loans and put money in the stock market /retirement funds. We have talked about it.
But for many this can be a small life line to get ahead. It just makes sense that if they have reduced loan costs then they would use that extra money to get ahead. Pay down credit cards, maybe buy a car. Maybe buying things they needed /wanted but couldn’t afford.
Today’s college numbers are insane. We had some decent 529 money but paid a lot of the 2 OOS colleges out of current income… 2 more weeks and the outflow of money stops… For now… Lol… Thank Goodness. My kids will never go through what we did. They can start their lives from day 1. Many, many kids won’t know that pleasure. They will be paying loans for 20 years at least.
So, what to do. Well. Free or low community college with tutors to help the kids be successful to go to the next level. Then guaranteed acceptance to the local (s) college if you make it at a certain GPA. Avenues to lower skilled jobs for those not 4 year college bound. Don’t need 4 years to learn to code. All this talk of good paying jobs for sustainability jobs etc.
I also had a 10 minute meeting with the loan officer to learn my fate. It sounded like blah, blah to a young kid that needed to money to go forward. No matter what I was told I would of still signed for the loans. I didn’t have a choice.
So before casting judgment on people on cc there are many of these stories. Yes, I always ask if they can afford it. It frustrates me when we answer these “Is it with $200, 000 for this school vs that school” don’t worry my dad will mortgage our house for my art degree At NYU… Agh!!!
We as a country need to do better. But as long as there are school that people are wiling to pay for it will never end. This might be the start of a reform but reforming the educational system needs to start now.
Getting off my soap box now.
Also…(he’s not done) I do agree with paying a portion of the loans based on income. Also working for a local community to get paid off per year towards the loans. I really think that is a great idea.
$100k in 1983 is about $263k in 2021. That’s a lot. Wayne State and Michigan in-state are about $254k and $285k now, but students who do not get into their in-state public medical schools are looking at $400k.
I agree. The fees are outrageous today… Just glad we are able to get our kids through it. We are privileged now. Can’t imagine being a kid that’s not now. Lots needs to change.
My point is that if loans are forgiven because the borrower isn’t paying, there’s no bankruptcy, no red flag that they’ve previously defaulted, no ding to the credit rating, that person is free to borrow again when they couldn’t hack it the first time. If the borrower isn’t in default and the loan is forgiven that’s a different situation, i.e. if they’re paying why should it be forgiven.
I’m in favor of lower interest rates on the loans, longer terms for repayment, incremental forgiveness for public service and so forth but I do not support general blanket across the board loan forgiveness.
Regarding the original question, I believe people should be expected to honor loan agreements unless there are extenuating circumstances. I don’t think debt should be cancelled because debt can be crippling. Instead people should think carefully before taking on what may be crippling debt and consider the potential ramifications of that debt. I’d make a similar statement about other types of debt besides just student loans. For example, I’d suggest thinking carefully about taking on a mortgage that is many times your annual salary with a FHA loan for a dream home, even if you can find a bank that will give one out.
A related issue is what conditions led to the large loans and addressing those conditions. According to the NCES, the 2015-16 average debt by terminal degree type are below. MD’s were particularly large with an average debt of $242k. Many MDs will no doubt have a high enough income to realistically pay it off, but I imagine being faced with hundreds of thousands in debt will limit career options, last for decades, etc. JD’s also had average debt well in to the 6 figures and may have less certainty of a lucrative job upon graduation. PhD Eds averaged 6 figures as well and probably have less chance of lucrative job upon graduation.
MD – 81% have debt, Average Debt = $242k
JD – 69% have debt, Average Debt = $143k
PhD Ed – 63% have debt, Average Debt = $110k
PhD non-Ed – 45% have debt, Average Debt = $97k
Master’s – 60% have debt, Average Debt = $65k
Bachelor’s – 69% have debt, Average Debt = $30k
Associate’s – 48% have debt, Average Debt = $18k
The issue is multifaceted. One factor is whether the degree is necessary for planned career, and whether it should be necessary. Another factor is why the cost of education is high, and whether it can be decreased. And a 3rd factor is whether it is viable to choose lower cost alternatives. The answers vary depending on the particular student and location.
The person would be borrowing under normal credit terms. Student loans are hardly normal, as everyone qualifies. The former student borrower is not going to get a $27k unsecured loan. He might get a $20k secured loan on a car if he has the cash flow to make the payments even if he should be buying a clunker.
Private lenders care if the loan applicant can repay, but the feds don’t when making student loans.
Average vet school grad in the class of 2019 owed $183k. 83% took out loans. And that doesn’t include undergrad. Salaries are lower than other medical fields.
This is a popular view, but IMO a view that leads to continued bad behavior by the employers.
If a career requires expensive education, then the career should pay enough to justify that expensive education. But with IBR, the employer gets the benefit of the further education but gets to pass on the cost of that education to the taxpayers. And they have no need to change this behavior, ensuring that this cost shifting continues.
Although NJ is small, it has many different areas. North jersey is more expensive than south Jersey, and cities with the lowest median incomes do not have good schools and aren’t very safe. If you want to live in a town/city with decent schools and want to be able to feel safe, it will cost you more, especially in the north, where you want to be if you commute into NYC. Newark has a median income of $22,000, Montclair $195,000, both are less than 5 miles from me.
Yes, if you are close enough to commute, although it’s still double in state NY tuition.
27K would help so many get what is now considered “basic” for so many jobs. Beyond that, it’s on them. I don’t think we suddenly want to return solely to apprenticeships, etc, which would be the only other way I can think of to get educated engineers, hair dressers, etc.
I also have mixed feelings about this. Why should the government NOW forgive loans while people in their late 30s and 40s have had to struggle to pay them off? What happens in the future?
At the every least, I believe there should be a limit on the amount of forgiveness and it should be based on the graduate’s income. Someone working on Wall Street with a 6-figure income does not need loan forgiveness. Why should taxpayers subsidize them? Why wouldn’t every family, regardless of ability to pay, take out loans to be forgiven? A teacher or social worker earning much less? They will struggle to pay back the loans.
Also, many families choose colleges based on cost. My kids could not attend their first choice schools because they were too expensive, although the ones that chose to not attend the State flagship did take a portion of the Stafford loans and so would benefit from this.
I agree that the interest rates on these loans are way too high. I am just not sure that cancelling all debt - regardless of ability to repay the loans - makes sense. There are so many other spending priorities that may make more sense. Shouldn’t we look at forgiving medical debt or debt for those that end up under water in their homes due to market conditions?
I’m also a proponent of income sharing agreements vs traditional loans. Purdue has a program called “back a boiler”. IMO, the biggest benefit is that it’s a percentage of income, not a fixed dollar amount, and payments are paused if a person is unemployed. I believe payments are 3% of one’s salary/month until it’s paid back.
In a way I agree, because people have struggled with loans in the past - no doubt. But… not fixing something that is wrong simply because others have suffered before… letting it continue to be wrong to affect many more, is not the answer.