6 ms·

We Must Cancel Everyone’s Student Debt, for the Economy’s Sake

40 points by rectang 9y ago

rectang 9y ago
Skyrocketing student debt like you see in this chart does not arise because students today are less virtuous or moral than their predecessors: https://pixel.nymag.com/imgs/daily/intelligencer/2018/02/09/09-student-debt-1.nocrop.w710.h2147483647.2x.png https://pixel.nymag.com/imgs/daily/intelligencer/2018/02/09/... It is the result of deliberate policy decisions, such as excluding student debt from being cleared through personal bankruptcy. These deliberate policy decisions magnify the advantage that accumulated wealth has on success. Deserving outsiders are thwarted from fulfilling their potential in the so-called "meritocracy", so that by and large social mobility is stilled and American "meritocracy" becomes a first-order approximation of aristocracy. When the policy decisions which have led to this crisis are so vast and immoral, why not consider an action as dramatic as forgiving all student debt?
- troydavis 9y ago
  > why not consider an action as dramatic as forgiving all student debt? As someone who would like to see public education be free for future students, I’ll give you 3 great reasons why rewriting the past is an awful idea: 1. It would treat someone who worked throughout college (and possibly learned less and earned worse grades because of it) in order to borrow less - and someone who didn’t even attend because they couldn’t service the debt - the same as someone who borrowed heavily. It rewards a poor decision, one that others handled better. 2. It would treat someone who took on $30k/year in debt for a mediocre private school the same as someone who took on $10k/year to go to an in-state school (or nothing because they worked), or $30k/year to go to a top private school. At least 1 of those choices is a low-return decision. 3. There’s a lender on the other side of every transaction and they may not have had anything to do with the policy decisions you disagree with. Finally, the paper covers many possible implementations. If by “forgiveness” you mean that the government should negotiate a payment to lenders (so taxpayers are paying off everyone’s loans), here’s why that shouldn’t happen. There’s a much stronger argument that future education from public universities should be free. Until that happens, given finite resources, any money that would go towards debt should go towards future students, not retroactively rewarding what may well have then been a poor decision. Pay/fund public colleges, not lenders. Basically, any retroactive move rewards a lot of people who made what were then poor choices, and penalizes those who didn’t. Focus on making (public or otherwise verifiably cost-effective) education cheaper or free for future students. Also, here’s a deep link to the paper PDF: http://www.levyinstitute.org/pubs/rpr_2_6.pdf http://www.levyinstitute.org/pubs/rpr_2_6.pdf
  - throwaway2048 9y ago
    the point of this article is that moralizing about who "deserves" it more is a waste of time that is destroying the economy. Is it really worth it to hold back everyone else just so you can finger wag at people that wern't responsible?
    - troydavis 9y ago
      > the point of this article is that moralizing about who "deserves" it more is a waste of time that is destroying the economy That was arguably the point of the NY Mag article, but the paper that the article is based on goes a lot deeper, and doesn't claim that student loan debt is destroying the economy. > Is it really worth it to hold back everyone else just so you can finger wag at people that wern't responsible? The last part of my comment addresses that. If you believe that (at least cost-effective) college education can have a net positive impact on the nation's economy, as I also believe, then put the money one would put into eliminating debt into making future public college free (or subsidized in whatever way maximizes impact for the subsidy). Since they're both very expensive changes, the chances that both can happen is unlikely. Moreover, until at least some college is free, future students would still need to borrow. They'd re-create the same debt problem. (Less important: it's not "finger-wagging" to not want to change the game underneath someone. It's trying to create a set of circumstances that reward good choices. Large swaths of our society exist to try to make incentives reward good choices.)
    - Consultant32452 9y ago
      Why are student loans special in this regard? Is the reason different than your standard communist/socialist talking points?
    - isoskeles 9y ago
      Expecting people to honor their debts isn't finger wagging.
  - reader5000 9y ago
    The only poor decision made was for the taxpayer to offer student loans in the first place. This necessitated taking the loans in order to be competitive. Canceling existing student debt does not "reward" people who took the loans, it simply nullifies the original exploitation. The only person being "penalized" is the taxpayer who deserves it for handing out $100k loans to 18 year olds.
- deleted 9y ago
  [deleted]
- tptacek 9y ago
  Student lending wouldn't work if loans were simply dischargeable in bankruptcy. The deliberate policy decision here was to ensure that tuition lending would be available to pretty much everyone regardless of cosigning family wealth. Before the HEA, loans were dischargeable, but only after being in repayment for 7 years. As a practical matter, young pre-family college graduates in the workforce couldn't discharge loans in bankruptcy.
  - deleted 9y ago
    [deleted]
- phil21 9y ago
  > why not consider an action as dramatic as forgiving all student debt? What about folks who couldn't afford college because they actually had to work to make money? The ones who were busting their ass 60 hours/week while their better off (and less financially responsible) peers partied on cheap government money in college? If you don't think there is already a huge amount of resentment in a sizable minority of the "working underclass" on this point you are mistaken. As one of those guys who had to forego college in favor of starting a career I'd be absolutely livid. A relatively spoon-feed population gets yet another handout? The below market rate debt that you could only get due to taxpayer guarantee wasn't enough? That's what the optics will look like to the vast majority of the country. Most of the country will never have the privilege that a kid with a 4 year college degree already has had in their life - debt or not. Talk about creating winners and losers. Reading comments like this on HN (and other places with similar demographics) makes me realize how utterly socially disconnected as a society we are. It's downright scary at this point.
  - always_good 9y ago
    It doesn't seem to make much sense letting sour grapes direct policy. For example, I eat healthy and exercise every day. I could complain that virtually nobody else does yet I'm effectively stuck in the same insurance pool as them. And I could use this to forever resent a single-payer system as well. But that's just silly. Or something like "Ugh, I didn't eat pizzas every night because I had no health insurance. It's unfair if everyone gets healthcare for free! Think of all those pizzas I missed out on!"
    - troydavis 9y ago
      > Or something like "Ugh, I didn't eat pizzas every night because I had no health insurance. It's unfair if everyone gets healthcare for free! Think of all those pizzas I missed out on!" Since this proposal is debt-specific and retroactive, the analogy would be something like: "It's unfair if everyone gets all debt for prior health expenses repaid. Not their actual health expenses (however they were paid for), nor a reasonable health expense, but instead, whatever part of their health expenses are currently outstanding as debt."
nabla9 9y ago
Student dept payments should be tied to income. After person graduates, they must use x percent of their income to pay student debt. In this way the student avoids the debt trap in the case of unemployment, or personal difficulties. Some may be able to pay the debt, some may not, but it's the government that shares the risk and has stake in seeing people getting the education they need. Implementation can happen trough government either guarantees for the loan or direct loans from the government. I think Sweden has this kind of system.
- dmitrygr 9y ago
  Wouldn't this just cause rapid multiplication of art history majors? Free four years of fun sponsored by the taxpayer since x% of 0 is 0
  - lagadu 9y ago
    It doesn't on our side of the pond.
  - nabla9 9y ago
    The underlying assumption is that people incentives to get jobs where they earn their living. Political argumentation using moralizing negative or positive use cases without any attempt to quantify them can be very harmful. The real question is if positives outweigh the negatives. For example, is 2 to 5 ratio of misuse's vs. honestly can't pay too much? If we prevent two cases of misuse but five people have their life ruined because various unseen reasons, is it a good deal?
  - imtringued 9y ago
    4 years of fun is definitively worth the risk of being homeless for the rest of your life. Seriously what the hell is wrong with HN? Do you really think the vast majority people are this greedy and short sighted at their own expense?
- maccard 9y ago
  We have this system in the UK, you pay 9% on everything above 21k, and the debt is written off after 25(?) years. It’s a stealth tax on the poor/low middle earners. Anyone who can afford to not take out the loans ends up with a 9% pay rise. Anyone who can afford to pay them back early (high earning graduates) end up saving. Then you end up with the majority of people who will end up paying back many many times the debt over in interest. A fairer option for all would be a flat graduate tax where all graduates pay x% of their earnings over a threshol.
indescions_2018 9y ago
Cancelled debt is usually taxed as income. Which would simply create another liability. One alternative, is to securitize student obligations. they have avalue which is non-zero. And allow them to be traded in an exchange. It would provide the reverse incentive that certain majors or career paths would obtain better terms. But an even better option is to simply allow for direct corporate sponsorship at the undergrad level. If Apple needs 300 extra kernel hackers by 2022. They should begin recruiting right at the high school level. Offering full tuition, stipend and guaranteed employment upon successful graduation. In other words, transfer education "risk" away from students. And provide some insurance mechanism in case of failure.
- criddell 9y ago
  > simply allow for direct corporate sponsorship at the undergrad level It's hard for me to express, but I really don't like this idea. It turns education into training.
threepipeproblm 9y ago
This seems dramatic. Why not just cancel the Clinton administration's sinister provisions Higher Education Amendments of 1998 (the 1998 HEA) which made student debt non-dischargeable in bankruptcy? They sold out all the students with that.
- dmitrygr 9y ago
  When people graduate from college, they basically have nothing yet. They haven't had time to acquire anything. This would make it trivial to get free education at the taxpayers' expense. Declare bankruptcy on graduation day, and then move on with your life.
  - dnautics 9y ago
    Sure, and the only way you're incentivised to do such stupidity is if the cost of education is unbearably steep. Do you do that for a school that's 100k a year? Probably. For one that's 10k a year? Probably not. Also it wouldn't be taxpayer expense, if it were a privately given loan.
    - dmitrygr 9y ago
      Have you gone to college in America? Did you hang out with somebody outside of Science and Mathematics departments? Plenty of people go to college here just for the fun experience. They go there for the bars, fraternity/sorority parties, sex, drugs, alcohol, etc. They don't have a single care in the world about what happens after college. They don't really care what it costs because they don't pay it. One way or the other. To summarize, it wouldn't be about purposefully defrauding the taxpayers. It's just that that thought would never even come up.
  - threepipeproblm 9y ago
    That wasn't a big problem before 1998. There are many disincentives to bankruptcy which is why people who are not broke or those with prospects to earn aren't lining up to do it. If a college actually prepares a student for the job market they would be insane to do this; if it doesn't they may have no recourse. Very few forms of debt are excluded from bankruptcy. IMO it's far from humane to make college, of all things, in that category. Should those who pay huge $$$ for American degrees and then can't get jobs be forced to pay the bloated costs despite having to go back to a retail job where they can barely survive? The original act takes a civil liberty, which most people enjoy, from a vulnerable group. Young people just starting out who may have made a huge investment that didn't pan out... being unable to declare bankruptcy prevents such young people from getting back on sound financial ground for potentially decades. It's embarrassing that the Clintons haven't taken more heat for this, arguably nothing but an act of crony capitalism.
Eridrus 9y ago
This article is clearly wishful thinking, but it struck me that they want to do a big debt forgiveness thing without worrying about why people rack up these debts and just leave that as something to be figured out after we've done this big expensive thing.
tptacek 9y ago
Is this the most effective and most moral way to spend a trillion dollars? The benefits of such a policy would accrue primarily to households that don't really need financial assistance, and would do little to help those who really do.
- yequalsx 9y ago
  I can’t say it’s the most effective or most moral way to spend a trillion dollars. I can say it’s much more moral and effective than spending a trillion dollars on waging useless wars in Iraq and Afghanistan. It’s much more moral and effective than giving trillions to the very wealthy in the form of tax cuts. Higher education is a public good. It used to be the case that tuition was around 1/3 the cost of running a university. Now it’s north of 50%. It’s not good for society to have some many people in a lot of debt in their 20s. The so called greatest generation in American history, at least partly, got their greatness from free higher education. Maybe this isn’t the best option but something needs to be done because the current system isn’t sustainable.
  - tptacek 9y ago
    That’s a good argument for not engaging in another trillion dollar war, but not necessarily for spending a trillion elsewhere. Also: why is it particularly bad for 20-somethings to carry debt? They’re 40 years from retirement.
    - yequalsx 9y ago
      I didn’t say it was bad for them to carry debt. It’s bad for them to carry a lot of debt. Yes, it was not a great argument for spending a trillion dollars on student loan forgiveness. Mostly I was pointing out how out of whack the moral priorities of the U.S. are. There is very little debate or angst over spending a trillion dollars on a useless war. But somehow spending a trillion dollars on student loan forgiveness makes everyone think about moral hazard. You mentioned morality and so I took things a bit further than what you did.
c8d3f7b49897918 9y ago
We must cancel everybody's debt for the economy's sake, but we also have to do it in a fair way. Thankfully, we have Steve Keen, who has already worked out a solution: http://www.ideaeconomics.org/a-modern-jubilee/ http://www.ideaeconomics.org/a-modern-jubilee/
username8884547 9y ago
My solution: Make it dis-chargeable in bankruptcy. Since it's a for profit loan--albeit at lower rates, especially compared to 20+% a year credit cards--the lender took the risk. The next time, they'll price this in and think twice before approving every loan. The borrower that took the loan--you signed it, right, and you were 18+ years old ? --makes a calculated decision on whether to file for bankruptcy or not. It has costs for the filer, at least for 7 years, and possibly for life (some jobs will ask if you ever filed for bankruptcy). Other than that, who cares: you are a big bank...sometimes you win, sometimes you lose. You should treat a bank like it treats you, if you can get away with it, of course.
- crankylinuxuser 9y ago
  But but... what about $rich_schooling when they declare bankruptcy? Those doctors are screwing us all over! Which, the above happened in the late 70's and early 80, as bankruptcy protections were whittled away for everyone, because of a small percentage of bad actors. The doctor issue seemed simple: a judge has to approve the bankruptcy. And they can make a determination that it was happening to ignore scholastic debt and cancel the doctor's license. But I guess the "applies to every american" was much more profitable.
- ZeroGravitas 9y ago
  I think there's too much moral hazard there. A young person, with no real assets (you can't repossess a degree) would probably decide bankruptcy is a relatively good option, immediately after they graduate. And so the interest rates spike to cover the risk, which makes bankruptcy an ever better option. This is one of things, like corporations being able to sue governments, that sounds horrific but has relatively clear benefits because if the risk is too high the business deal won't happen. A classic prisoner's dilemma, and the answer to that is always to change the rules of the game to try to make cooperation pay for both parties. Not that both systems couldn't be improved.
  - username8884547 9y ago
    Debt is debt, you tried to make a profit and x% of borrowers cannot fully pay it (they might stop paying after 6 years for example, so not all is lost). The idea is to curtail this kind of debt. In bankruptcy court they are protections, you cannot have $2 mil in the bank or a $250k salary and try to get out of paying $92k in student loans.
gedy 9y ago
I was a low-information student, first to go to college in family. Once I decided to go however, the entire equation was what college could I afford and the living costs. Loans never felt like an option. Because of that, I basically was forced to choose a state school and live off campus in cheap housing. Plus side is I came out with no debt, drawback is I didn't have much fun. I guess that biases my thinking, but student debt forgiveness seems ridiculous for most all of the people I know who went deep in debt for a non-economically practical degree.
- deleted 9y ago
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- klodolph 9y ago
  If that's your perspective, I can understand why it would seem ridiculous. But consider other perspectives. Think of all the people who weren't the first in their family to go to college. Imagine that you're 18, and everyone you know tells you that you need to go to school to get a good job. People are competing to get into better schools, and you get admitted to a relatively nice private college with a beautiful campus. Your parents went to a similar college, graduated, got jobs, started a family, and are encouraging you to do the same thing. Except now, college is something like 5x as expensive as it was for your parents, teachers, and advisors, adjusted for inflation. Your job prospects after college are worse, too. Maybe you manage to pull in $15/hr and you think it's pretty good, but meanwhile rent is 50% higher than it was for your parents and teachers. You feel like you were lied to, betrayed, and you feel trapped. As a society, we created this problem. I'm not trying to take away agency from the people who chose to take out loans and study whatever they felt like, but we did send an army of teachers and academic advisers after our children telling them that college is what you need, and loans are how you pay for it. The idea of a "non-economically practical degree" is a bit of a red herring, here. It doesn't matter as much which degree you get as an undergraduate. Sure, there are a few high-paying degrees like geology but in many fields you can get work with a range of degrees. Based on what I was majoring in, people would ask me if I was going to go into teaching, as if that were the only option for someone in my field. Yet here I am, working in industry.
  - 9y ago
maehwasu 9y ago
The really gross thing here is the insane moral hazard that universities represent in this feedback loop. Universities, particularly through the media, exercise strong influence over public discourse about education spending. They also benefit massively from that spending. Canceling student debt without penalizing that feedback loop likely accomplishes nothing or a negative. Whether you forgive student debt or not, universities keep their huge gains that they've pumped into infrastructure, administrators, and influence.
rehemiau 9y ago
No, this is just plain stupid. You (wherever student debt is so common) must prioritize early school education about personal finance and loan consequences.
deleted 9y ago
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bfuller 9y ago
I spent most of my 20s paying off my loans, I guess if this happens that would make me the biggest sucker alive.
deleted 9y ago
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TYPE_FASTER 9y ago
Addressing the "astronomically rising tuition" issue is equally important.
RickJWag 9y ago
Yes, and everyone should be given free pizza for life and a new Corvette also. People need to make responsible decisions, that's all.
rendall 9y ago
People always bring morality into these discussions which then makes discussion difficult, since it becomes about how we all feel about it. Rather than thinking about how much it's 'right' or 'wrong' to forgive debt, let's try to keep focus on the effect it would have on society. Positive? Negative? And, if it truly is deeply immoral to forgive debt, what effect would this have on society? Would the problems introduced thereby outweigh the benefits?
wonderflpancake 9y ago
I'm OK with cancelling anyone's student debt, IF they also get their degree CANCELLED as well. As in, when an employer calls to verify their resume, the institution will have to say they DO NOT have what they claimed. Otherwise, what about the many people like me who didn't do something so stupid? We can't go back in time. They end up with a free degree for being stupid, we end up with nothing for being responsible?
stmfreak 9y ago
I find it difficult to understand how taking money from people who earned it, even if used to "forgive" loans borrowed with expectation of repayment, is a means to increase economic activity. How is this different than the broken window fallacy? The students, loans forgiven, are now going to spend their former loan payments, sure, but the former recipients of those payments will not be spending them. Sounds like zero-sum game with a feel good motive.

40 points by rectang 9y ago

Skyrocketing student debt like you see in this chart does not arise because students today are less virtuous or moral than their predecessors: https://pixel.nymag.com/imgs/daily/intelligencer/2018/02/09/09-student-debt-1.nocrop.w710.h2147483647.2x.png https://pixel.nymag.com/imgs/daily/intelligencer/2018/02/09/... It is the result of deliberate policy decisions, such as excluding student debt from being cleared through personal bankruptcy. These deliberate policy decisions magnify the advantage that accumulated wealth has on success. Deserving outsiders are thwarted from fulfilling their potential in the so-called "meritocracy", so that by and large social mobility is stilled and American "meritocracy" becomes a first-order approximation of aristocracy. When the policy decisions which have led to this crisis are so vast and immoral, why not consider an action as dramatic as forgiving all student debt?

troydavis 9y ago
> why not consider an action as dramatic as forgiving all student debt? As someone who would like to see public education be free for future students, I’ll give you 3 great reasons why rewriting the past is an awful idea: 1. It would treat someone who worked throughout college (and possibly learned less and earned worse grades because of it) in order to borrow less - and someone who didn’t even attend because they couldn’t service the debt - the same as someone who borrowed heavily. It rewards a poor decision, one that others handled better. 2. It would treat someone who took on $30k/year in debt for a mediocre private school the same as someone who took on $10k/year to go to an in-state school (or nothing because they worked), or $30k/year to go to a top private school. At least 1 of those choices is a low-return decision. 3. There’s a lender on the other side of every transaction and they may not have had anything to do with the policy decisions you disagree with. Finally, the paper covers many possible implementations. If by “forgiveness” you mean that the government should negotiate a payment to lenders (so taxpayers are paying off everyone’s loans), here’s why that shouldn’t happen. There’s a much stronger argument that future education from public universities should be free. Until that happens, given finite resources, any money that would go towards debt should go towards future students, not retroactively rewarding what may well have then been a poor decision. Pay/fund public colleges, not lenders. Basically, any retroactive move rewards a lot of people who made what were then poor choices, and penalizes those who didn’t. Focus on making (public or otherwise verifiably cost-effective) education cheaper or free for future students. Also, here’s a deep link to the paper PDF: http://www.levyinstitute.org/pubs/rpr_2_6.pdf http://www.levyinstitute.org/pubs/rpr_2_6.pdf
- throwaway2048 9y ago
  the point of this article is that moralizing about who "deserves" it more is a waste of time that is destroying the economy. Is it really worth it to hold back everyone else just so you can finger wag at people that wern't responsible?
  - troydavis 9y ago
    > the point of this article is that moralizing about who "deserves" it more is a waste of time that is destroying the economy That was arguably the point of the NY Mag article, but the paper that the article is based on goes a lot deeper, and doesn't claim that student loan debt is destroying the economy. > Is it really worth it to hold back everyone else just so you can finger wag at people that wern't responsible? The last part of my comment addresses that. If you believe that (at least cost-effective) college education can have a net positive impact on the nation's economy, as I also believe, then put the money one would put into eliminating debt into making future public college free (or subsidized in whatever way maximizes impact for the subsidy). Since they're both very expensive changes, the chances that both can happen is unlikely. Moreover, until at least some college is free, future students would still need to borrow. They'd re-create the same debt problem. (Less important: it's not "finger-wagging" to not want to change the game underneath someone. It's trying to create a set of circumstances that reward good choices. Large swaths of our society exist to try to make incentives reward good choices.)
  - Consultant32452 9y ago
    Why are student loans special in this regard? Is the reason different than your standard communist/socialist talking points?
  - isoskeles 9y ago
    Expecting people to honor their debts isn't finger wagging.
- reader5000 9y ago
  The only poor decision made was for the taxpayer to offer student loans in the first place. This necessitated taking the loans in order to be competitive. Canceling existing student debt does not "reward" people who took the loans, it simply nullifies the original exploitation. The only person being "penalized" is the taxpayer who deserves it for handing out $100k loans to 18 year olds.
deleted 9y ago
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tptacek 9y ago
Student lending wouldn't work if loans were simply dischargeable in bankruptcy. The deliberate policy decision here was to ensure that tuition lending would be available to pretty much everyone regardless of cosigning family wealth. Before the HEA, loans were dischargeable, but only after being in repayment for 7 years. As a practical matter, young pre-family college graduates in the workforce couldn't discharge loans in bankruptcy.
- deleted 9y ago
  [deleted]
phil21 9y ago
> why not consider an action as dramatic as forgiving all student debt? What about folks who couldn't afford college because they actually had to work to make money? The ones who were busting their ass 60 hours/week while their better off (and less financially responsible) peers partied on cheap government money in college? If you don't think there is already a huge amount of resentment in a sizable minority of the "working underclass" on this point you are mistaken. As one of those guys who had to forego college in favor of starting a career I'd be absolutely livid. A relatively spoon-feed population gets yet another handout? The below market rate debt that you could only get due to taxpayer guarantee wasn't enough? That's what the optics will look like to the vast majority of the country. Most of the country will never have the privilege that a kid with a 4 year college degree already has had in their life - debt or not. Talk about creating winners and losers. Reading comments like this on HN (and other places with similar demographics) makes me realize how utterly socially disconnected as a society we are. It's downright scary at this point.
- always_good 9y ago
  It doesn't seem to make much sense letting sour grapes direct policy. For example, I eat healthy and exercise every day. I could complain that virtually nobody else does yet I'm effectively stuck in the same insurance pool as them. And I could use this to forever resent a single-payer system as well. But that's just silly. Or something like "Ugh, I didn't eat pizzas every night because I had no health insurance. It's unfair if everyone gets healthcare for free! Think of all those pizzas I missed out on!"
  - troydavis 9y ago
    > Or something like "Ugh, I didn't eat pizzas every night because I had no health insurance. It's unfair if everyone gets healthcare for free! Think of all those pizzas I missed out on!" Since this proposal is debt-specific and retroactive, the analogy would be something like: "It's unfair if everyone gets all debt for prior health expenses repaid. Not their actual health expenses (however they were paid for), nor a reasonable health expense, but instead, whatever part of their health expenses are currently outstanding as debt."

nabla9 9y ago

Student dept payments should be tied to income. After person graduates, they must use x percent of their income to pay student debt. In this way the student avoids the debt trap in the case of unemployment, or personal difficulties. Some may be able to pay the debt, some may not, but it's the government that shares the risk and has stake in seeing people getting the education they need. Implementation can happen trough government either guarantees for the loan or direct loans from the government. I think Sweden has this kind of system.

dmitrygr 9y ago
Wouldn't this just cause rapid multiplication of art history majors? Free four years of fun sponsored by the taxpayer since x% of 0 is 0
- lagadu 9y ago
  It doesn't on our side of the pond.
- nabla9 9y ago
  The underlying assumption is that people incentives to get jobs where they earn their living. Political argumentation using moralizing negative or positive use cases without any attempt to quantify them can be very harmful. The real question is if positives outweigh the negatives. For example, is 2 to 5 ratio of misuse's vs. honestly can't pay too much? If we prevent two cases of misuse but five people have their life ruined because various unseen reasons, is it a good deal?
- imtringued 9y ago
  4 years of fun is definitively worth the risk of being homeless for the rest of your life. Seriously what the hell is wrong with HN? Do you really think the vast majority people are this greedy and short sighted at their own expense?
maccard 9y ago
We have this system in the UK, you pay 9% on everything above 21k, and the debt is written off after 25(?) years. It’s a stealth tax on the poor/low middle earners. Anyone who can afford to not take out the loans ends up with a 9% pay rise. Anyone who can afford to pay them back early (high earning graduates) end up saving. Then you end up with the majority of people who will end up paying back many many times the debt over in interest. A fairer option for all would be a flat graduate tax where all graduates pay x% of their earnings over a threshol.

indescions_2018 9y ago

Cancelled debt is usually taxed as income. Which would simply create another liability. One alternative, is to securitize student obligations. they have avalue which is non-zero. And allow them to be traded in an exchange. It would provide the reverse incentive that certain majors or career paths would obtain better terms. But an even better option is to simply allow for direct corporate sponsorship at the undergrad level. If Apple needs 300 extra kernel hackers by 2022. They should begin recruiting right at the high school level. Offering full tuition, stipend and guaranteed employment upon successful graduation. In other words, transfer education "risk" away from students. And provide some insurance mechanism in case of failure.

criddell 9y ago
> simply allow for direct corporate sponsorship at the undergrad level It's hard for me to express, but I really don't like this idea. It turns education into training.

threepipeproblm 9y ago

This seems dramatic. Why not just cancel the Clinton administration's sinister provisions Higher Education Amendments of 1998 (the 1998 HEA) which made student debt non-dischargeable in bankruptcy? They sold out all the students with that.

dmitrygr 9y ago
When people graduate from college, they basically have nothing yet. They haven't had time to acquire anything. This would make it trivial to get free education at the taxpayers' expense. Declare bankruptcy on graduation day, and then move on with your life.
- dnautics 9y ago
  Sure, and the only way you're incentivised to do such stupidity is if the cost of education is unbearably steep. Do you do that for a school that's 100k a year? Probably. For one that's 10k a year? Probably not. Also it wouldn't be taxpayer expense, if it were a privately given loan.
  - dmitrygr 9y ago
    Have you gone to college in America? Did you hang out with somebody outside of Science and Mathematics departments? Plenty of people go to college here just for the fun experience. They go there for the bars, fraternity/sorority parties, sex, drugs, alcohol, etc. They don't have a single care in the world about what happens after college. They don't really care what it costs because they don't pay it. One way or the other. To summarize, it wouldn't be about purposefully defrauding the taxpayers. It's just that that thought would never even come up.
- threepipeproblm 9y ago
  That wasn't a big problem before 1998. There are many disincentives to bankruptcy which is why people who are not broke or those with prospects to earn aren't lining up to do it. If a college actually prepares a student for the job market they would be insane to do this; if it doesn't they may have no recourse. Very few forms of debt are excluded from bankruptcy. IMO it's far from humane to make college, of all things, in that category. Should those who pay huge $$$ for American degrees and then can't get jobs be forced to pay the bloated costs despite having to go back to a retail job where they can barely survive? The original act takes a civil liberty, which most people enjoy, from a vulnerable group. Young people just starting out who may have made a huge investment that didn't pan out... being unable to declare bankruptcy prevents such young people from getting back on sound financial ground for potentially decades. It's embarrassing that the Clintons haven't taken more heat for this, arguably nothing but an act of crony capitalism.

Eridrus 9y ago

This article is clearly wishful thinking, but it struck me that they want to do a big debt forgiveness thing without worrying about why people rack up these debts and just leave that as something to be figured out after we've done this big expensive thing.

tptacek 9y ago

Is this the most effective and most moral way to spend a trillion dollars? The benefits of such a policy would accrue primarily to households that don't really need financial assistance, and would do little to help those who really do.

yequalsx 9y ago
I can’t say it’s the most effective or most moral way to spend a trillion dollars. I can say it’s much more moral and effective than spending a trillion dollars on waging useless wars in Iraq and Afghanistan. It’s much more moral and effective than giving trillions to the very wealthy in the form of tax cuts. Higher education is a public good. It used to be the case that tuition was around 1/3 the cost of running a university. Now it’s north of 50%. It’s not good for society to have some many people in a lot of debt in their 20s. The so called greatest generation in American history, at least partly, got their greatness from free higher education. Maybe this isn’t the best option but something needs to be done because the current system isn’t sustainable.
- tptacek 9y ago
  That’s a good argument for not engaging in another trillion dollar war, but not necessarily for spending a trillion elsewhere. Also: why is it particularly bad for 20-somethings to carry debt? They’re 40 years from retirement.
  - yequalsx 9y ago
    I didn’t say it was bad for them to carry debt. It’s bad for them to carry a lot of debt. Yes, it was not a great argument for spending a trillion dollars on student loan forgiveness. Mostly I was pointing out how out of whack the moral priorities of the U.S. are. There is very little debate or angst over spending a trillion dollars on a useless war. But somehow spending a trillion dollars on student loan forgiveness makes everyone think about moral hazard. You mentioned morality and so I took things a bit further than what you did.

c8d3f7b49897918 9y ago

We must cancel everybody's debt for the economy's sake, but we also have to do it in a fair way. Thankfully, we have Steve Keen, who has already worked out a solution: http://www.ideaeconomics.org/a-modern-jubilee/ http://www.ideaeconomics.org/a-modern-jubilee/

username8884547 9y ago

My solution: Make it dis-chargeable in bankruptcy. Since it's a for profit loan--albeit at lower rates, especially compared to 20+% a year credit cards--the lender took the risk. The next time, they'll price this in and think twice before approving every loan. The borrower that took the loan--you signed it, right, and you were 18+ years old ? --makes a calculated decision on whether to file for bankruptcy or not. It has costs for the filer, at least for 7 years, and possibly for life (some jobs will ask if you ever filed for bankruptcy). Other than that, who cares: you are a big bank...sometimes you win, sometimes you lose. You should treat a bank like it treats you, if you can get away with it, of course.

crankylinuxuser 9y ago
But but... what about $rich_schooling when they declare bankruptcy? Those doctors are screwing us all over! Which, the above happened in the late 70's and early 80, as bankruptcy protections were whittled away for everyone, because of a small percentage of bad actors. The doctor issue seemed simple: a judge has to approve the bankruptcy. And they can make a determination that it was happening to ignore scholastic debt and cancel the doctor's license. But I guess the "applies to every american" was much more profitable.
ZeroGravitas 9y ago
I think there's too much moral hazard there. A young person, with no real assets (you can't repossess a degree) would probably decide bankruptcy is a relatively good option, immediately after they graduate. And so the interest rates spike to cover the risk, which makes bankruptcy an ever better option. This is one of things, like corporations being able to sue governments, that sounds horrific but has relatively clear benefits because if the risk is too high the business deal won't happen. A classic prisoner's dilemma, and the answer to that is always to change the rules of the game to try to make cooperation pay for both parties. Not that both systems couldn't be improved.
- username8884547 9y ago
  Debt is debt, you tried to make a profit and x% of borrowers cannot fully pay it (they might stop paying after 6 years for example, so not all is lost). The idea is to curtail this kind of debt. In bankruptcy court they are protections, you cannot have $2 mil in the bank or a $250k salary and try to get out of paying $92k in student loans.

gedy 9y ago

I was a low-information student, first to go to college in family. Once I decided to go however, the entire equation was what college could I afford and the living costs. Loans never felt like an option. Because of that, I basically was forced to choose a state school and live off campus in cheap housing. Plus side is I came out with no debt, drawback is I didn't have much fun. I guess that biases my thinking, but student debt forgiveness seems ridiculous for most all of the people I know who went deep in debt for a non-economically practical degree.

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klodolph 9y ago
If that's your perspective, I can understand why it would seem ridiculous. But consider other perspectives. Think of all the people who weren't the first in their family to go to college. Imagine that you're 18, and everyone you know tells you that you need to go to school to get a good job. People are competing to get into better schools, and you get admitted to a relatively nice private college with a beautiful campus. Your parents went to a similar college, graduated, got jobs, started a family, and are encouraging you to do the same thing. Except now, college is something like 5x as expensive as it was for your parents, teachers, and advisors, adjusted for inflation. Your job prospects after college are worse, too. Maybe you manage to pull in $15/hr and you think it's pretty good, but meanwhile rent is 50% higher than it was for your parents and teachers. You feel like you were lied to, betrayed, and you feel trapped. As a society, we created this problem. I'm not trying to take away agency from the people who chose to take out loans and study whatever they felt like, but we did send an army of teachers and academic advisers after our children telling them that college is what you need, and loans are how you pay for it. The idea of a "non-economically practical degree" is a bit of a red herring, here. It doesn't matter as much which degree you get as an undergraduate. Sure, there are a few high-paying degrees like geology but in many fields you can get work with a range of degrees. Based on what I was majoring in, people would ask me if I was going to go into teaching, as if that were the only option for someone in my field. Yet here I am, working in industry.
- 9y ago

maehwasu 9y ago

The really gross thing here is the insane moral hazard that universities represent in this feedback loop. Universities, particularly through the media, exercise strong influence over public discourse about education spending. They also benefit massively from that spending. Canceling student debt without penalizing that feedback loop likely accomplishes nothing or a negative. Whether you forgive student debt or not, universities keep their huge gains that they've pumped into infrastructure, administrators, and influence.

rehemiau 9y ago

No, this is just plain stupid. You (wherever student debt is so common) must prioritize early school education about personal finance and loan consequences.

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bfuller 9y ago

I spent most of my 20s paying off my loans, I guess if this happens that would make me the biggest sucker alive.

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TYPE_FASTER 9y ago

Addressing the "astronomically rising tuition" issue is equally important.

RickJWag 9y ago

Yes, and everyone should be given free pizza for life and a new Corvette also. People need to make responsible decisions, that's all.

rendall 9y ago

People always bring morality into these discussions which then makes discussion difficult, since it becomes about how we all feel about it. Rather than thinking about how much it's 'right' or 'wrong' to forgive debt, let's try to keep focus on the effect it would have on society. Positive? Negative? And, if it truly is deeply immoral to forgive debt, what effect would this have on society? Would the problems introduced thereby outweigh the benefits?

wonderflpancake 9y ago

I'm OK with cancelling anyone's student debt, IF they also get their degree CANCELLED as well. As in, when an employer calls to verify their resume, the institution will have to say they DO NOT have what they claimed. Otherwise, what about the many people like me who didn't do something so stupid? We can't go back in time. They end up with a free degree for being stupid, we end up with nothing for being responsible?

stmfreak 9y ago

I find it difficult to understand how taking money from people who earned it, even if used to "forgive" loans borrowed with expectation of repayment, is a means to increase economic activity. How is this different than the broken window fallacy? The students, loans forgiven, are now going to spend their former loan payments, sure, but the former recipients of those payments will not be spending them. Sounds like zero-sum game with a feel good motive.