4 ms·

> Am I the only one who hates the notion of being forced to pay for other people's bad financial decisions? Not just that: this is, ultimately, a giveaway to t

by zeveb 10y ago

> Am I the only one who hates the notion of being forced to pay for other people's bad financial decisions? Not just that: this is, ultimately, a giveaway to the academic classes, who have lucked into the business of selling things to unwise consumers spending someone else's money. When these loans are forgiven (let's not fool ourselves: they will be), the federal government will have moved $1.3 trillion into the coffers of colleges, universities, professors, junior assistant vice-provosts of diversity affairs, athletic coaches and the whole panoply of 21st-century academia.

Haven_Monahan 10y ago
This. This. THIS. Federally-backed student loans, undischargeable and given to all and sundry, to be spent wherever on whatever, is a gigantic short in the moral-hazard circuit. I would throw an actual party for any dictator in the US who would do to the colleges what Henry VIII did to the monasteries.
- gozur88 10y ago
  >Federally-backed student loans, undischargeable and given to all and sundry, to be spent wherever on whatever, is a gigantic short in the moral-hazard circuit. I'm not sure you're using the term "moral hazard" correctly. If the loans were dischargeable that would be a moral hazard, because the smart thing to do would be to borrow up to your eyeballs and then declare bankruptcy ten years later on graduation day.
  - dpark 10y ago
    Is it not also a moral hazard to lend unceasingly knowing that you'll destroy the economy before taking a hit on the bad loans you've issued?
    - deleted 10y ago
      [deleted]
    - gozur88 10y ago
      I don't think so. Getting companies to lend to students was the whole point of the program. Normally you'd use the term to describe unwanted side effects.
      - dpark 10y ago
        The term describes the situation in which the cost of one party's risks are born by another party. Whether it's "unwanted" doesn't actually seem that relevant. If foolish incentives create a moral hazard, the moral hazard still exists regardless of the intent behind the incentives.
  - pjlegato 10y ago
    It's a moral hazard for the banks and schools, not for the students. It induces banks to knowingly make loans that are unlikely to be repayable. It induces schools to tell students to take loans to attend programs that are very unlikely to ever lead to employment that will pay enough to be able to pay back the loans.
    - gozur88 10y ago
      I don't agree. The whole point of the program is to get banks to lend money to students when the spreadsheet says it's a bad idea. And the schools should not be in the business of telling students what they can afford. For one thing, they probably can't know.
      - pjlegato 10y ago
        But you just repeated my exact points. Those reasons are precisely what makes it a moral hazard to have this structure. Without the government guarantees, banks would think hard about whether a loan was repayable, and schools wouldn't have nearly as many anthropology or art history programs cranking out unemployable specialists year after year. The government guarantee removes economic consequences for certain actors -- for the school and the bank, but NOT for the student. The student with an art history degree is now stuck with a massive loan that is not even dischargeable in bankruptcy, whereas the bank and the school suffer no consequences for having trained someone in an unemployable specialty of little to no economic value. On the contrary, they are incentivized to do that.
duaneb 10y ago
> to the academic classes The academic dream is that everyone deserves the same education. This is obviously not a reality, but you should at least acknowledge the middle ground is disliked by the "academic class" and the "non-academic class" alike: it's expensive as hell and we still have idiots running the world.
- oldmanjay 10y ago
  Sure, those few thousand Machiavellian geniuses who run everything are idiots. That is a very reasonable opinion.
whyenot 10y ago
I don't see it. Academia already has this money. It was paid to them as tuition. If loans are forgiven, the money will be "moved" (so to speak) to the bank accounts of the indebted, not academia. In the case of state schools, student loans also benefitted the tax payers. Student loans means such schools can charge a higher tuition, which means they need fewer subsidies from the the state.
- baddox 10y ago
  Being able to charge higher tuition due to government-subsidized loans IS a subsidy from the government, by definition. The government paying the resulting debt would be a further subsidy.
- deleted 10y ago
  [deleted]
- MrQuincle 10y ago
  We (my wife and me) would be so happy if we can just pay the principal and not accumulate interest anymore. The latter amounts to a bill of $700 each month. Or if the interest rate would be capped at 5% or less. Moreover, I wish it went to the professors etc. but with intermediaries like Great Lakes I also fear that even that is not the case.
dragonwriter 10y ago
> When these loans are forgiven (let's not fool ourselves: they will be), the federal government will have moved $1.3 trillion into the coffers of colleges, universities, professors, junior assistant vice-provosts of diversity affairs, athletic coaches and the whole panoply of 21st-century academia. The principal on those loans already went there, and forgiving the debt won't move any additional money there except insofar as people with unpaid student loan debt overlaps with people working in academia.
- tostitos1979 10y ago
  You know what is worse? This subsidy isn't going to your top-tier or even mid-tier CS/engineering prof. For those students, education totally pays off. The subsidy is really going to the lowest-tiers of the academic enterprise.
alexqgb 10y ago
For better or worse, the giveaway has already happened. The colleges have already been paid and they now have massively over-staffed administrations housed in remarkably nice offices to show for it. The point of a move this move is twofold. The first is to unburden people who were, in essence forced into massive debt at gunpoint as the result of fairly recent and arguably corrupt policy changes (note the lifetime health / income / well-being stats. for those without college degrees, and the role played by banking lobbies if you doubt any of this). The second is to signal to the predatory class of administrators who have benefited the most that the party is over. It may be unfeasible to claw back what they got from massively inflating the cost of higher education, but it's more than feasible to cap the damages and force a reckoning that will almost certainly lead to vastly more efficient administrations and more economically healthy graduates.
- zeveb 10y ago
  > It may be unfeasible to claw back what they got from massively inflating the cost of higher education, but it's more than feasible to cap the damages and force a reckoning that will almost certainly lead to vastly more efficient administrations and more economically healthy graduates. Sure, I could see being in favour of loan forgiveness if at the same time we completely eliminated federally-subsidised loans. But I don't see that happening: I see us forgiving outstanding loans, then granting even more loans, with absolutely no pressure for students to economise. True fact: one doesn't need a single-occupancy bedroom or a multi-room suite in order to get a good education. One doesn't need a winning football team. One doesn't need a fancy cafe with subsidised prices; one doesn't need a climbing wall. All one needs for a good education is food, shelter and good professors. But as long as someone else is (or appears to be) footing the bill, students will angle for the nicest possible way to spend their four, or six, or more, years.

by zeveb 10y ago

Haven_Monahan 10y ago

This. This. THIS. Federally-backed student loans, undischargeable and given to all and sundry, to be spent wherever on whatever, is a gigantic short in the moral-hazard circuit. I would throw an actual party for any dictator in the US who would do to the colleges what Henry VIII did to the monasteries.

gozur88 10y ago
>Federally-backed student loans, undischargeable and given to all and sundry, to be spent wherever on whatever, is a gigantic short in the moral-hazard circuit. I'm not sure you're using the term "moral hazard" correctly. If the loans were dischargeable that would be a moral hazard, because the smart thing to do would be to borrow up to your eyeballs and then declare bankruptcy ten years later on graduation day.
- dpark 10y ago
  Is it not also a moral hazard to lend unceasingly knowing that you'll destroy the economy before taking a hit on the bad loans you've issued?
  - deleted 10y ago
    [deleted]
  - gozur88 10y ago
    I don't think so. Getting companies to lend to students was the whole point of the program. Normally you'd use the term to describe unwanted side effects.
    - dpark 10y ago
      The term describes the situation in which the cost of one party's risks are born by another party. Whether it's "unwanted" doesn't actually seem that relevant. If foolish incentives create a moral hazard, the moral hazard still exists regardless of the intent behind the incentives.
- pjlegato 10y ago
  It's a moral hazard for the banks and schools, not for the students. It induces banks to knowingly make loans that are unlikely to be repayable. It induces schools to tell students to take loans to attend programs that are very unlikely to ever lead to employment that will pay enough to be able to pay back the loans.
  - gozur88 10y ago
    I don't agree. The whole point of the program is to get banks to lend money to students when the spreadsheet says it's a bad idea. And the schools should not be in the business of telling students what they can afford. For one thing, they probably can't know.
    - pjlegato 10y ago
      But you just repeated my exact points. Those reasons are precisely what makes it a moral hazard to have this structure. Without the government guarantees, banks would think hard about whether a loan was repayable, and schools wouldn't have nearly as many anthropology or art history programs cranking out unemployable specialists year after year. The government guarantee removes economic consequences for certain actors -- for the school and the bank, but NOT for the student. The student with an art history degree is now stuck with a massive loan that is not even dischargeable in bankruptcy, whereas the bank and the school suffer no consequences for having trained someone in an unemployable specialty of little to no economic value. On the contrary, they are incentivized to do that.

duaneb 10y ago

> to the academic classes The academic dream is that everyone deserves the same education. This is obviously not a reality, but you should at least acknowledge the middle ground is disliked by the "academic class" and the "non-academic class" alike: it's expensive as hell and we still have idiots running the world.

oldmanjay 10y ago
Sure, those few thousand Machiavellian geniuses who run everything are idiots. That is a very reasonable opinion.

whyenot 10y ago

I don't see it. Academia already has this money. It was paid to them as tuition. If loans are forgiven, the money will be "moved" (so to speak) to the bank accounts of the indebted, not academia. In the case of state schools, student loans also benefitted the tax payers. Student loans means such schools can charge a higher tuition, which means they need fewer subsidies from the the state.

baddox 10y ago
Being able to charge higher tuition due to government-subsidized loans IS a subsidy from the government, by definition. The government paying the resulting debt would be a further subsidy.
deleted 10y ago
[deleted]
MrQuincle 10y ago
We (my wife and me) would be so happy if we can just pay the principal and not accumulate interest anymore. The latter amounts to a bill of $700 each month. Or if the interest rate would be capped at 5% or less. Moreover, I wish it went to the professors etc. but with intermediaries like Great Lakes I also fear that even that is not the case.

dragonwriter 10y ago

> When these loans are forgiven (let's not fool ourselves: they will be), the federal government will have moved $1.3 trillion into the coffers of colleges, universities, professors, junior assistant vice-provosts of diversity affairs, athletic coaches and the whole panoply of 21st-century academia. The principal on those loans already went there, and forgiving the debt won't move any additional money there except insofar as people with unpaid student loan debt overlaps with people working in academia.

tostitos1979 10y ago
You know what is worse? This subsidy isn't going to your top-tier or even mid-tier CS/engineering prof. For those students, education totally pays off. The subsidy is really going to the lowest-tiers of the academic enterprise.

alexqgb 10y ago

For better or worse, the giveaway has already happened. The colleges have already been paid and they now have massively over-staffed administrations housed in remarkably nice offices to show for it. The point of a move this move is twofold. The first is to unburden people who were, in essence forced into massive debt at gunpoint as the result of fairly recent and arguably corrupt policy changes (note the lifetime health / income / well-being stats. for those without college degrees, and the role played by banking lobbies if you doubt any of this). The second is to signal to the predatory class of administrators who have benefited the most that the party is over. It may be unfeasible to claw back what they got from massively inflating the cost of higher education, but it's more than feasible to cap the damages and force a reckoning that will almost certainly lead to vastly more efficient administrations and more economically healthy graduates.

zeveb 10y ago
> It may be unfeasible to claw back what they got from massively inflating the cost of higher education, but it's more than feasible to cap the damages and force a reckoning that will almost certainly lead to vastly more efficient administrations and more economically healthy graduates. Sure, I could see being in favour of loan forgiveness if at the same time we completely eliminated federally-subsidised loans. But I don't see that happening: I see us forgiving outstanding loans, then granting even more loans, with absolutely no pressure for students to economise. True fact: one doesn't need a single-occupancy bedroom or a multi-room suite in order to get a good education. One doesn't need a winning football team. One doesn't need a fancy cafe with subsidised prices; one doesn't need a climbing wall. All one needs for a good education is food, shelter and good professors. But as long as someone else is (or appears to be) footing the bill, students will angle for the nicest possible way to spend their four, or six, or more, years.