4 ms·

Serious question: Who loses out if all the student debt got canceled? Not the colleges, I assume, because they already got the tuition. And not the students. So

Serious question: Who loses out if all the student debt got canceled? Not the colleges, I assume, because they already got the tuition. And not the students. So would it be loan companies and the US government? Would such an action be catastrophic?

mholmes680 9y ago
I think the "cancelling" action you're saying would be some way to pay the loan companies off with US govt funding. So, as a US taxpayer who is almost done paying his student loans, I lose out. Twice, i think.
Rainymood 9y ago
I think this is kind of a nonsensical question but please feel free to correct me if I'm wrong. Imagine you and I agree to a deal, both verbally and contractually (i.e. on paper). I give you 10 euros and you pay me back 11 euros in exactly 1 year. Now 6 months into the deal you suddenly ask yourself: "Well who would lose out when this debt gets cancelled?" Do you see now why I think it is a nonsensical question?
- tbirrell 9y ago
  Sure, it would seem obvious that the loaner is the one to lose out. The things it, I'm not sure who all the various loaners are these days or how much the economy itself would be affected by these people suddenly not having $1.3 trillion (or whatever the figure is these days) coming to them.
  - jononor 9y ago
    The question is can future students get any loans to finance their studies then (or at what rates/conditions? Good chance they would lose out too.
- brianwawok 9y ago
  What happened if you sold the default risk as a swap to a 3rd party. Who loses now?
godelski 9y ago
Someone still has to pay the debt. Though many times the (defaulted) debt can be bought for pretty cheap. It's complicated, but in the end somebody pays it.
- colorint 9y ago
  Debt is an asset to the lender, and in case of default (and no hope of renegotiation) the asset is written off. Whether this is "someone paying it" is like asking whether the owner "pays for" a truck that's struck by a meteorite and totally destroyed. Your total claims on stuff (i.e., capital) have gone down, and you might even journal the destruction of the truck as an "expense" (which is, itself, nothing more than a change in capital), but I'd still be wary of saying it's "paid for." Obviously this does mean that having enough assets get struck by enough meteorites can throw you into insolvency. (In this thought experiment we're ignoring insurance. Or you could imagine an uninsured asset being destroyed.)
  - godelski 9y ago
    Let's take a simple example. I loan you $10k to buy a truck. Not too long after you get it, a meteorite hits you and your truck. Disintegrating both completely. You have no money in the bank, insurance, or anything for me to get my $10k back. The truck (or student loans) was still paid for. I thought I'd get my money back, but I didn't and that is a risk in loaning money. I can write that off as a loss in my taxes, and recuperate some of the losses, but definitely not all. So in our student loan case somebody still has to pay off that debt. Either it is by a massive loss to the companies that loaned the money (let's ignore the possibility of them being in the green) or the federal government purchases the loans and writes them off. And if the loan companies are forced to write them off then that is written off as an expense and can greatly change how their taxes are calculated (see Trump). Which the "pays for" is that purchase or tax deduction/rebate. And now the entire tax paying population pays for (which tbh I'm personally okay with). But it still gets paid by somebody. Somebody "loses" (maybe not in the long run, but in our short game).
notfromhere 9y ago
The gov't loses the repayment, since student loans are federally backed. Though the fed is double dipping on the student loans: they get interest back on the loans while also getting higher tax revenue from higher incomes.
djrogers 9y ago
Student loans are mostl federally backed, so the US taxpayers would lose out.

mholmes680 9y ago

I think the "cancelling" action you're saying would be some way to pay the loan companies off with US govt funding. So, as a US taxpayer who is almost done paying his student loans, I lose out. Twice, i think.

Rainymood 9y ago

I think this is kind of a nonsensical question but please feel free to correct me if I'm wrong. Imagine you and I agree to a deal, both verbally and contractually (i.e. on paper). I give you 10 euros and you pay me back 11 euros in exactly 1 year. Now 6 months into the deal you suddenly ask yourself: "Well who would lose out when this debt gets cancelled?" Do you see now why I think it is a nonsensical question?

tbirrell 9y ago
Sure, it would seem obvious that the loaner is the one to lose out. The things it, I'm not sure who all the various loaners are these days or how much the economy itself would be affected by these people suddenly not having $1.3 trillion (or whatever the figure is these days) coming to them.
- jononor 9y ago
  The question is can future students get any loans to finance their studies then (or at what rates/conditions? Good chance they would lose out too.
brianwawok 9y ago
What happened if you sold the default risk as a swap to a 3rd party. Who loses now?

godelski 9y ago

Someone still has to pay the debt. Though many times the (defaulted) debt can be bought for pretty cheap. It's complicated, but in the end somebody pays it.

colorint 9y ago
Debt is an asset to the lender, and in case of default (and no hope of renegotiation) the asset is written off. Whether this is "someone paying it" is like asking whether the owner "pays for" a truck that's struck by a meteorite and totally destroyed. Your total claims on stuff (i.e., capital) have gone down, and you might even journal the destruction of the truck as an "expense" (which is, itself, nothing more than a change in capital), but I'd still be wary of saying it's "paid for." Obviously this does mean that having enough assets get struck by enough meteorites can throw you into insolvency. (In this thought experiment we're ignoring insurance. Or you could imagine an uninsured asset being destroyed.)
- godelski 9y ago
  Let's take a simple example. I loan you $10k to buy a truck. Not too long after you get it, a meteorite hits you and your truck. Disintegrating both completely. You have no money in the bank, insurance, or anything for me to get my $10k back. The truck (or student loans) was still paid for. I thought I'd get my money back, but I didn't and that is a risk in loaning money. I can write that off as a loss in my taxes, and recuperate some of the losses, but definitely not all. So in our student loan case somebody still has to pay off that debt. Either it is by a massive loss to the companies that loaned the money (let's ignore the possibility of them being in the green) or the federal government purchases the loans and writes them off. And if the loan companies are forced to write them off then that is written off as an expense and can greatly change how their taxes are calculated (see Trump). Which the "pays for" is that purchase or tax deduction/rebate. And now the entire tax paying population pays for (which tbh I'm personally okay with). But it still gets paid by somebody. Somebody "loses" (maybe not in the long run, but in our short game).

notfromhere 9y ago

The gov't loses the repayment, since student loans are federally backed. Though the fed is double dipping on the student loans: they get interest back on the loans while also getting higher tax revenue from higher incomes.

djrogers 9y ago

Student loans are mostl federally backed, so the US taxpayers would lose out.