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Education Department Forgives $415M of For-Profit College Debt
- KindOne 5y agohttps://archive.is/20N5L https://archive.is/20N5L
- blakesterz 5y agoThe article says this is part of the $16 billion in loan discharges for around 680,000 borrowers since Mr. Biden took office, around $2 billion of which came through the borrower defense program. These numbers surprised me, I guess I haven't been paying very close attention: "There are around 43 million Americans with student debt.... All told, Americans owe around $1.6 trillion in federal student loans and more than $130 billion in private student loans, according to the data company MeasureOne. About 5.2 million federal borrowers are in default."
- pureliquidhw 5y agoApproximately 12.1% in default. I wonder what percentage of the $1.73 Trillion in debt that 12% makes up? Forgiving loans will continue to increase demand (and prices) for housing and other assets, right?
- tempnow987 5y agoThe federal funding giveaway for crazy degrees is amazing. If you pay $250,000 to become a chef/cook - that is insane. That is ONLY possible with federal funding, no private lender would fund that. I think similar issues exist with a fair number social science / ethnic studies / minor language degrees (greek etc). If you go through to a Master or PhD in ethnomusicology, while very cool (yes, I took a class along these lines I very much liked) -> the market isn't there currently in academia and the private market is to some degrees worse.
- throwaway0a5e 5y ago> you pay $250,000 to become a chef/cook - that is insane. Seems like those sorts of situations are well into the territory of "if you owe the bank $1,000,000,000 then the bank has a problem"
- andrewvc 5y agoNope, guaranteed by the government and not dischargable in bankruptcy!
- ketzo 5y agoI think "the bank with a problem" is the government, in this case.
- core-utility 5y agoExactly, in a market where the government doesn't guarantee these loans, students would have to negotiate loans with banks who would be very invested in the ability to pay back the loan after graduation. A cook (in this example) would be very unlikely to pay back a $250,000 loan, and no bank would fund that.
- alex_young 5y ago> That is ONLY possible with federal funding, no private lender would fund that. Isn't this about private loans? Seems like it according to the title and the non-paywalled portion of the article.
- gruez 5y ago"for profit college" =/= "private lender"
- foobarbaz33 5y agoAlthough government is interfering with these loans by taking away much of the risk. Green lighting no bankruptcy. 250k for life long wage garnishments could be a good deal.
- mempko 5y agoOk, now do all of it.
- burner556 5y agoI worked very hard to pay off my loans, I don’t think my tax dollars should go to bailing people out of debt they agreed to repay.
- colejohnson66 5y agoThey agreed because they had no choice. College is basically forced on every high schooler to the point that your guidance counselors ask you which one you choose and won’t take “none” as an answer. Ask me how I know. HR departments will also pass on your application unless it has a university listed. With the rising costs of tuition year after year, it’s becoming unreasonable. And when they’re not dischargable during bankruptcy, it’s giving a middle finger to the poor. Saying, “F you, I got mine” doesn’t solve anything. Something needs to be done about it.
- gjs278 5y ago
- BoorishBears 5y agoI didn't go. Could have went for free even, still didn't go. During interviews for my current position as an L6 in the AV space I wasn't asked until a degree until post offer, and even that was a recruiter asking in passing. Turns out you can just... not go to college and learn things on your own. - I don't necessarily agree that people with bad loans should hang out to dry, but in my opinion this mess should fall on schools first. They got to use 18 year olds to cosign unsecured loans. Simple as that. A school can't ask a bank for a $500 million dollar unsecured loan. But it can ask tens of thousands of kids to each bring back 50k. Now that the jig is up I want to see for-profit schools held accountable for the practice. The class of people affected by this are not the worse off in this country. There are a lot of places where trillions of tax dollars could be a bigger help than college grads.
- rubyist5eva 5y agoso the lesson here is, take out a shitload of debt for a relatively worthless degree and get the American taxpayer to bail you out Awesome
- kyrra 5y agoThat's a problem with many federally-backed student loans out there. The government being in the job of backing student loans is inflating college costs, as there is no factor to stop price increases. They aren't available for bankruptcy. There is no risk analysis for the people being lent the money. There's no balancing between job prospects and the degrees people are earning.
- FranchuFranchu 5y agoI don't see the problem. A huge for-profit organization gets free money in the shape of a student loan, without spending any of it because the degree is allegedly worthless, and then the money gets taxed to pay the loan off? It cancels out.
- unethical_ban 5y agoThe lesson is to read the article before commenting. Allow me to view source > gather the first visible paragraphs of the WSJ article. >WASHINGTON—The Education Department will discharge another $415 million in student debt held by borrowers who said they were defrauded by for-profit schools that misrepresented their graduates’ employment prospects or otherwise swindled them, federal officials said Wednesday. >The loans of nearly 16,000 former students are being forgiven under a legal provision known as borrower defense to repayment, which allows students to have their debts erased if they prove that their schools defrauded them. This is unrelated to general federal student loan cancellation, which is still a good idea. It isn't as if the debt would be discharged without changes to the loan programs themselves. But before we get into the discussion regarding cancellation in general it's important to acknowledge this has nothing to do with that.
- mjamesaustin 5y agoFor reference, this amount is less than 0.03% of the total ~$1.6 trillion in student debt.
- RhysU 5y agoI will pocket that 0.03% if anyone wants. That's still nontrivial clams.
- zozbot234 5y agoIt's highly targeted to the fraction of student debt that's actually highly problematic according to reliable scholarly research (that is, the debt that's actually 'trapping' largely non-traditional students with an unsustainable burden). Though debt incurred for professional graduate degrees (think MBA and what not) is not far behind.
- baggy_trough 5y agoFar too many people go to college as it is. One simple step we could take is make college loans illegal.
- strikelaserclaw 5y agoOr make state colleges cheaper and build more of them.
- ericmcer 5y agoAre they going to at least take some preventative actions? Curbing for profit colleges? Cutting down on predatory market tactics? Screening people for unreasonable loans (i.e. 60,000/yr for art school)? Or is the plan just to forgive the loans, throw the money on the govt. balance sheet and let the for profit college owners sail away on their yachts.
- unityByFreedom 5y agoPBS Frontline investigated this in 2010: https://www.pbs.org/video/frontline-college-inc/ https://www.pbs.org/video/frontline-college-inc/ If I recall correctly, these schools were not sufficiently held accountable for borrowers who couldn't repay loans. They only tracked students' ability to repay for something like two years. I think policies were adjusted so that such predatory lending for a poor education is no longer possible. It's probably a game of cat, mouse, businessmen and politics. I doubt anything was done 2016-2020 since that president once ran his own for-profit U, but I think some changes were made before that.
- prostoalex 5y ago> not sufficiently held accountable for borrowers who couldn't repay loans What is the gold standard for accountability here? Does a large state university track repayment ability for longer periods?
- jonathanjaeger 5y agoI'm not defending the current system, but the predatory tactics of a decade+ ago changed dramatically under Obama and there are other steps currently being taken to prevent overly aggressive marketing tactics. University of Phoenix, for example, completely changed their marketing habits (among others afraid of getting sued/losing accreditation).
- jonahbenton 5y agoYes, this is a tiny tiny fraction of outstanding student loan debt, in this case nearly all likely issued under fraudulent pretenses. Since Biden has taken over, similar specific, targeted actions have been taken on small portions of this enormous space.
- HarryHirsch 5y ago16000 borrowers who were targets of fraud benefit. A drop on the hot stone, as they say. It's not at all the change in policy that the current administration promised us.
- dpark 5y agoDid they actually promise a policy change around student loans?
- aesh2Xa1 5y agoIt’s here: https://joebiden.com/beyondhs/ https://joebiden.com/beyondhs/
- dpark 5y agoThanks. This is definitely not the same “wave a pen and forgive all debt” demands I see from the very progressive left, but it’s certainly a lot more progressive on loan forgiveness than the current policies.
- eric4smith 5y agoDebt forgiveness for student loans is a horrible idea. It perpetuates choosing degrees that will in 90% of cases never have enough of a return to pay for the loan itself. Look, I’m not against choosing whatever degree you want. But fiduciary responsibility is doing even a tiny bit of research to see the LTV of that degree. Unless there is out and out fraud, very little of student loans should be forgiven.
- jonahbenton 5y agoNearly all of these forgiven loans were likely issued under fraudulent pretenses.
- deleted 5y ago[deleted]
- thaumasiotes 5y ago> But fiduciary responsibility is doing even a tiny bit of research to see the LTV of that degree. How are you going to measure it? Philosophy majors tend to have good life outcomes. Is that because they were trained in philosophy? Why would training as a chef be less valuable than training as a philosopher?
- hellcow 5y agoPresumably if the average earnings of "people who obtained a philosophy degree" is higher than those who trained as a chef, then lenders would be willing to pay more for that education. That seems like a trivial thing for lenders to track and learn over time.
- thaumasiotes 5y agoWe're not talking about the lenders investigating the value of making a loan. We're talking about the student investigating the value of obtaining a degree. >>> Look, I’m not against choosing whatever degree you want. But fiduciary responsibility is doing even a tiny bit of research to see the LTV of that degree.
- core-utility 5y agoBlanket funding of education is terrible. Loans should be negotiated on an individual basis based on the degree and that degree's ability to provide a salary high enough to pay back the original loan. This government loan enables colleges to charge more because students will simply take a higher loan out with no calculation of return on investment.
- xracy 5y agoEvery person with a bullshit degree that I know had their parents pay their entire way in college. There are plenty of necessary degrees that don't provide enough compensation to pay off the loans of people who take them. We don't pay money in this society for people who provide necessary services. If you think that we do, then please, by all means, explain to me why Software Engineers (a profession invented in the last 50 years), get paid more than farmers (a profession that defines how humans have come so far).
- slt2021 5y agoBecause farmers depend heavily on software engineers to create and maintain highly complex software for their automated GPS navigated tractors. Plus supply and demand, farm labor can come from Mexico for cheap, but firmware software engineers in agriculture aint coming for the same price
- xracy 5y ago> Because farmers depend heavily on software engineers to create and maintain highly complex software for their automated GPS navigated tractors. Yes, farmers need Software engineers to make complex GPS software, which is why we didn't have farmers until after software engineers became a profession. Before software engineers made gps for tractors we were all hunter-gatherers. The first part of your comment is so absurd I legitimately can't tell if you're serious.
- slt2021 5y agoBy farmers I was referring to modern farmers. You can certainly do farming in early 19/20th century style with horses instead of tractors, but let me know how that would work for farmer’s profit&loss
- D13Fd 5y agoThis is truly terrible. It penalizes people who paid off their own loans, it rewards people who made poor choices, and it drives up the cost of school for everyone.
- core-utility 5y agoWhile I generally agree with you, this forgiveness seems to target victims of fraud rather than student loans in general. It could be argued that the government should have never allowed a loan to be taken out for a fraudulent school (if they had done due diligence)
- elpatoisthebest 5y agoFrom the article: "The loans of nearly 16,000 former students are being forgiven under a legal provision known as borrower defense to repayment, which allows students to have their debts erased if they prove that their schools defrauded them." I paid off my student loans for the state university I attended. How does a student who can prove they were defrauded being forgiven penalize me?
- D13Fd 5y agoLowering the risk of student loans drives more people to take them out, putting more money in the system. More money in the system increases the cost of schools for everyone. Assuming you are in the US, then you, I, and everyone else here is paying for this debt forgiveness via taxes.
- xracy 5y agoProve the causal link that lowering the risk of student loans (by forgiving student loan debt) drives more people to take them out. You're also missing the illegal behavior on the part of the for-profit institutions. That's what we, as tax-payers, are on the hook for. And we would be on the hook for it regardless. You want to complain, complain about the for-profit institutions that defrauded these people illegally for us to have to clean up.
- 5y ago