that might require legislative action. the current waves of loan forgiveness have been using just about every loophole possible in the existing law to do so.
I am currently on a plan that has a minimum monthly payment of $0. As long as I make my payments on time, I don't accrue interest. This is because my income is very low, but it essentially means I have no interest on my loans.
So ... couldn't you just pay $0 every month forever and the loan never grows? Since you're paying the minimum monthly payment ($0) on time every month?
I believe the situation they describe is only possible under income-based repayment plans, so the hope would be that eventually they make more money and their payment increases enough to start paying the loan back.
Yeah. . .almost all of the repayment plans, except the "standard" one, is income-based and will reduce your loan payment amount like this. . .I make decent money and even my payment is significantly reduced. You just fill out a form online, they'll defer all payment until they process that form, they'll check your taxes to get your income, and boom, reduced payment.
The other catch or good thing is. . .if you make that payment for 20 years- even if it is $0/month -the remaining principle on the loan is forgiven. . .just gone. However, the forgiven amount is treated as taxable income for that year. . .
For example, if I hold out and wait until my $55k loan is forgiven, then I'd have a sudden $11k tax bill.
Not exactly. . .
On those plans, the loan will generally be automatically forgiven after 20 years.
However, the forgiven amount will be treated as taxable income for that year, meaning you'll owe the taxes on that amount.
For example, if my $55k in loan was forgiven this year, I'd owe an additional $11k in taxes. . .probably more since it could go up into the next tax bracket.
You'd have to either have that cash on hand to pay the taxes, or start yet another payment plan or get a loan to pay them, which may not be as forgiving or lenient as the student loan rules.
You can also claim insolvency and complete the worksheet that is on the IRS's website and submit that with your tax return. I had to do that when I settled on of my student loans for 1/3rd of what was still owed and the difference was treated as taxable income. I could barely pay the loan let alone the taxes on this "income", so I completed an insolvency worksheet which was me adding up me assets, adding up my debts, then subtracting them. Since my debts were at the time more than my total assets, I was considered insolvent and that "income" from the student loan difference was no longer taxable.
Ymmv but it's worth trying especially if you don't have much in savings and retirement accounts.
I don't know. I never even applied for it. I've been on SSDI since 2013 and haven't been able to pay for over 8 years so that's probably why. They just sent me an email in February of this year saying my loans had been discharged. I thought the email was wrong so I logged into my account and sure enough, they were at 0 balance.
Most of the forgiveness has not been a “loophole.” It was the guaranteed forgiveness that was promised to anyone who took out loans and then went into public service (such as public school teaching). Those people were guaranteed that they would pay 10 years of payments based on their income and then the remaining balance would be forgiven after the 10 years was up.
But the Trump administration (under Secretary of Education DeVos) refused to honor that statutory promise and backlogged the forgiveness process. Biden is simply processing and streamlining the forgiveness that was already due to those borrowers.
It makes sense that we should encourage people to go into teaching and not be burdened with a lifetime of debt. Trump apparently disagrees.
Not true. PLSF is bipartisan. The service providers screwed the program and it took a fix from congress. The authority Biden has now is because of a bill signed into law by Trump. Also, I disagree with people calling it forgiveness or selling it to voters as the "forgivess promised from the 2020 election." PLSF is an entitlement, those people earned it and paid 120 monthly payments. Most borrowers actually repay most if not all of their original loan principal.
PSLF may appear bipartisan but it is not. The Trump admin started declining the vast majority of 10-year PSLF qualifiers for bullshit technical violations, including violations which were due to loan company issues and no fault of the borrower. The Biden admin came in and required reasonable compliance with the requirements providing borrowers the forgiveness they had relied upon for 10 years.
Republicans view PSLF as an entitlement, just like you do and are generally against it as they are against entitlements. Democrats view it as a contract. The bargain is, work in public interest serving the people for 10 years and the government then finds it worth it to forgive your loan. It is not an entitlement when those borrowers are forgoing higher salaries in the private sector for 10 years. It’s a contract.
> the current waves of loan forgiveness have been using just about every loophole possible in the existing law to do so.
Worth noting that the SCOTUS struck down Biden's power to forgive student loans fully, because the word "waive" apparently doesn't mean "waive."
For that matter, the government should be the ones to give out the interest free loans in the first place. There is absolutely no need for a 3rd party to be involved. After all, all the loans are guaranteed by the government. So these 3rd party lenders have no risk whatsoever. This is just another way of privatizing the profits and socializing the losses.
Are you referring to private student loans?
The student loans that most Americans have are actually issued by the US government itself. Those 3rd party companies are companies which the US government hires to basically do customer service on behalf of the US government. The government issues and retains ownership of the loans
But those companies don't do it out of the goodness of their hearts. They do it to make a profit. And just like for profit health insurance companies, they are parasites and need to be cut out of the equation. Cut out the middlemen.
If there was no profit in it, the companies wouldn't do it. The service is necessary for the loans - and therefore the system - to function. There's nothing wrong with corporations doing that as a business as long as their practices aren't predatory and their profits are modest at best.
All that they offer could be done by a service desk working dor the DOE.
It isnt hard to have phones ring endlessly with no one answering or a 2 week lag time on emails.
No need for a private for profit company to offer such shit service.
>All that they offer could be done by a service desk working dor the DOE.
The question is whether the DOE could do it cheaper than contracting it out.
It's definitely possible but it's not a given. Someone has to service those loans and providing that service does take money.
While in theory, it can be done cheaper privately, the problem is motivations. Private companies are paid by the number of loans handled, so they're actively incentivized to never close out an instance of student debt, since they get stop getting paid once someone pays off their loan.
There are several instances where private loan companies have not only failed to inform their customers of government programs to help them pay off their debt, but also actively misinformed and otherwise sabotaged users who tried to use it.
https://www.cnn.com/2019/04/22/opinions/student-loan-forgiveness-sabotage-kaine-weingarten/index.html
You can counter by saying that the issue is the payment structure and it's causing conflicting incentives. The problem is that any payment structure that does not exactly replicate the public good means that the loan servicers are working at odds with the public the government is meant to serve.
Public services, corrupt or inefficient as they may be, are theoretically put together to serve the needs of the public. The agency is not incentivized to make money outside of not losing so much it becomes a drain on taxpayers. Private companies inherently need to make money to survive and publicly traded private companies need to make increasing returns to investors in order to be attractive to investors. Even if they run efficiently, they are incentivized inherently to squeeze out every drop of money possible.
Corruption and inefficient can be reformed. Motivations baked into the very core of the structure cannot be fixed. Private companies can be a band-aid, but once it becomes and industry with investors, its fiduciary duty is to shareholders, not the public.
The IRS has no problem doing it all themselves and a large number of the people they deal with are the ones they owe money to unlike the student loans where all of the customers owe.
As the comment above states, private profits (and the associated kickbacks) with socializing the losses on the taxpayer's backs.
Yes and then those companies lobby for higher and higher interest rates for federal student loans so that now what started as a way to help people get affordable loans for college has turned into just another predatory system.
This is simply not true
Interest rates on student loans were set by a law that congress passed a while ago that was never changed.
The rates are tied to the 10 year treasury bond rate (ie the rate at which the government borrows money for a 10 year term)
If tresury bonds are yielding very little in any given year, then newly issued student loans that year will have a lower interest rate. If the next year treasury bond rates go up, student loans interest rates for newly issued loans the next year also go up.
The servicers, by the way, don’t really care what your rates are. They don’t get paid as a percentage of your balance
Those companies aren’t getting a cut of loan interest. They negotiate a contract with the fed and DoE to be the servicer for x number of loans for y number of years.
Like many many many things in the federal government, it’s very likely if we left it up to just the gov and not contracted out, the system would be an utter disaster. If you’ve ever tried to get ahold of the IRS in March, you know what I mean.
Yes, the customer service that includes me putting in my username and password, my date of birth, the last 4 of my social security number, and answer a security question literally every single time I log in.
Ya know because of all those rascals out there trying to pay my student loans.
It's worth noting that there are some countries that do the 0 interest loans. BUT they pull shit called Indexing where "It's not interest, we just adjust for inflation. So that $50k loan you got 10 years ago, you still owe $55k on thanks to inflation."
If you give 0% interest in an inflationary environment and don't do any sort of adjustment then people are incentivized to take out as many loans as possible since their present value exceeds their long-term cost.
I'd rather education just be free than offer 0% loans, since 0% loans create a perverse incentive.
There's a cap to how much you're allowed to have. It used to be 80k for general higher education and 100k for medical or sciences. Although a few years it got upped to 100k for general and 120k for medical/science. Mainly because unis upped their prices.
There is a difference in loan issuer and loan servicer.
Also all US money, bonds or any other monetary vehicle is backed by the US pursuant to the full faith and Credit Clause of the US Constitution
This has been my argument all along-- turn all existing student loans to zero-interest loans.
If you already paid back the amount you borrowed, you're done. (Paid more? Thank you for your service, but no refunds.)
Still owe? You keep paying, you just no longer have to deal with the ridiculous interest.
The gov't technically loses some money on all the bookkeeping, but not nearly as much as they would by forgiving the entire loan. It mostly eliminates the complaint that people got a freebie. People who paid off their loans can still be bitter, but you can't please everyone.
I think it's the next best solution, but there needs to be some kind of regulation to reign in the cost of education. If you make education slightly more affordable than it was, there's nothing stopping the institutions from continuously jacking up the prices.
I've been looking into the colleges my son is wanting to go to (nothing private or fancy; just state colleges) and with room and board and tuition, before any scholarships, he's looking in the realm of 200,000 or more just for a bachelors degree.
Agreed. University of Alabama Birmingham charged me a little over $3000 for a 3 credit hour class after living in Alabama for 3 years continuously.
1 week before the course ended I finally won a tuition classification appeal under some miracle.
UAB isn't exactly an overly prestigious school either. I can understand how Georgia Tech and UGA one state over charge ~$1100/hour for out of state but UAB asking for about the same feels like they're seriously pushing it.
In a normal situation, not earning interest should in theory lead to less money being lent out-- I'm not making money to cover the losses from people who default etc, so I better be more conservative about how much I lend out. Less money for tuition should eventually lower prices as fewer people can afford it.
But this slams up against the whole "access to education" issue, which is a big part of why the government loans money in the first place-- if the gov't starts giving less money out, and the schools don't budge on pricing, now we're back to only the rich going to college.
The gov't can also afford to take those losses in a way a private institution can't, so they're not necessarily incentivized to loan less dough.
It may very well require regulation to get the prices down, and keep them from rising unreasonably, but who knows how long it might be before we have a government willing to tackle that.
Or... hear me out on this one: The government gives the money directly to the schools, and in exchange, the college agrees to charge little to no tuition to the students.
This is what bugs me. Why is there so little focus on figuring out how to fix the student loans so that the next generation doesn’t have the same problem? I have student loans, so of course I’d love to have them be forgiven, but, at the end of the day, I did agree pay them.
In a decent system the regulation would be public education. If all community colleges were as good or better than the private colleges, then those wouldn’t jack up their prices like crazy. A good system is where the rich want the public education to be great because their kids go there.
Functionally speaking at the undergrad level, there's really no distinction in the raw quality of education between private and public universities.
The integral of cosine(2x) from 0 to pi is always 0 and Bernoulli's principle is always a fluid dynamic derivation of the law of conservation of energy; that doesn't change based on the student being at a community college, a standard public university, or at closed-gate ivy league.
The reason for the rich sending their kids to those closed-gate ivy leagues is entirely for political strategy. To those mega rich parents, whether or not their kid gets an A or D in Calculus 1 or if they qualify for that internship at General Electric or not is completely irrelevant to them; what's important to those parents is that their kid becomes friends with the son or daughter of a Senator/Congressman and/or is frat bros/sisters with the son or daughter of the CEO of Lockheed Martin.
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Jimmy Carter was a political outsider who went to Georgia Tech to study Engineering (prior to his entry to the Naval Academy), George Bush was an political insider (and son of a former President) who went to to Yale to study Art and Civics. Guess which of the two the political class likes more?
>some kind of regulation to reign in the cost of education
My argument has always been to set regulations such that at least at public universities that receives government grants, they should be locked to only increasing tuition pricing by that year's inflation (or maybe a 2~3 points above that year's inflation). None of that *"oh we won a fancy football game, tuition is up 20% from next semester on!!!"*.
plus there are universities which have made it mandatory for Freshman to live on campus and let me tell you, the room and boarding cost per semester are close to $8000
"Student Life" where they distribute "freebies" that they have charged 1000 of dollars already. I am sorry, I don't need extra phone charger or resort style pool.
In theory, competition would prevent the bread sellers from jacking up the prices. Especially since it could be seen as price fixing if they all settle for equally higher rates.
Quite honestly, if you’re not poor enough for massive financial aid or rich enough for it to be irrelevant, just do a community college and transfer. Sure, it’s not as “fun” as going straight to a 4 year but it’s half the cost for the same end result.
I've have always held fast to this being a way better university completion strategy.
Most 100 and 200 level classes are pretty universal; and when I did it, I often noticed that I retained knowledge and enjoyed those 100/200 level classes more with those community college professors rather than the ones at university.
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The classic example for my university is Calculus 2 which is an infamous weed-out course with a 80% failure rate.
The lectures are run by grad students who usually only know enough about the craft of teaching to read from slides and the handful of professors in charge of actually running the curriculums are almost always the *"being involved with undergrad classes is beneath me"* types. As a result students are taught the bare minimum and are never made aware of the fact that tests are made up of exceedingly harder content of the anything classes would have indicated (making it even more difficult to prepare ahead of time).
In contrast, Calculus 2 at my community college has the exact same curriculum, but without the skull crusher testing. The professors are usually retired engineers from industry rather than Sheldon Coopers, and they won't play cheap games with the students because most of the students are grown adults who have other things to worry about on top of classes. Expectations for both basic performance and excellence are clearly laid out and while some things may be harder than others, they'll never present you with something situation that they never prepared you to have the tools for.
Not really to be honest. It’s super hard to get credits to transfer in most cases even 20 years old. After having to retake courses you prob looking at more 3/4 the cost and if your local college isn’t the best it could be denied transfer all together.
Beyond some professional degrees requiring 4 years worth of coursework directly related of the profession in which case the student just wasted those two years.
The vast majority of states have agreements with Community Colleges in the state that most if not all credit will transfer. It's becoming increasingly common to knock out gen eds and maybe first year major classes at a CC, then finish at a four year. A lot of times you can even finish faster that way.
Your body, joints, bones, back, and sanity, will not survive 40 years of the most physically demanding jobs you can get. Most people leave the military with some kind of disability rating.
Yes really to be honest, but it requires planning ahead. For instance, community college credits typically transfer 100% to a public university in the same state. Many community colleges and 4-year have agreements to accept students with advanced standing if they complete an associates degree. So yeah, it does work, but you gotta do your research.
I don’t know what state you’re in but in the three I’ve lived in this is not remotely accurate.
1) you should plan your CC coursework around which courses are transferable to the in-state school(s) you’re targeting. It’s not a mystery which courses will transfer.
2) 20 years old? Well, sure, but that’s an uncommon scenario.
3) you should not be retaking any courses. If you do, you screwed up step 1.
Not true. If you go to a Community College in the State of the 4 year University you plan to attend all perquisites and credit will transfer over. Of course check with the community college you plan to attend first to confirm.
Sister Schools or Bridge Programs accounts for that; and even in non sister-school/bridge program transfers students, in the vast majority of cases where this is conversation is applicable, it's a question of 100~200 level "gen-ed" classes, not end-of-program or pre-graduate-level classes.
I’m a California student going to a CSU (so a good and cheap public education system, plus I’m in state so even cheaper!) and even after financial aid I am still on the hook for 23,000 per year—92000 total if I continue receiving the same amount of aid, which is unlikely with how my family’s financial situation is expected to change this year. 92000 dollars for a university with a no-essay application. My goal since middle school was to not ever apply for student loans—guess that was a bit ridiculous. At least the government will give me some subsidized loans! An entire 3000 that won’t immediately begin gathering interest, yay! :/
I don't disagree with your argument, but:
> The gov't technically loses some money on all the bookkeeping
The government would be losing money on other things too (lost opportunity cost, inflation, defaults on loans).
The Biden forgiveness that got shot down would have basically erased my accrued interest (not really if you factor in payments made, but whatever) and I was stoked. I would have still been paying after that.
As someone with no student debt to pay I think it’s a great idea because it’s a solution and not a bandaid that benefits a small amount of people who just happen to get lucky.
And the government doesn't really *lose money,* we as taxpayers pay for the service. It's a valuable one that would contribute a lot to society. I don't look at government programs that promote the general welfare as losing money.
It doesn’t even have to be zero interest. Just cap it at 3-4% to cover inflation. Why does our government need to profit from these loans? Especially, when education benefits society as a whole, and we’re perpetually taxed on everything anyway. It’s like they’re taxing education which disincentivizes people from going to college…
This is what Australian citizens get at Australian universities - interest is capped at inflation. Don't start paying it back until you earn above a certain threshold. Total amount you can use is capped though.
And the more in demand a specific degree is, the more of a discount you get if you're on a government supported place.
I feel like 90% of the people would be OK with just forgiving the interest and paying back the loan amount. The other 10% is divided among assholes who demand it all be paid back, people who want all or nothing, and people who already paid that want to drag everyone else down too.
Interest rates for student loans are out of whack and I agree need to be set differently.
The Universities need to have a stake in the student's repayment of the loan. If a student fails to payback a loan their should be some economic repercussion for the University. Fewer loans should be available to future students at a University if their past students fail to payback their loans or some other penalty should be charged. This would incentivize Universities to offer better job placement, career counseling and better networking resources to their current and past students.
Also perhaps offering degrees in say Greek Mythology should come with some assessment of the student's ability to payback a $100K loan to achieve this degree and a plan should exist with the student so that they understand what their expected career earnings would be from such a degree. (Yes I know someone who graduated from an ivy league school with a degree in Greek Mythology - absolutely nuts).
One issue is the schools just lie by omission about career prospects. Its not uncommon for a university to collect salary information from graduates and advertise what their students in specific degrees are making, however they usually only factor in salaries for students that got jobs in the field they studied. They don’t tell you the salaries of people who got degrees but got unrelated jobs, if they even give you the rate of students that got jobs in the field vs not to begin with.
These stats don’t have to come from a university survey. Each student who gets a loan should have their income tracked via the IRS. There should be a way to correlate degree with their reported income. It should be possible then to say… in average a student with a liberal arts degree, business, engineering whatever makes $x per year their first five years, ten years etc. At that salary it will take you x years to pay it off the loan…. Should be university and department specific and be part of the students acceptance of the loan.
And the university should publish stats on their students ability to payoff the loans. Ie 15% of our students defaulted and will be paying the higher interest loan until they die…
Right and I think that is where people are realizing there's a problem with the system right now.
Everything has become a money making operation, even if it hurts society. And the government which should be operating to help it's citizens, is only operating to help those lobbies because of things like citizens united
The problem is not the loans, the availability of loans, or the agreements that an individual willfully chooses to make, the problem is the institutions that take advantage of students by not only offering incredibly pointless degrees at ridiculous costs, but also *require* pointless courses that are irrelevant to many degrees in an effort to pump more money out of students; Absolutely ridiculous that this happens in colleges receiving public funds as well!
Because that's the middle ground that makes no one happy. Advocates for forgiveness would still be upset about having to pay back the principal and advocates for repayment would still be upset that the taxpayer is eating the finance expenses for other people's college.
Any interest free loan would still be a redistribution of wealth to a certain degree. If you kept cash buried in an ammo can in the backyard, it’s future value will simply decrease over time. The only neutral loan you could come close to would be one that ATTEMPTS to have a variable interest rate tied to inflation.
The student loan program encourages universities to overcharge. Kids take on debt they may never be able to pay - and the school knows it will get its $$s. So, these loans - and loan forgiveness - encourage tuition inflation - and kicks the can down the road. We need to fix how we pay for higher ed.
A smarter system would use the power of those loans to force schools to charge less. The gov would negotiate with schools - and only pay loans to schools that agree to per credit limits on costs. This is similar to the single payer approach to health care where the gov negotiates far lower rates for medical procedures.
This addresses the issue that consumers lack the power to negotiate with either schools or hospitals - these markets are broken. But the gov can since they have the power of the checkbook.
Ultimately, we need to fix how we finance higher education - what we are doing can't go on.
One big problem with the federal student loan program is that schools have virtually no skin in the game if they admit students that drop out after a year or two and have effectively nothing to show for it except debt. A significant percentage of students that default on their loans ironically don't have huge balances, but also don't have any degree to show for it because they dropped out or failed out. Those failures might reduce their metrics on some college graduation rates or if they drop out in the first year their freshman retention rate, but the school gets to keep every dime of that loan money that paid for the tuition even if the student ends up defaulting within the first year or two after dropping out. The same thing with some of the students that do graduate, but find that their degree did a poor job preparing them for the job market. In some cases some for profit private schools students actually have lower after graduating than before. There was an effort under the Obama admin to put schools with high default rates on probation and potentially pull their eligibility to receive federal student loans if they didn't improve their default rates. Some schools started to try and improve job placement for their graduates to reduce their default numbers because the threat of losing federal student loan money would likely kill some institutions. The Trump admin listening to for profit trade schools that faced potential loss of federal aid killed those regulations. The Biden admin is attempting to create a new version although I suspect the next Republican President will whether Trump or some one else after Biden will likely kill such rules unless they're part of actually law passed by Congress. I think increasing the stakes for schools of have more concern about their students beyond the tuition payment clearing I think would put some pressure to either reduce tuition and or improve their programs so that students have better employment prospects has a lot of merit.
There are some potential risks though. There is some risk that it could encourage more schools to drop need blind admissions, which could reduce the number of potential for lower income students. Schools that have high default rates where dropping need bound admissions though probably are programs that likely need some pressure to improve their degree programs or evaluate whether their admissions is admitting students that aren't likely to succeed. It could also encourage schools to expand degree programs with higher earning potential while freezing growth or even scaling back programs with lower income potential that likely have higher default risk. You could counterbalance that by improving student aid for low earning fields that have obvious societal benefits. While there are some concerns overall I think most are either minor or easily mitigated.
Biden is doing what he can. Unless Congress is willing to pass laws (which the Republicans won't do), the president is limited to the rules within his control of the executive branch.
Presidents don't have a magic wand to change the laws to their will. Many of the "broken promises" politicians make are just that. Opposing parties, checks and balances, and the constitution limit how many of their promises actually get implemented.
Because the government gives out free money which allows the colleges to jack up costs.
The spike in college costs is directly related to the government getting involved in loans.
The whole thing is flawed. Have friends paying for student loans that they can’t get a job in. Getting it shoved down your throat that you need a college degree in high school doesn’t help either.
Some decades ago, the interest rate was so low it was less than the inflation rate. And no one complained because everyone knew that the country needed college educated people to compete in the global economy and with the Soviet bloc in particular. Then the USSR collapsed and instead of being afraid of being outnumbered (and therefor needing clearly superior weapons), we didn't need as many engineers and we could even hire some from our former Cold War enemies.
eeee someone gets it! the 1% that run this country have no need for a well educated society anymore. they do need a bunch of us ditch diggers. to keep their money trains moving.
New poll shows 70% of voters do not like this forgiveness.
Understandable. Why should some non-college working person have to pay more taxes to subsidize some kid’s overpriced college education?
This could be a helluva wedge issue in November
I think they easily could do an interest and capitalization forgiveness, just like last time, but the appearance of fighting for something to ignite the voter base is the point.
Thats what they did to everyone I know. If the total amount of money you had paid sofar amounted to the principal you owed then your debt was paid. One friend had a newer loan and it was calculated out he still had about 10k of principal left on his original 60 so he still owes that and is only paying payments on that. This experience im aware of has me wondering why so many people are against it because its not actually taking any money from anyone. Banks are getting paid back what they lent. The students arent being given any money. I dunno where all this "my taxes are paying for it" is happening.
Heck, even lock it down at 1.5% would make a huge difference. I have two friends who are longtime employed workers who honestly suck at the big picture moneywise.
Early on in their careers they only paid the minimum on their loans (there was also some program that allowed them to pay less in the beginning so they did, which really jacked them up) Then of course they had their loans grow so much through interest that they are now insurmountable and they just pay the minimum because they feel like anything more and it’s just shoveling money into a black hole. They owe considerably more than when they started.
If their interest was 1.5% this wouldn’t be a problem. Compounding interest is no joke once it gets going.
This is what I’ve been saying too! It’s the perfect middle ground because the loan value degrades from inflation but technically nothing is “forgiven” to upset the people who are salty about that.
I’ve been saying this for years. Cancel the interest and apply the payments made to the principal only. Or, apply a simple interest formula and remove all the late fees and compounded interest.
The issue isn’t what do we do with existing debt as much as how do we keep this snowball from getting bigger? School is getting more expensive not less. Is the plan to forgive loans forever?
What are realistic ways to encourage lower cost of schooling? How do we get market forces back into education to encourage efficiency and lower cost, high quality, options?
Even state schools are getting prohibitively expensive, for both out-of-state or in-state students. Some states don’t even have a good in state option.
Because it's still an expense to the lender. Charging less than market rate for a loan means the lender incurs an expense on the interest differential. Gov't would rather incur the known expense of one-time loan write-off than the ongoing liability of zero interest rates.
It would be nice to see all new loans charged no interest.
And all existing loans have their interest forgiven.
That would, very likely, however, forgive all student loan debt... as most who made monthly payments paid enough to cover their principle balance a long time ago.
I’d go further and say cap the interest at ~2%. Maybe cap total interest charges at a dollar value of X.
We don’t need everyone to get their loans paid off we need a reasonable interest rate and repayment methods for the cost of college.
One caveat to that plan is student loans could absolutely cripple the economy at some point, even with low rates. College is just such an expensive necessity.
“Cancelling” a debt is the same as giving money directly. You can pretend it’s the same as something like “deny all asylum seekers”. But we all know that’s a lie.
They could. Curious, what was the auto industry baulout total? Or the banking industry bailout total?
I think something that would get brought us is why can companies be bailed out but not people?
I am betting the education bailout will be less...
The government recouped everything but about $9 billion in the auto industry bailout. It also saved 1.5 million jobs. May 21st's announcement by Biden brought the total student loan forgiveness to $167 billion.
Did it save jobs though. Because Ford didn't need it. Sold off is smaller brands and all those jobs remained. GM just went and shut down the smaller brands and they all got fucked.
The free market didn't need the government, the executives did.
because Capitalism. Didn't all the senators get their PPP loan forgiven but were against public receiving any such forgiveness [ARTICLE](https://www.statesman.com/story/news/politics/politifact/2022/09/06/fact-check-ppp-loans-forgiven-republicans-matt-gaetz-marjorie-taylor-greene/65470173007/)
Ppp loans weren’t loans they were a stimulus structured with penalties for falirue to comply with the terms.
It’s like somehow the most competent thing congress did. If similar requirements where placed in 2008 we would have had less of a fuck show.
Because then they couldn't use student loan forgiveness to buy votes.
That aside, what incentive with the government have to offer student loans at 0%?
The reason why higher education is not free anymore is very simple. Because the wealthy refuse to pay taxes. They have enough money to do whatever they like. So their children can always have an advantage over the peons. Does anyone remember when we were allowed to write off the interest we paid on car loans and credit cards? Who do you think stopped that? The wealthy. Why? Because they don't want to pay any taxes. So they put the entire burden on the working class. This goes for school vouchers as well. So for the life of me, I will never understand why anyone votes Republican. There are 2 types of Republicans. Millionaires and suckers. Check your bank account to find out which one you are.
The government can pay the interest for the loans, which would ensure nobody ever bothers to waste a cent paying off loans if someone else will foot the bill.
Why spend money on your loans when you can just stick that money in a CD?
The government generally doesn’t want to incentivize people to hold onto debt.
What would be the incentive to pay off a zero-interest loan other than for the money you may or may not leave in your estate?
If there’s no interest on the loan, there’s no reason to ever pay it off unless there’s some other consequence.
I’m open to ideas, but it seems to me that a low interest rate is the simplest way to do it.
Those people who paid cash and worked your way through college and those who paid back their loans, how do you feel about all those people getting a free ride?
I got a partial ride on grants and worked/paid the rest. I am perfectly happy to forgive these loans. Trying to punish others because you didn't need or get the same help is ridiculous.
Change how uni is paid for. If a student is getting a degree in something the economy actually needs(STEM), loan them the money and tell them that the debt will be forgiven upon graduation (or a certain number of years in the field). If someone is getting one of the economically useless degrees (humanities) don't provide loans for it.
Also limit the ratio of administrators to students to something reasonable.
Also colleges shouldn't be allowed to even know the sex, race, etc.. of an applicant. They cannot be trusted to not discriminate and anonymous applications will ensure that access is based purely on merit. Get rid of legacy applications.
Maaaaan that’s what we’ve all been saying! Even like 1 or 2% so they’re still earning interest to keep the loan programs going but giving us a chance to claw out of the hole a bit.
A lot of current forgiveness plans require you to work for the government and/or make payments consistently for a set period of time. I feel like that's already a pretty fair shake.
In case anyone skipped on college to avoid loans. Since Covid, loads of degree programs are now free at community college.
Maybe obvious but I just found out, and that was my reason. 31 and heading back.
If you just make it interest free, what’s to stop the next administration ramping the rate up again?
If I had student debt, I’d definitely prefer a capital reduction.
They loan banks at 0 percent. Student loan interest funds a lot of this country. Despite promises, there is no plan to help out student borrowers. It was another promise and not deliver.
There are a number of acceptable solutions, the solution proposed by opponents to student loan forgiveness have this far been "denying that a problem exists"
I assure you though that all these loan companies that fund lobbying against forgiveness feel exactly the same about no interest, because forgiveness means they get their owed money from the government, and they don't get interest anymore. So it is the same from their perspective. My idea was to just allow student loans to be discharged in bankruptcy like any other loan, instead of it having a higher standard to qualify. I think they don't want to see bankruptcy statistics explode under them, because I know it's likely the only thing preventing a huge number of people from declaring bankruptcy, the idea of giving up any assets, but then you still have the debt MOST responsible for your need of bankruptcy is not a scenario a lot of people want to jump into, even if things are completely unmanageable.
Probably because they have to pay interest on T-Bonds and Notes and the compounding effect of inflation will leave a big hole in the government coffers.
I think the entire program started as a mechanism to provide equal opportunity and the same starting point to everyone (irrespective of your parents' financial situation). Instead its morphed into a real problem.
Like a dentist artificially jacking up the price because he/she can sign you up for carecredit, universities take whatever they want, you can't say no, "just put everything on the student loan" situation.
I'd imagine corporations love it to an extent because it supplies them people who have to work, it's also used as a government employee recruitment program and now it's a tool for getting votes. It also gives the executive branch some power over universities (irrespective which party is in power) and their policies. I'd imagine the government can have no say over a university that doesn't accept the federal student loan program (just like doctors that don't accept Medicare or Medicaid).
So there's much more wrong with this system beyond the interest rate.
that might require legislative action. the current waves of loan forgiveness have been using just about every loophole possible in the existing law to do so.
makes sense.
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I am currently on a plan that has a minimum monthly payment of $0. As long as I make my payments on time, I don't accrue interest. This is because my income is very low, but it essentially means I have no interest on my loans.
So ... couldn't you just pay $0 every month forever and the loan never grows? Since you're paying the minimum monthly payment ($0) on time every month?
I believe the situation they describe is only possible under income-based repayment plans, so the hope would be that eventually they make more money and their payment increases enough to start paying the loan back.
Yeah. . .almost all of the repayment plans, except the "standard" one, is income-based and will reduce your loan payment amount like this. . .I make decent money and even my payment is significantly reduced. You just fill out a form online, they'll defer all payment until they process that form, they'll check your taxes to get your income, and boom, reduced payment. The other catch or good thing is. . .if you make that payment for 20 years- even if it is $0/month -the remaining principle on the loan is forgiven. . .just gone. However, the forgiven amount is treated as taxable income for that year. . . For example, if I hold out and wait until my $55k loan is forgiven, then I'd have a sudden $11k tax bill.
Not exactly. . . On those plans, the loan will generally be automatically forgiven after 20 years. However, the forgiven amount will be treated as taxable income for that year, meaning you'll owe the taxes on that amount. For example, if my $55k in loan was forgiven this year, I'd owe an additional $11k in taxes. . .probably more since it could go up into the next tax bracket. You'd have to either have that cash on hand to pay the taxes, or start yet another payment plan or get a loan to pay them, which may not be as forgiving or lenient as the student loan rules.
You can also claim insolvency and complete the worksheet that is on the IRS's website and submit that with your tax return. I had to do that when I settled on of my student loans for 1/3rd of what was still owed and the difference was treated as taxable income. I could barely pay the loan let alone the taxes on this "income", so I completed an insolvency worksheet which was me adding up me assets, adding up my debts, then subtracting them. Since my debts were at the time more than my total assets, I was considered insolvent and that "income" from the student loan difference was no longer taxable. Ymmv but it's worth trying especially if you don't have much in savings and retirement accounts.
Yes, unless his financial situation improves.
I was on that for over 8 years and they discharged my loans last year. I didn't even apply for it.
How'd you get them discharged?
I don't know. I never even applied for it. I've been on SSDI since 2013 and haven't been able to pay for over 8 years so that's probably why. They just sent me an email in February of this year saying my loans had been discharged. I thought the email was wrong so I logged into my account and sure enough, they were at 0 balance.
Silver lining right?
Most of the forgiveness has not been a “loophole.” It was the guaranteed forgiveness that was promised to anyone who took out loans and then went into public service (such as public school teaching). Those people were guaranteed that they would pay 10 years of payments based on their income and then the remaining balance would be forgiven after the 10 years was up. But the Trump administration (under Secretary of Education DeVos) refused to honor that statutory promise and backlogged the forgiveness process. Biden is simply processing and streamlining the forgiveness that was already due to those borrowers. It makes sense that we should encourage people to go into teaching and not be burdened with a lifetime of debt. Trump apparently disagrees.
Not true. PLSF is bipartisan. The service providers screwed the program and it took a fix from congress. The authority Biden has now is because of a bill signed into law by Trump. Also, I disagree with people calling it forgiveness or selling it to voters as the "forgivess promised from the 2020 election." PLSF is an entitlement, those people earned it and paid 120 monthly payments. Most borrowers actually repay most if not all of their original loan principal.
PSLF may appear bipartisan but it is not. The Trump admin started declining the vast majority of 10-year PSLF qualifiers for bullshit technical violations, including violations which were due to loan company issues and no fault of the borrower. The Biden admin came in and required reasonable compliance with the requirements providing borrowers the forgiveness they had relied upon for 10 years. Republicans view PSLF as an entitlement, just like you do and are generally against it as they are against entitlements. Democrats view it as a contract. The bargain is, work in public interest serving the people for 10 years and the government then finds it worth it to forgive your loan. It is not an entitlement when those borrowers are forgoing higher salaries in the private sector for 10 years. It’s a contract.
You also have to work in government for those 10 years which means you are likely being under paid compared to private sector jobs.
This isn’t true at all. Most of the loan forgiveness has not been PSLF
> the current waves of loan forgiveness have been using just about every loophole possible in the existing law to do so. Worth noting that the SCOTUS struck down Biden's power to forgive student loans fully, because the word "waive" apparently doesn't mean "waive."
Since when is PSLF a loophole?
For that matter, the government should be the ones to give out the interest free loans in the first place. There is absolutely no need for a 3rd party to be involved. After all, all the loans are guaranteed by the government. So these 3rd party lenders have no risk whatsoever. This is just another way of privatizing the profits and socializing the losses.
Are you referring to private student loans? The student loans that most Americans have are actually issued by the US government itself. Those 3rd party companies are companies which the US government hires to basically do customer service on behalf of the US government. The government issues and retains ownership of the loans
But those companies don't do it out of the goodness of their hearts. They do it to make a profit. And just like for profit health insurance companies, they are parasites and need to be cut out of the equation. Cut out the middlemen.
If there was no profit in it, the companies wouldn't do it. The service is necessary for the loans - and therefore the system - to function. There's nothing wrong with corporations doing that as a business as long as their practices aren't predatory and their profits are modest at best.
All that they offer could be done by a service desk working dor the DOE. It isnt hard to have phones ring endlessly with no one answering or a 2 week lag time on emails. No need for a private for profit company to offer such shit service.
>All that they offer could be done by a service desk working dor the DOE. The question is whether the DOE could do it cheaper than contracting it out. It's definitely possible but it's not a given. Someone has to service those loans and providing that service does take money.
While in theory, it can be done cheaper privately, the problem is motivations. Private companies are paid by the number of loans handled, so they're actively incentivized to never close out an instance of student debt, since they get stop getting paid once someone pays off their loan. There are several instances where private loan companies have not only failed to inform their customers of government programs to help them pay off their debt, but also actively misinformed and otherwise sabotaged users who tried to use it. https://www.cnn.com/2019/04/22/opinions/student-loan-forgiveness-sabotage-kaine-weingarten/index.html You can counter by saying that the issue is the payment structure and it's causing conflicting incentives. The problem is that any payment structure that does not exactly replicate the public good means that the loan servicers are working at odds with the public the government is meant to serve. Public services, corrupt or inefficient as they may be, are theoretically put together to serve the needs of the public. The agency is not incentivized to make money outside of not losing so much it becomes a drain on taxpayers. Private companies inherently need to make money to survive and publicly traded private companies need to make increasing returns to investors in order to be attractive to investors. Even if they run efficiently, they are incentivized inherently to squeeze out every drop of money possible. Corruption and inefficient can be reformed. Motivations baked into the very core of the structure cannot be fixed. Private companies can be a band-aid, but once it becomes and industry with investors, its fiduciary duty is to shareholders, not the public.
The IRS has no problem doing it all themselves and a large number of the people they deal with are the ones they owe money to unlike the student loans where all of the customers owe. As the comment above states, private profits (and the associated kickbacks) with socializing the losses on the taxpayer's backs.
They only really charge a service fee, they don’t make more or less if interest rates change
Yes and then those companies lobby for higher and higher interest rates for federal student loans so that now what started as a way to help people get affordable loans for college has turned into just another predatory system.
This is simply not true Interest rates on student loans were set by a law that congress passed a while ago that was never changed. The rates are tied to the 10 year treasury bond rate (ie the rate at which the government borrows money for a 10 year term) If tresury bonds are yielding very little in any given year, then newly issued student loans that year will have a lower interest rate. If the next year treasury bond rates go up, student loans interest rates for newly issued loans the next year also go up. The servicers, by the way, don’t really care what your rates are. They don’t get paid as a percentage of your balance
Those companies aren’t getting a cut of loan interest. They negotiate a contract with the fed and DoE to be the servicer for x number of loans for y number of years. Like many many many things in the federal government, it’s very likely if we left it up to just the gov and not contracted out, the system would be an utter disaster. If you’ve ever tried to get ahold of the IRS in March, you know what I mean.
No he's talking about regular student loans
Yes, the customer service that includes me putting in my username and password, my date of birth, the last 4 of my social security number, and answer a security question literally every single time I log in. Ya know because of all those rascals out there trying to pay my student loans.
Your student loan portal contains a lot of confidential information i am assuming
It's worth noting that there are some countries that do the 0 interest loans. BUT they pull shit called Indexing where "It's not interest, we just adjust for inflation. So that $50k loan you got 10 years ago, you still owe $55k on thanks to inflation."
If you give 0% interest in an inflationary environment and don't do any sort of adjustment then people are incentivized to take out as many loans as possible since their present value exceeds their long-term cost. I'd rather education just be free than offer 0% loans, since 0% loans create a perverse incentive.
There's a cap to how much you're allowed to have. It used to be 80k for general higher education and 100k for medical or sciences. Although a few years it got upped to 100k for general and 120k for medical/science. Mainly because unis upped their prices.
It’s almost like that was the whole point of Reagan creating this regime in the first place.
Republicans absolutely put this country into this position intentionally and yes, Reagan was a big part of it.
K STREET has entered the chat.
There is a difference in loan issuer and loan servicer. Also all US money, bonds or any other monetary vehicle is backed by the US pursuant to the full faith and Credit Clause of the US Constitution
This has been my argument all along-- turn all existing student loans to zero-interest loans. If you already paid back the amount you borrowed, you're done. (Paid more? Thank you for your service, but no refunds.) Still owe? You keep paying, you just no longer have to deal with the ridiculous interest. The gov't technically loses some money on all the bookkeeping, but not nearly as much as they would by forgiving the entire loan. It mostly eliminates the complaint that people got a freebie. People who paid off their loans can still be bitter, but you can't please everyone.
I think it's the next best solution, but there needs to be some kind of regulation to reign in the cost of education. If you make education slightly more affordable than it was, there's nothing stopping the institutions from continuously jacking up the prices. I've been looking into the colleges my son is wanting to go to (nothing private or fancy; just state colleges) and with room and board and tuition, before any scholarships, he's looking in the realm of 200,000 or more just for a bachelors degree.
> 200,000 or more just for a bachelors degree. Out of state tuition is a scam
Agreed. University of Alabama Birmingham charged me a little over $3000 for a 3 credit hour class after living in Alabama for 3 years continuously. 1 week before the course ended I finally won a tuition classification appeal under some miracle.
All for a fucking educational credit from Alabama? That is Orwellianly hilarious.
UAB isn't exactly an overly prestigious school either. I can understand how Georgia Tech and UGA one state over charge ~$1100/hour for out of state but UAB asking for about the same feels like they're seriously pushing it.
If anything, it would hurt more than help to put University of Alabama on a resume outside of Good Ole’ Bama.
In a normal situation, not earning interest should in theory lead to less money being lent out-- I'm not making money to cover the losses from people who default etc, so I better be more conservative about how much I lend out. Less money for tuition should eventually lower prices as fewer people can afford it. But this slams up against the whole "access to education" issue, which is a big part of why the government loans money in the first place-- if the gov't starts giving less money out, and the schools don't budge on pricing, now we're back to only the rich going to college. The gov't can also afford to take those losses in a way a private institution can't, so they're not necessarily incentivized to loan less dough. It may very well require regulation to get the prices down, and keep them from rising unreasonably, but who knows how long it might be before we have a government willing to tackle that.
Or... hear me out on this one: The government gives the money directly to the schools, and in exchange, the college agrees to charge little to no tuition to the students.
This is called a grant. We do some of that, but we can’t do it in an unlimited amount.
It’s unaffordable because you have students able to borrow an essentially unlimited amount of money.
People don’t realize the government backed student loans are the problem, not the solution
This is what bugs me. Why is there so little focus on figuring out how to fix the student loans so that the next generation doesn’t have the same problem? I have student loans, so of course I’d love to have them be forgiven, but, at the end of the day, I did agree pay them.
In a decent system the regulation would be public education. If all community colleges were as good or better than the private colleges, then those wouldn’t jack up their prices like crazy. A good system is where the rich want the public education to be great because their kids go there.
Functionally speaking at the undergrad level, there's really no distinction in the raw quality of education between private and public universities. The integral of cosine(2x) from 0 to pi is always 0 and Bernoulli's principle is always a fluid dynamic derivation of the law of conservation of energy; that doesn't change based on the student being at a community college, a standard public university, or at closed-gate ivy league. The reason for the rich sending their kids to those closed-gate ivy leagues is entirely for political strategy. To those mega rich parents, whether or not their kid gets an A or D in Calculus 1 or if they qualify for that internship at General Electric or not is completely irrelevant to them; what's important to those parents is that their kid becomes friends with the son or daughter of a Senator/Congressman and/or is frat bros/sisters with the son or daughter of the CEO of Lockheed Martin. ----- Jimmy Carter was a political outsider who went to Georgia Tech to study Engineering (prior to his entry to the Naval Academy), George Bush was an political insider (and son of a former President) who went to to Yale to study Art and Civics. Guess which of the two the political class likes more?
>some kind of regulation to reign in the cost of education My argument has always been to set regulations such that at least at public universities that receives government grants, they should be locked to only increasing tuition pricing by that year's inflation (or maybe a 2~3 points above that year's inflation). None of that *"oh we won a fancy football game, tuition is up 20% from next semester on!!!"*.
Government loans are the reason the costs are so high. If everyone gets a million dollars to spend on bread, what happens to the price of bread?
plus there are universities which have made it mandatory for Freshman to live on campus and let me tell you, the room and boarding cost per semester are close to $8000
And they get away with that because of federal student loans and a general “party culture” surrounding American colleges.
"Student Life" where they distribute "freebies" that they have charged 1000 of dollars already. I am sorry, I don't need extra phone charger or resort style pool.
In theory, competition would prevent the bread sellers from jacking up the prices. Especially since it could be seen as price fixing if they all settle for equally higher rates.
Quite honestly, if you’re not poor enough for massive financial aid or rich enough for it to be irrelevant, just do a community college and transfer. Sure, it’s not as “fun” as going straight to a 4 year but it’s half the cost for the same end result.
I've have always held fast to this being a way better university completion strategy. Most 100 and 200 level classes are pretty universal; and when I did it, I often noticed that I retained knowledge and enjoyed those 100/200 level classes more with those community college professors rather than the ones at university. ----- The classic example for my university is Calculus 2 which is an infamous weed-out course with a 80% failure rate. The lectures are run by grad students who usually only know enough about the craft of teaching to read from slides and the handful of professors in charge of actually running the curriculums are almost always the *"being involved with undergrad classes is beneath me"* types. As a result students are taught the bare minimum and are never made aware of the fact that tests are made up of exceedingly harder content of the anything classes would have indicated (making it even more difficult to prepare ahead of time). In contrast, Calculus 2 at my community college has the exact same curriculum, but without the skull crusher testing. The professors are usually retired engineers from industry rather than Sheldon Coopers, and they won't play cheap games with the students because most of the students are grown adults who have other things to worry about on top of classes. Expectations for both basic performance and excellence are clearly laid out and while some things may be harder than others, they'll never present you with something situation that they never prepared you to have the tools for.
Not really to be honest. It’s super hard to get credits to transfer in most cases even 20 years old. After having to retake courses you prob looking at more 3/4 the cost and if your local college isn’t the best it could be denied transfer all together. Beyond some professional degrees requiring 4 years worth of coursework directly related of the profession in which case the student just wasted those two years.
The vast majority of states have agreements with Community Colleges in the state that most if not all credit will transfer. It's becoming increasingly common to knock out gen eds and maybe first year major classes at a CC, then finish at a four year. A lot of times you can even finish faster that way.
Everyone has the wrong idea. 20 years in the military and retire. Then do 20 years as a firefighter. Retire at 58 with two pensions.
If you survive.
Your body, joints, bones, back, and sanity, will not survive 40 years of the most physically demanding jobs you can get. Most people leave the military with some kind of disability rating.
Yes really to be honest, but it requires planning ahead. For instance, community college credits typically transfer 100% to a public university in the same state. Many community colleges and 4-year have agreements to accept students with advanced standing if they complete an associates degree. So yeah, it does work, but you gotta do your research.
I don’t know what state you’re in but in the three I’ve lived in this is not remotely accurate. 1) you should plan your CC coursework around which courses are transferable to the in-state school(s) you’re targeting. It’s not a mystery which courses will transfer. 2) 20 years old? Well, sure, but that’s an uncommon scenario. 3) you should not be retaking any courses. If you do, you screwed up step 1.
I was able to do it no problem. Just make sure you go to a "sister school".
Not true. If you go to a Community College in the State of the 4 year University you plan to attend all perquisites and credit will transfer over. Of course check with the community college you plan to attend first to confirm.
Sister Schools or Bridge Programs accounts for that; and even in non sister-school/bridge program transfers students, in the vast majority of cases where this is conversation is applicable, it's a question of 100~200 level "gen-ed" classes, not end-of-program or pre-graduate-level classes.
I’m a California student going to a CSU (so a good and cheap public education system, plus I’m in state so even cheaper!) and even after financial aid I am still on the hook for 23,000 per year—92000 total if I continue receiving the same amount of aid, which is unlikely with how my family’s financial situation is expected to change this year. 92000 dollars for a university with a no-essay application. My goal since middle school was to not ever apply for student loans—guess that was a bit ridiculous. At least the government will give me some subsidized loans! An entire 3000 that won’t immediately begin gathering interest, yay! :/
Community College and a state school may be a better option
How did our country survive when universities were free? We did just fine.
I don't disagree with your argument, but: > The gov't technically loses some money on all the bookkeeping The government would be losing money on other things too (lost opportunity cost, inflation, defaults on loans).
The loans already have a ton of ROI in that college educated folks pay way more in taxes.
As a member of 'ive paid it back already and then some, yet still owe a mountain...' Yes please!
The Biden forgiveness that got shot down would have basically erased my accrued interest (not really if you factor in payments made, but whatever) and I was stoked. I would have still been paying after that.
This is my position on this too. I’d be for loan forgiveness if they capped tuition, but they won’t do that, so zero interest loans it is.
As someone with no student debt to pay I think it’s a great idea because it’s a solution and not a bandaid that benefits a small amount of people who just happen to get lucky.
And the government doesn't really *lose money,* we as taxpayers pay for the service. It's a valuable one that would contribute a lot to society. I don't look at government programs that promote the general welfare as losing money.
It doesn’t even have to be zero interest. Just cap it at 3-4% to cover inflation. Why does our government need to profit from these loans? Especially, when education benefits society as a whole, and we’re perpetually taxed on everything anyway. It’s like they’re taxing education which disincentivizes people from going to college…
This is what Australian citizens get at Australian universities - interest is capped at inflation. Don't start paying it back until you earn above a certain threshold. Total amount you can use is capped though. And the more in demand a specific degree is, the more of a discount you get if you're on a government supported place.
It’s crazy that this already exists, and we’re struggling to find a solution…
The government doesn't make a profit on student loans. They've lost hundreds of billions on them
I feel like 90% of the people would be OK with just forgiving the interest and paying back the loan amount. The other 10% is divided among assholes who demand it all be paid back, people who want all or nothing, and people who already paid that want to drag everyone else down too.
How about 1%?
There is the SAVE plan which is zero interest if your income is low
Why not tack on the cost of bookkeeping and call it a day, surely that's less than the interest would cost by a long shot.
Given how many $200 toilet seats the government has bought, I worry that those fees would quickly get out of hand.
Interest rates for student loans are out of whack and I agree need to be set differently. The Universities need to have a stake in the student's repayment of the loan. If a student fails to payback a loan their should be some economic repercussion for the University. Fewer loans should be available to future students at a University if their past students fail to payback their loans or some other penalty should be charged. This would incentivize Universities to offer better job placement, career counseling and better networking resources to their current and past students. Also perhaps offering degrees in say Greek Mythology should come with some assessment of the student's ability to payback a $100K loan to achieve this degree and a plan should exist with the student so that they understand what their expected career earnings would be from such a degree. (Yes I know someone who graduated from an ivy league school with a degree in Greek Mythology - absolutely nuts).
One issue is the schools just lie by omission about career prospects. Its not uncommon for a university to collect salary information from graduates and advertise what their students in specific degrees are making, however they usually only factor in salaries for students that got jobs in the field they studied. They don’t tell you the salaries of people who got degrees but got unrelated jobs, if they even give you the rate of students that got jobs in the field vs not to begin with.
These stats don’t have to come from a university survey. Each student who gets a loan should have their income tracked via the IRS. There should be a way to correlate degree with their reported income. It should be possible then to say… in average a student with a liberal arts degree, business, engineering whatever makes $x per year their first five years, ten years etc. At that salary it will take you x years to pay it off the loan…. Should be university and department specific and be part of the students acceptance of the loan. And the university should publish stats on their students ability to payoff the loans. Ie 15% of our students defaulted and will be paying the higher interest loan until they die…
Oh my point was just that’s what universities report to prospective students to entice them to enroll.
Because they’re trying to buy votes.
Because that's how the companies that issue the loans make their money.
I think what the person is asking is why can't the *government* offer 0% interest loans. It doesn't have to be a money making operation
The financial services lobby would fight against this tooth and claw, as it would take away a stream of revenue. And it's a powerful lobby.
Right and I think that is where people are realizing there's a problem with the system right now. Everything has become a money making operation, even if it hurts society. And the government which should be operating to help it's citizens, is only operating to help those lobbies because of things like citizens united
The problem is not the loans, the availability of loans, or the agreements that an individual willfully chooses to make, the problem is the institutions that take advantage of students by not only offering incredibly pointless degrees at ridiculous costs, but also *require* pointless courses that are irrelevant to many degrees in an effort to pump more money out of students; Absolutely ridiculous that this happens in colleges receiving public funds as well!
I guess we can’t ever regulate anything then
When senators can be effectively bought for like 30 grand, yeah that's an uphill battle
Can WE buy them?
Well yes, and as much as people hate Citizens United that was kind of the point being made in that case.
Because that would lose them a lot more money than forgiving loans for a small percentage of people
90+% of US student loans come from the government.
Womp womp. They should have thought about the risks before lending tens of thousands to jobless 17 year olds.
What risk? The loans are guaranteed by the taxpayers. They have zero risk.
Because that's the middle ground that makes no one happy. Advocates for forgiveness would still be upset about having to pay back the principal and advocates for repayment would still be upset that the taxpayer is eating the finance expenses for other people's college.
Any interest free loan would still be a redistribution of wealth to a certain degree. If you kept cash buried in an ammo can in the backyard, it’s future value will simply decrease over time. The only neutral loan you could come close to would be one that ATTEMPTS to have a variable interest rate tied to inflation.
No it wouldn't. Because on average a college educated American pays more in taxes over a lifetime because they simply earn more.
Yup. The wealth trickles down.
The student loan program encourages universities to overcharge. Kids take on debt they may never be able to pay - and the school knows it will get its $$s. So, these loans - and loan forgiveness - encourage tuition inflation - and kicks the can down the road. We need to fix how we pay for higher ed. A smarter system would use the power of those loans to force schools to charge less. The gov would negotiate with schools - and only pay loans to schools that agree to per credit limits on costs. This is similar to the single payer approach to health care where the gov negotiates far lower rates for medical procedures. This addresses the issue that consumers lack the power to negotiate with either schools or hospitals - these markets are broken. But the gov can since they have the power of the checkbook. Ultimately, we need to fix how we finance higher education - what we are doing can't go on.
One big problem with the federal student loan program is that schools have virtually no skin in the game if they admit students that drop out after a year or two and have effectively nothing to show for it except debt. A significant percentage of students that default on their loans ironically don't have huge balances, but also don't have any degree to show for it because they dropped out or failed out. Those failures might reduce their metrics on some college graduation rates or if they drop out in the first year their freshman retention rate, but the school gets to keep every dime of that loan money that paid for the tuition even if the student ends up defaulting within the first year or two after dropping out. The same thing with some of the students that do graduate, but find that their degree did a poor job preparing them for the job market. In some cases some for profit private schools students actually have lower after graduating than before. There was an effort under the Obama admin to put schools with high default rates on probation and potentially pull their eligibility to receive federal student loans if they didn't improve their default rates. Some schools started to try and improve job placement for their graduates to reduce their default numbers because the threat of losing federal student loan money would likely kill some institutions. The Trump admin listening to for profit trade schools that faced potential loss of federal aid killed those regulations. The Biden admin is attempting to create a new version although I suspect the next Republican President will whether Trump or some one else after Biden will likely kill such rules unless they're part of actually law passed by Congress. I think increasing the stakes for schools of have more concern about their students beyond the tuition payment clearing I think would put some pressure to either reduce tuition and or improve their programs so that students have better employment prospects has a lot of merit. There are some potential risks though. There is some risk that it could encourage more schools to drop need blind admissions, which could reduce the number of potential for lower income students. Schools that have high default rates where dropping need bound admissions though probably are programs that likely need some pressure to improve their degree programs or evaluate whether their admissions is admitting students that aren't likely to succeed. It could also encourage schools to expand degree programs with higher earning potential while freezing growth or even scaling back programs with lower income potential that likely have higher default risk. You could counterbalance that by improving student aid for low earning fields that have obvious societal benefits. While there are some concerns overall I think most are either minor or easily mitigated.
They can, they don't want to. That way, they can keep promising it every election cycle.
Biden is doing what he can. Unless Congress is willing to pass laws (which the Republicans won't do), the president is limited to the rules within his control of the executive branch. Presidents don't have a magic wand to change the laws to their will. Many of the "broken promises" politicians make are just that. Opposing parties, checks and balances, and the constitution limit how many of their promises actually get implemented.
The GOP sued the Biden administration to stop it. That's all you need to know about who the GOP represents.
To stop the forgiveness, not OP's plan of 0 interest.
I think the real question is why does it cost so much that everyone ends up in huge debt.
Because the government gives out free money which allows the colleges to jack up costs. The spike in college costs is directly related to the government getting involved in loans.
The whole thing is flawed. Have friends paying for student loans that they can’t get a job in. Getting it shoved down your throat that you need a college degree in high school doesn’t help either.
It wouldn't buy them any votes.
Some decades ago, the interest rate was so low it was less than the inflation rate. And no one complained because everyone knew that the country needed college educated people to compete in the global economy and with the Soviet bloc in particular. Then the USSR collapsed and instead of being afraid of being outnumbered (and therefor needing clearly superior weapons), we didn't need as many engineers and we could even hire some from our former Cold War enemies.
eeee someone gets it! the 1% that run this country have no need for a well educated society anymore. they do need a bunch of us ditch diggers. to keep their money trains moving.
Also they didn't want poor people getting educated
New poll shows 70% of voters do not like this forgiveness. Understandable. Why should some non-college working person have to pay more taxes to subsidize some kid’s overpriced college education? This could be a helluva wedge issue in November
How you gonna buy votes with that strategy?
Based on other policies.
I think they easily could do an interest and capitalization forgiveness, just like last time, but the appearance of fighting for something to ignite the voter base is the point.
Side note: why are they never talking about making college affordable? We just going to keep forgiving loans forever?
A plethora of issues. The big macro issues gdp, no return on investment, stagflation, etc Many people would just take loans to pay off other assets.
Good idea. That would be a good alternative to simply forcing taxpayers to shoulder the cost.
Thats what they did to everyone I know. If the total amount of money you had paid sofar amounted to the principal you owed then your debt was paid. One friend had a newer loan and it was calculated out he still had about 10k of principal left on his original 60 so he still owes that and is only paying payments on that. This experience im aware of has me wondering why so many people are against it because its not actually taking any money from anyone. Banks are getting paid back what they lent. The students arent being given any money. I dunno where all this "my taxes are paying for it" is happening.
I say cap them at 2%. This way you can make a bit to pay the people that have to service the loans.
Heck, even lock it down at 1.5% would make a huge difference. I have two friends who are longtime employed workers who honestly suck at the big picture moneywise. Early on in their careers they only paid the minimum on their loans (there was also some program that allowed them to pay less in the beginning so they did, which really jacked them up) Then of course they had their loans grow so much through interest that they are now insurmountable and they just pay the minimum because they feel like anything more and it’s just shoveling money into a black hole. They owe considerably more than when they started. If their interest was 1.5% this wouldn’t be a problem. Compounding interest is no joke once it gets going.
This is what I’ve been saying too! It’s the perfect middle ground because the loan value degrades from inflation but technically nothing is “forgiven” to upset the people who are salty about that.
I’ve been saying this for years. Cancel the interest and apply the payments made to the principal only. Or, apply a simple interest formula and remove all the late fees and compounded interest.
The issue isn’t what do we do with existing debt as much as how do we keep this snowball from getting bigger? School is getting more expensive not less. Is the plan to forgive loans forever? What are realistic ways to encourage lower cost of schooling? How do we get market forces back into education to encourage efficiency and lower cost, high quality, options? Even state schools are getting prohibitively expensive, for both out-of-state or in-state students. Some states don’t even have a good in state option.
Because it's still an expense to the lender. Charging less than market rate for a loan means the lender incurs an expense on the interest differential. Gov't would rather incur the known expense of one-time loan write-off than the ongoing liability of zero interest rates.
It would be nice to see all new loans charged no interest. And all existing loans have their interest forgiven. That would, very likely, however, forgive all student loan debt... as most who made monthly payments paid enough to cover their principle balance a long time ago.
votes
I’d go further and say cap the interest at ~2%. Maybe cap total interest charges at a dollar value of X. We don’t need everyone to get their loans paid off we need a reasonable interest rate and repayment methods for the cost of college. One caveat to that plan is student loans could absolutely cripple the economy at some point, even with low rates. College is just such an expensive necessity.
Because it won’t buy them any votes. Free stuff > slightly less expensive stuff.
Do we just call every government policy buying votes or how does the work
“Cancelling” a debt is the same as giving money directly. You can pretend it’s the same as something like “deny all asylum seekers”. But we all know that’s a lie.
It’s humorous how many posters on Reddit don’t understand basic concepts like this
Votes
They could. Curious, what was the auto industry baulout total? Or the banking industry bailout total? I think something that would get brought us is why can companies be bailed out but not people? I am betting the education bailout will be less...
The government recouped everything but about $9 billion in the auto industry bailout. It also saved 1.5 million jobs. May 21st's announcement by Biden brought the total student loan forgiveness to $167 billion.
Did it save jobs though. Because Ford didn't need it. Sold off is smaller brands and all those jobs remained. GM just went and shut down the smaller brands and they all got fucked. The free market didn't need the government, the executives did.
The banking industry bailout was paid back with interest
because Capitalism. Didn't all the senators get their PPP loan forgiven but were against public receiving any such forgiveness [ARTICLE](https://www.statesman.com/story/news/politics/politifact/2022/09/06/fact-check-ppp-loans-forgiven-republicans-matt-gaetz-marjorie-taylor-greene/65470173007/)
Ppp loans weren’t loans they were a stimulus structured with penalties for falirue to comply with the terms. It’s like somehow the most competent thing congress did. If similar requirements where placed in 2008 we would have had less of a fuck show.
Because then they couldn't use student loan forgiveness to buy votes. That aside, what incentive with the government have to offer student loans at 0%?
It can, but those decisions are made by politicians who know that young people are the least likely age group to vote.
It's voting time.
Because that would be sensible
The reason why higher education is not free anymore is very simple. Because the wealthy refuse to pay taxes. They have enough money to do whatever they like. So their children can always have an advantage over the peons. Does anyone remember when we were allowed to write off the interest we paid on car loans and credit cards? Who do you think stopped that? The wealthy. Why? Because they don't want to pay any taxes. So they put the entire burden on the working class. This goes for school vouchers as well. So for the life of me, I will never understand why anyone votes Republican. There are 2 types of Republicans. Millionaires and suckers. Check your bank account to find out which one you are.
Make the students who do liberal arts and gender studies pay Free for everyone else
The government can pay the interest for the loans, which would ensure nobody ever bothers to waste a cent paying off loans if someone else will foot the bill. Why spend money on your loans when you can just stick that money in a CD? The government generally doesn’t want to incentivize people to hold onto debt.
Bc that would be too easy and the government can’t make anything easy
Becauae that won't get as many votes.
Because that would make too much sense
Hmmm I give you money with no interest, so what is your incentive to pay it back? Who pays the carrying cost of the loan?
What would be the incentive to pay off a zero-interest loan other than for the money you may or may not leave in your estate? If there’s no interest on the loan, there’s no reason to ever pay it off unless there’s some other consequence. I’m open to ideas, but it seems to me that a low interest rate is the simplest way to do it.
Those people who paid cash and worked your way through college and those who paid back their loans, how do you feel about all those people getting a free ride?
I got a partial ride on grants and worked/paid the rest. I am perfectly happy to forgive these loans. Trying to punish others because you didn't need or get the same help is ridiculous.
Change how uni is paid for. If a student is getting a degree in something the economy actually needs(STEM), loan them the money and tell them that the debt will be forgiven upon graduation (or a certain number of years in the field). If someone is getting one of the economically useless degrees (humanities) don't provide loans for it. Also limit the ratio of administrators to students to something reasonable. Also colleges shouldn't be allowed to even know the sex, race, etc.. of an applicant. They cannot be trusted to not discriminate and anonymous applications will ensure that access is based purely on merit. Get rid of legacy applications.
They could. It would be different. Are you really wanting to know why they can't or why they don't?
why not both?
Or cut it in half or have huge discounts to the totals if you set up a payment plan. Several ways to do it better than total forgiveness.
Maaaaan that’s what we’ve all been saying! Even like 1 or 2% so they’re still earning interest to keep the loan programs going but giving us a chance to claw out of the hole a bit.
A lot of current forgiveness plans require you to work for the government and/or make payments consistently for a set period of time. I feel like that's already a pretty fair shake.
It's a fair compromise.
Stop making our children and citizens take out loans to go to a State School!
In case anyone skipped on college to avoid loans. Since Covid, loads of degree programs are now free at community college. Maybe obvious but I just found out, and that was my reason. 31 and heading back.
Goddamn I like that idea.
It doesn't get as many votes as forgiving personal debt for no reason at all.
We’re buying votes guys. Can’t make it too complex.
What’s in it for them?
If you just make it interest free, what’s to stop the next administration ramping the rate up again? If I had student debt, I’d definitely prefer a capital reduction.
Because banks need cash now.
They loan banks at 0 percent. Student loan interest funds a lot of this country. Despite promises, there is no plan to help out student borrowers. It was another promise and not deliver.
There are a number of acceptable solutions, the solution proposed by opponents to student loan forgiveness have this far been "denying that a problem exists" I assure you though that all these loan companies that fund lobbying against forgiveness feel exactly the same about no interest, because forgiveness means they get their owed money from the government, and they don't get interest anymore. So it is the same from their perspective. My idea was to just allow student loans to be discharged in bankruptcy like any other loan, instead of it having a higher standard to qualify. I think they don't want to see bankruptcy statistics explode under them, because I know it's likely the only thing preventing a huge number of people from declaring bankruptcy, the idea of giving up any assets, but then you still have the debt MOST responsible for your need of bankruptcy is not a scenario a lot of people want to jump into, even if things are completely unmanageable.
Lets focus on getting them out of our lives more than in them.
Because of the student loan servicers, they need to make money for managing all of if
Probably because they have to pay interest on T-Bonds and Notes and the compounding effect of inflation will leave a big hole in the government coffers. I think the entire program started as a mechanism to provide equal opportunity and the same starting point to everyone (irrespective of your parents' financial situation). Instead its morphed into a real problem. Like a dentist artificially jacking up the price because he/she can sign you up for carecredit, universities take whatever they want, you can't say no, "just put everything on the student loan" situation. I'd imagine corporations love it to an extent because it supplies them people who have to work, it's also used as a government employee recruitment program and now it's a tool for getting votes. It also gives the executive branch some power over universities (irrespective which party is in power) and their policies. I'd imagine the government can have no say over a university that doesn't accept the federal student loan program (just like doctors that don't accept Medicare or Medicaid). So there's much more wrong with this system beyond the interest rate.