Student loans are an effective culture war tool for the President, because his support tends to be strongest with those who have less education. If you've been to graduate school, the odds that you will support him were much smaller than they are for the general public in all three of his elections.
When I hear Republicans talking about this, they tend to describe it in terms of fairness: you took a loan, you ought to pay it back in full (with interest). When I hear Democrats talking about it, they also talk in terms of fairness: the government made a deal with the students that included loan forgiveness at some point (usually 20 years, sometimes 10 for those in public service jobs), and it's not fair to revoke that deal now.
There's an alternative way of looking at the problem that I haven't heard people discussing. The government has essentially inflated these debts twice. It did so first by making student loans the main way of paying for college, so that the costs soared as the colleges could add on fees and higher tuition knowing that Uncle Sam would foot the bill. That's not the fault of anyone who wanted an education, but it is a fact that they had to deal with.
Then, since the 1990s but especially under President Obama, the government made deals on how much former students had to pay that caused their loans to increase again. If you were in the Public Service Loan Forgiveness program and also Income Based Repayment, you weren't paying enough every month to pay off the debt in the 10 years it would take for you to get to forgiveness. Therefore, your loan balance continued to grow. You could have chosen a more expensive option, but since the government was promising to forgive the debt, why should you take money out of your family's pocket to do so? You were keeping up your end of the deal the government had made with you.
As a result of the first inflation, it now costs almost thirty times as much to go to college as it did in the 1970s. As a result of the second, people who owed X amount now may owe 2X as a consequence of keeping faith with the government. Assuming you relied on loans to go to college as many do X was, thus, thirty times what it used to be, and now is sixty times what it was. 100% of that vast increase in debt is due to government action, the largest part of which no one could escape except by virtue of being born earlier than they were.
The government is basically altering the deal with people after the fact, mostly in order to punish them for political opinions. Likewise, Biden's ham-handed and failed attempts at student loan forgiveness were mostly to reward people for their political opinions.
That's not really a legitimate function of government. It's certainly not fairness, no matter how you look at it. It's more like extortion in the one case and bribery in the other; criminal behavior in either case, when it isn't being done by the government.
15 comments:
We are where we are, and it may be that the only solution is "Pay up" or file for bankruptcy to get the loan(s) discharged. That last, though, would require Congress to take concrete action: statutorily allow student loans to be dischargeable in bankruptcy.
I do, though, lack some sympathy for today's student borrowers. You could have chosen a more expensive option, but since the government was promising to forgive the debt, why should you take money out of your family's pocket to do so?
Why, indeed? A few years ago, I looked at going to law school and getting a JD in constitutional law. As it happened, I could have paid all of that cost out of my family's finances, or I could have borrowed some or all of the cost and taken my degree and gone to work for the Ft Worth district attorney's office for 10 years and get the remainder of my loan forgiven.
In the end, I decided not to go. As a constitutional lawyer at that stage of my life, I would not have made enough income over my remaining work life to recover that cost plus the opportunity cost of the interim, and I chose not to do that to my wife's retirement. I also declined to take the other path, as that loan forgiveness would only have transferred my loan payback responsibility to the good citizens of the northern district of Texas, if not of the nation as a whole.
Nothing is stopping--and nothing stopped--other students and families from making similar moral choices.
Pay up, suckers.
Eric Hines
When I started graduate school (MA) at a state U in 2003, my cost was $100/credit hour. I took 12 hours. When I finished my course work (PhD) in the spring of 2008, it was $1200/credit hour. Still in-state, no additional benefits, books and fees still extra. In 1991, my private college tuition would have been $70,000 for all four years, except I got a very, very nice merit-based scholarship. Two years ago, when last I looked, it was $80K per year, plus fees, dorm costs, meals, and so on.
I don't think the quality of the education got that much better.
LittleRed1
The entire purpose of government is to grift off one set, to buy favors from another. Free ice cream, it is the universal solvent for integrity.
Here is my Raven the Dictator solution.
Dissolve all the colleges and universities that have accepted public funds, forgive all the debts of the students, and use the university endowments and investment funds to pay off the balance. At the same invalidate any credentials from the schools. Let them all sink or swim on their own merits, not some piece of paper obtained through Marxist indoctrination.
Anything left over can go to fund trade school two year programs.
I will work out the details after a couple beers....
I'd take that deal. I don't really need the credentials, and don't work in the field where they'd do any good anyway. I went, and went back, because there were things I wanted to know and to understand.
That said, we would still need places for that purpose: to help those who want to know, or to understand. That is a high function of education that it still sometimes manages to serve.
[W]e would still need places for that purpose: to help those who want to know, or to understand.
That's the rub. If we had some way to guarantee or at least maximize the likelihood of that, we'd have no need of draconian solutions like Raven's. Which I don't like, anyway; it's much too one-size-fits-all to suit me.
Eric Hines
It would be sorted out. The competent would band together to form new associations for education. And with on line resources, the cost would drop hugely. If you want to learn, you don't need a fifty million dollar sports complex or any of the other fluff the Unlimited Government Money provided. (UGM)
Government backed student loans have distorted the education market to a nearly indescribable level.
And we will still have Hillsdale.....
" That is a high function of education that it still sometimes manages to serve."
Yeah, but at this point it seems to be mostly a side effect.....
Grim, I'm somewhat sympathetic to the arguments you're making... but two things. First, this is a hard lesson in the difference between the black-and-white agreement, and the wink-wink modification of the agreement. And the upshot of the lesson is, you can only count on the things you have a legal right to enforcement-- in this case, the black-and-white loan agreement that the borrowers signed. If the government was REALLY making an agreement, they'd have given a legally-enforceable contract to that effect (as they do in, e.g., enlistment contracts in the military, where the government agrees to pay $X per month for Y months on the enlistee's student loans, provided the enlistee completes his/her obligations for those Y months). Wink-wink can disappear at will. We can all no doubt name lots of other wink-wink arrangements that evaporate-- rate resets mortgages/credit cards/etc, "nobody" is prosecuted for X, they'll renew the contract on the same terms like always, and so on.
Whereas, if you paid back what you owed, you'd be 100% immune to this thrashing in Washington.
The second point is: at some point, the grift has to end, and that means somebody will end up holding the bag. It could have been at 30x inflation, when the supply of people who could/would pay it started drying up; it could be now, at 60x inflation, when the taxpayers willing to pay it start drying up. Or, we could stall some more, and inflate it to 120x, and hurt the people making decisions now that much more than the people who made decisions 10 years ago. As the saying goes, "What cannot continue, will stop." The sooner that happens, the less overall pain there will be. I'm sorry for the borrowers, and sorry for the colleges that will fire people and/or go bankrupt, but... I don't have the magic wand that makes the problem solvable without that.
--Janet
To be clear, Janet, death is the answer. When you die, the unpaid amount of the loan is discharged. It doesn’t pass on to your descendants.
So it’s getting forgiven sooner or later. The government isn’t getting the money back. They themselves made and broke deals that rendered simple payback impossible for many. The only question is how long the extortion (or bribery) can go on.
I have long thought that the solution is:
- the government forgives 1/3 of the outstanding loan amount;
- the borrower retains responsibility for 1/3 of the outstanding loan amount;
- the college must pay 1/3 of the loan amount.
If the college won’t agree to that, the student stays on the hook for the entire amount.
After reading this post, I would modify that to:
- the government forgives 1/3 of the outstanding loan amount OR the entire interest amount, whichever is great;
- the borrower retains responsibility for 1/2 of the remaining loan amount;
- the college must pay 1/2 of the remaining loan amount.
And, still, if the college won’t agree to that, the student stays on the hook for the entire amount.
That seems to me a reasonable way to address a mess we’ve gotten ourselves into. Then I think about the father and daughter who made sure the daughter graduated from college with no debt. The father worked extra shifts; the daughter worked since she was ten; they saved money wherever they could. He confronted Elizabeth Warren to ask if he and his daughter would get money back. Warren said that of course they wouldn’t. The father pointed out that her plan would thus screw over people who had worked hard and behaved responsibly. He’s right and that makes me think that there needs to be some kind of consequence to the borrower for forgiving any of his or her debt. I just don’t know what that consequence should be. Perhaps a modified bankruptcy so his or her financial rating takes a hit?
https://www.youtube.com/watch?v=62i2feu9fxk
And if we do forgive some or all of the outstanding student debt then we need to get the Federal government out of the student loan business once and for all. Otherwise, it’s just the 1986 immigration amnesty all over again and we’ll be right back in this mess is 10, 15, 20 years. I don’t know how we do that since anything a Republican Congress does, a Democratic Congress can undo.
Grim, I don't agree that the federal government is going to necessarily end up paying 100% of these loans regardless. As you noted in your earlier comments: there were alternate ways for folks to pay these off, but why would they take a hit to their lifestyle if they didn't have to? I think that is most of the cases under discussion here. In any event, I am opposed to policies that convert private debts to public debts, including these. I also don't believe that "non profit" organizations should receive preferential treatment over for profit organizations-- most of the "public service" jobs covered by these rules aren't actually "public" service, but rather private non-profits.
That observation also doesn't address the question of how to change the dynamics so that more lemmings don't go falling off the cliff. When I went to undergraduate school (late 80s/early 90s), it was quite common to tell students "just follow your passion!" ... Almost nobody talked to students about costs, let alone cost/benefit. Now that my kids are getting ready to go to college, there is a LOT of talk about affordability-- guidance counselors directly discuss financial limitations with the kids, telling them to adjust their expectations about where they could go and looking for bargains. NOBODY says "follow your passion" anymore. Unfortunately, the only way to make the expectations change, is to make the results change... I'm sorry for the folks that didn't have a seat when the music stopped, but that was always going to have to happen, and it's better for it to happen sooner rather than later-- before anybody else falls into the debt trap.
PS, that was me. Janet
I don’t really have a solution for this problem, though obviously some of you have thought a lot about it. I just wanted to introduce the degree of government responsibility for the problem.
It’s not like a loan from a bank. It’s more like a loan from the mafia. The terms keep changing, and somehow you pay for decades and the principle never goes down.
I graduated from the undergraduate program with no debt back in the 1990s. The game changed a lot after that. None of it was for the better.
Everyone seems to be debating between the government and the borrowers as to who should pay, but I think you really need to have the colleges involved, or it's never going to be fair. I think Elise's proposals are interesting and a good starting point. I also think all the money that was going to fraud and worse at USAID and other departments can be used to solve the problem in a way that's far less upsetting to the "you took the loan, you pay it back" side.
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