Writing off student loan debt is a wealth transfer to the affluent and academia.
Let me outline the spectacle that is the current plan to reduce or eliminate student debt:
How did we get here where the federal government holds $1.6 Trillion of student debt?
In 2010, Democrats passed the Obamacare law and needed some ‘savings’ to help pay for it. They eliminated the guarantee fees paid to private lenders and assumed the debt on behalf of the taxpayers. What always happens when the government believes it can do something better than the markets? While we often criticize foreign countries for nationalizing markets (read Mexico oil markets), we nationalized our student lending process!
They also passed legislation that forgave loans; borrowers would be limited to making payments of 10% of their income’ and be discharged after 20 years.
The promise was that it would reduce defaults and reduce the cost of the loan program - let’s look at the results:
2013 - 2.1 million students owing $31 billion were in default
2022 - 5 million students owing $110 billion are in default
Along with '“you can keep your doctor AND your medical plan,” it was a lie.
Loan limits were set at $57,500 for independent undergraduates and $31,000 for those dependent on their parents.
How are the students doing on paying back their obligations?
One-quarter of all grads make less than $30,000/year - think they are paying down principal? What happens to accrued interest? Remember AOC? After graduating, she was a bartender until she found a better job in Congress. She now makes $175K/yr and still owes $17,000 on her student loans. She represents a pervasive belief that people shouldn’t have to honor their commitments, regardless of being poor or rich.
One in seven makes less than the poverty line.
About 8% of students account for 40% of the total student debt held by the government.
Fewer than half of borrowers were even paying down loans before the pandemic.
Others go to grad school and pile on more debt. Federal graduate debt is uncapped.
The amount of debt held by borrowers owing more than $200,000 has grown 69% since 2017, and more than 30% for those owing between $80,000 and $200,000.
Households with income over $74,000 hold roughly 60% (or $1.26T) of the total public student loan debt.
How are universities responding to this crisis?
They are still delivering courses/degrees that don’t have enough market value to enable the graduate to pay back their obligations.
The average student who completes a master's degree in film at New York University owes $113,000 and makes $30K three years after graduation.
They are raising tuition to take advantage of the federal government’s increased loan caps.
They have added expensive graduate programs to reel in more subsidies. A note on this, total graduate-level debt is almost equal to undergraduate debt - is this normal?
How are the democrats and the President responding to this crisis?
Progressives claim that the Higher Education Act of 1965 grants the President sweeping authority to “compromise”—i.e., modify—student loans. Since Congress granted the Education Department the power to create student debt, they argue, the Biden Administration also has the power to cancel it.
But…In December 2020, Mr. Biden said it was “pretty questionable” whether he had the authority to cancel debt across the board.
Now he may figure that the courts are unlikely to stop him, at least before the November election. Us taxpayers and those who repaid their loans won’t have legal standing to sue.
They promised this in 2020 to the young voters and need to keep this base.
Meanwhile, they have kept a hold on the interest accrual on these loans due to the pandemic. The President just extended this last month for four more months! Can you think of any other pandemic-related relief that is still being provided? Would you like to take the book on whether this deferral of interest payments will last through the next election?
Try to remember a colossal mistake you have made in your life. Wouldn’t it have been nice if you could have just erased it? Yeah, life does not work that way unless you are in the government.
Why isn’t Congress working on a solution? Ideas are:
Make colleges own some of this debt by tapping their obscene private foundations. It could be based on how many of their students are in debt. Or on degrees that do not make a livable income. Make them a part of the solution.
Put a cap on Master's programs.
Tie loans to actual school expenses of the student like it was in the sixties. Spring Break trips and lavish living arrangements shouldn’t be on a loan backed with no collateral.
Make any government (means taxpayer) relief tied to student payments - like payment matching. The student pays a dollar, and we taxpayers contribute a matching dollar.
Absolutely no relief to graduates that make a decent living (average US income or above?).
Your ideas? Is there any way to make this fair? Those that paid off their loans before will be livid at best. In memory of my son that recently died, many friends donated to a college fund for his three children still in college - should we have spent that money somewhere else and waited for the largesse of the taxpayers?
From https://educationdata.org/student-loan-debt-by-income-level
I don't get it ... the state (I/me) subsidize the colleges/universities, and the Feds (I/me) will pay off student loans? Where can I get a job like that? Not only that but the colleges/universities are indoctronating the students in anti-capitalism. Who ends up paying???
I hold no degree (except a high school diploma) and I teach civil engineers what I learned from over 40 years at the school of "hard knocks". Let's go, Brandon!!
I agree completely. It is totally unfair to those people who said off their student loans. No one forced the students to agree to the loans, especially as there are alternatives to worthless high priced student loans. Many jobs do not require expensive college degrees. The whole college degree process is a scan pushed on the people by those with degrees. Academia just wants to perpetuate itself. Medical and scientific degrees are especially valuable but others, like under water basket weaving are not.
I don't get it ... the state (I/me) subsidize the colleges/universities, and the Feds (I/me) will pay off student loans? Where can I get a job like that? Not only that but the colleges/universities are indoctronating the students in anti-capitalism. Who ends up paying???
I hold no degree (except a high school diploma) and I teach civil engineers what I learned from over 40 years at the school of "hard knocks". Let's go, Brandon!!
I agree completely. It is totally unfair to those people who said off their student loans. No one forced the students to agree to the loans, especially as there are alternatives to worthless high priced student loans. Many jobs do not require expensive college degrees. The whole college degree process is a scan pushed on the people by those with degrees. Academia just wants to perpetuate itself. Medical and scientific degrees are especially valuable but others, like under water basket weaving are not.