11 ms·

A Student-Loan Payment Pause Led Borrowers to Take on More Debt

33 points by mennaali 3y ago

jryan49 3y ago
Probably took on more debt cause of the pandemic not cause their student loans were paused...
- rufus_foreman 3y ago
  Borrowers with government owned loans had those loans paused during the pandemic, and took on more debt. Borrowers with loans that were not government owned did not have those loans paused during the pandemic, and did not take on more debt.
chiefalchemist 3y ago
Where is there a source - is there a source - for less aggregated student loan data? For example, not everyone gets the same amount loaned. What does that distribution look like? Map it to higher edu schools? Map it to tuition? Map it to high schools? Etc. The point is, there are a lot of students and therefore a lot of debt. Naturally, such a big pool is going to have outliers. When the media parades a student loan "victim" is that (e.g.) $100k of debt typical or atypical?
- anonymouskimmer 3y ago
  > When the media parades a student loan "victim" is that (e.g.) $100k of debt typical or atypical? It's atypical. Only 10% owe $100k or more: https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-student-loans.htm https://www.federalreserve.gov/publications/2022-economic-we... > Most student loan borrowers owe less than $25,000 on their loans. The median amount of education debt in 2021 among those with any outstanding debt for their own education was between $20,000 and $24,999. One-quarter of student loan borrowers had less than $10,000 in outstanding student debt (figure 40). Student debt balances vary across different demographic groups. Borrowers with an income of less than $50,000 a year were more likely to carry lower balances of student loan debt.
  - 35997279 3y ago
    This is what has always confused me about the student debt conversation. $25,000 is not a lot of debt. That's about what it cost to get a brand new Toyota Corolla. On top of which, the terms of this debt is very favorable. PAYE, low interest rates (mind were 6.8%, which was outrageous at the time but now we're entering a more inflationary / normal interest rate world), and are termed for 20+ years. There is also a lot of debt taken on by graduate students. To be clear, only around 30% of Americans overall have even a bachelor's degree. The need to take on graduate school debt just simply isn't there in the way the taking on debt for undergraduate is. So I think these numbers should break out graduate students, especially those who went into high-earning professions with credential gatekeepers, like medicine (law is debatable -- we've minted way too many lawyers).
    - anonymouskimmer 3y ago
      To be fair, I think those loans numbers are current balances, not original balances. So much of it represents originally larger balances that have now been paid down to less than $25k (while others represent balance increases due to capitalized-interest). Otherwise I agree with you. Grad-degree credentialism is a problem, especially in the STEM fields. Plenty of people, including some with student debt, can't afford a new Corolla (even ignoring the debt). They buy used.
- agloe_dreams 3y ago
  This is a firm misunderstanding of the issue at hand. The real problem is less the large universities but the area under the curve. Notably...community colleges. These ask for only ~$20k for a degree but the degree is sold to be worth more than it is (virtually valueless) and the Finance departments basically shovel students in, have them fill out a form, and tell them "you were approved" and the student never sees the interest rates, payments, or rough estimated profit of the degree. A large college has to answer to regulatory pressure..the little ones though are the real evils.
  - everybodyknows 3y ago
    Not doubting this, but -- sources?
  - chiefalchemist 3y ago
    The Higher Edu Industrial Complex and the society has created the perception of a need (for a four year degree) and has stigmatized alternatives (i.e., trades). It's been a collective effort. The fact that so many of the students taking on the loans have no concept of debt, compound interest, costs of living, etc. boggles the mind. And sacrafic? And adversity? Not even on their radar.
0zemp2c 3y ago
loan forgiveness is tantamount to asking me to participate in buying out someone else's loan a loan used to buy a degree a degree which isn't generating enough income to pay off the loan if you buy out other underperforming assets like foreclosed homes, there is a discount...where is the discount on these underperforming degrees? why do I want your underperforming asset? I already have a degree, but thanks!
- mempko 3y ago
  That is not how money works. Your income is other people going into debt. Your salary rise means more money in the system. Loan forgiveness means more income to you.
  - amadeuspagel 3y ago
    Woah, we should just forgive all loans then.
  - jallen_dot_dev 3y ago
    > Loan forgiveness means more income to you. But is it more in real or nominal terms?
    - mempko 3y ago
      In real terms.
- EatingWithForks 3y ago
  Frankly I think the problem of student debt is so large and so burdensome on the younger population that I don't really care if they're considered "underperforming assets" or whatever. The more money this generation spends on debt the less they have to buy houses and have children, and I personally will benefit from them being able to buy my house when I'm old and want to downsize and them having children so that there will be income into social security when I'm retired. All in all I would consider it an investment into my future retirement by ensuring the younger generation can support me.
idiotsecant 3y ago
An alternate headline for this story might be 'Students temporarily relieved of crushing lifelong debt slavery actually able to get mortgages and achieve a basic level of human dignity that would have been commonplace 50 years ago'. The education system needs a stupendous amount of reform, not the least of which is the ridiculous debt load we put on young adults in what should be the years they're laying the foundation for a productive, happy life.
- j_walter 3y ago
  To be fair this is debt they take on willingly. Now if the government should be letting 18-year olds take on huge amounts of debt without understanding the long term consequences...thats a different story.
  - willis936 3y ago
    This seems like a result of Sallie Mae going private. Can someone explain the reason why Sallie Mae is no longer a GSE?
    - j_walter 3y ago
      There are many reasons, but mainly that we are letting people take loans for significantly over what tuition is. When you write a check to an 18-year old for $5-10K every 3-4 months above and beyond what tuition costs...they aren't always the best at spending it wisely. Certainly government ownership and distribution of student loans that changed in 2009 was also a driver of the huge increase in loans, people going to college and thus rising costs.
    - adventured 3y ago
      It's not. The US student loan debt explosion began in the 1990s. It's a result of the US Government guaranteeing loans of ever greater sums regardless of the ability to pay them back. It's an extraordinarily obvious outcome to that foolish approach. Try it in real-estate or any other sector and see what happens. If they tried it in healthcare, a new US Government guaranteed healthcare loan program (need a $1 million loan (at 9% that you can't discharge) for your surgery? step right up), it's similarly obvious what would happen. The only solution being offered by the left is to generate a lot more debt in one of a few different ways (and the right is largely proposing no solutions at all; both sides are captive morons (to their dogma) when it comes to solving the student loan mess that the government created).
germamme 3y ago
Loan forgiveness is not a workable solution, it rewards one generation of students at the expense of the older folk who have paid and the younger folk who are not in college yet.
- rootusrootus 3y ago
  It's especially not workable if it doesn't involve a correction to the system that let the debt accumulate to begin with. It just becomes an expectation for future generations. If anything it'll drive the debt higher, faster.
  - Ekaros 3y ago
    Game theory would be to leverage to max with student loans and then invest the money you would have spend on tuition... Sounds like an other transfer to wealthy from poor.
    - anonymouskimmer 3y ago
      Some students did this with crypto or other ventures in the last decade or so.
- hikingsimulator 3y ago
  The former is a sunk cost fallacy, and the latter is solved by changing how education is financed -- making public universities free like most of the developped world. I took up debt to study at the graduate level, I won't use that past painpoint to defend forcing people to enter into debt now.
  - HDThoreaun 3y ago
    Forgiving the loans destroys the incentive to fix the system. Who's advocating for that now? Certainly no serious politician.
  - rocqua 3y ago
    It doesn't need to be free, just manageable. Cap it to 3000 a year, and things are much better. That's how the dutch system works.
deleted 3y ago
[deleted]
endisneigh 3y ago
I don't know how anyone can support student loan forgiveness. it's simply a fact that college graduates and people who even partially completed college make more money than those who never attended. there's really no argument that would justify forgiving peoples' loans vs giving the same amount of money to the poorest people in reverse order (poorest getting richer). if for some odd reason the poorest people also happened to be college participants (though to be clear, this is not true) then fine; still no broad student loan forgiveness required. I've asked people who support student loan forgiveness for their response and I get blank stares. and yes, we shouldn't give the rich tax breaks either.
- skinnymuch 3y ago
  Everyone could get the same tax credit that is also itself taxed. Forgive the loans of people and get poor people crucial money. No one has said that to you?
  - endisneigh 3y ago
    no because it is nonsensical. you still could give even more money to poor people if you didn't forgive the loans of college participants. what you are saying isn't really a response, it's an ambiguation of the issue.
    - skinnymuch 3y ago
      What you’re saying doesn’t exclude my policy specifications. The end result is the same. Every person of age gets up to $X in the way of loan debt payoff and/or tax credits. The results will be filed in taxes. A progressive tax rate based on wealth can be up to 100% for this specific money. If this is still an ambiguation of the issue to you, I can clarify further.
      - endisneigh 3y ago
        It’s not progressive because you’re unnecessarily giving rich people money. Is it that hard to understand? No rich person will have 100% taxation, thus they have benefited unnecessarily from your scheme. Simply give poor money people exclusively.
purpleblue 3y ago
Loan forgiveness is a temporary solution to appease voters with debt. It doesn't solve the root cause because in 10 years, the number of people with crushing student debt will be back to up to the same levels. You solve the problem by re-allowing student debt to be dischargeable through bankruptcy again. This is the root cause of the problem. The fact Clinton and Bush allowed this to happen is disgusting. All it did was allow banks to give loans to EVERYONE without any fears. Then schools could raise rates knowing kids would still pay the predatory prices, and that's how we get into the mess we are in now. By allowing student debt to be dischargeable, banks are now taking a risk of losing their money, which means that they won't give loans to people who frankly are wasting their money. A parent at my workplace was asking how she could afford to pay her daughter's $80k/yr tuition for a sociology degree. The fact that this completely stupid idea was even being considered shows the depths to which society is fucked up.
- rocqua 3y ago
  That would cause a massive interest rate hike, no?
  - purpleblue 3y ago
    No, why?
    - rocqua 3y ago
      Banks would need to price the risk of failing to get the loans back. Part of that might be refusing loans, but part of that would be raising the price. Even the most creditworthy student is more risky to loan to when a bankruptcy would cancel the debt. So even they should get a marginally higher interest rate.
      - purpleblue 3y ago
        If you look at historical rates, the dischargeability of student loans via bankruptcy had NO effect on student loan interest rates. https://www.savingforcollege.com/article/historical-federal-student-interest-rates-and-fees https://www.savingforcollege.com/article/historical-federal-...
panzagl 3y ago
As someone who has is currently enjoying the pause (on PLUS loans for my daughters' college- on a side note whatever happened to college being the parents' responsibility) the ideal solution to me is to resume payments with either no interest or relatively low interest (the rate was 7-8% even when credit was cheap). That way the loans are being paid back, but the students are not immediately burdened with crushing debt payments (basically the equivalent of a pretty low car payment). This seems so blindingly obvious to me that I'm really worried I've become totally disconnected from reality that no one else has floated the idea.
- D13Fd 3y ago
  That's just partial loan forgiveness - forgiving the interest but not the underlying debt.
beej71 3y ago
This might be true for some or even most, but I know someone who was able to pay off a pile of horrid credit card debt due to the pause.

33 points by mennaali 3y ago

jryan49 3y ago

Probably took on more debt cause of the pandemic not cause their student loans were paused...

rufus_foreman 3y ago
Borrowers with government owned loans had those loans paused during the pandemic, and took on more debt. Borrowers with loans that were not government owned did not have those loans paused during the pandemic, and did not take on more debt.

chiefalchemist 3y ago

Where is there a source - is there a source - for less aggregated student loan data? For example, not everyone gets the same amount loaned. What does that distribution look like? Map it to higher edu schools? Map it to tuition? Map it to high schools? Etc. The point is, there are a lot of students and therefore a lot of debt. Naturally, such a big pool is going to have outliers. When the media parades a student loan "victim" is that (e.g.) $100k of debt typical or atypical?

anonymouskimmer 3y ago
> When the media parades a student loan "victim" is that (e.g.) $100k of debt typical or atypical? It's atypical. Only 10% owe $100k or more: https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-student-loans.htm https://www.federalreserve.gov/publications/2022-economic-we... > Most student loan borrowers owe less than $25,000 on their loans. The median amount of education debt in 2021 among those with any outstanding debt for their own education was between $20,000 and $24,999. One-quarter of student loan borrowers had less than $10,000 in outstanding student debt (figure 40). Student debt balances vary across different demographic groups. Borrowers with an income of less than $50,000 a year were more likely to carry lower balances of student loan debt.
- 35997279 3y ago
  This is what has always confused me about the student debt conversation. $25,000 is not a lot of debt. That's about what it cost to get a brand new Toyota Corolla. On top of which, the terms of this debt is very favorable. PAYE, low interest rates (mind were 6.8%, which was outrageous at the time but now we're entering a more inflationary / normal interest rate world), and are termed for 20+ years. There is also a lot of debt taken on by graduate students. To be clear, only around 30% of Americans overall have even a bachelor's degree. The need to take on graduate school debt just simply isn't there in the way the taking on debt for undergraduate is. So I think these numbers should break out graduate students, especially those who went into high-earning professions with credential gatekeepers, like medicine (law is debatable -- we've minted way too many lawyers).
  - anonymouskimmer 3y ago
    To be fair, I think those loans numbers are current balances, not original balances. So much of it represents originally larger balances that have now been paid down to less than $25k (while others represent balance increases due to capitalized-interest). Otherwise I agree with you. Grad-degree credentialism is a problem, especially in the STEM fields. Plenty of people, including some with student debt, can't afford a new Corolla (even ignoring the debt). They buy used.
agloe_dreams 3y ago
This is a firm misunderstanding of the issue at hand. The real problem is less the large universities but the area under the curve. Notably...community colleges. These ask for only ~$20k for a degree but the degree is sold to be worth more than it is (virtually valueless) and the Finance departments basically shovel students in, have them fill out a form, and tell them "you were approved" and the student never sees the interest rates, payments, or rough estimated profit of the degree. A large college has to answer to regulatory pressure..the little ones though are the real evils.
- everybodyknows 3y ago
  Not doubting this, but -- sources?
- chiefalchemist 3y ago
  The Higher Edu Industrial Complex and the society has created the perception of a need (for a four year degree) and has stigmatized alternatives (i.e., trades). It's been a collective effort. The fact that so many of the students taking on the loans have no concept of debt, compound interest, costs of living, etc. boggles the mind. And sacrafic? And adversity? Not even on their radar.

0zemp2c 3y ago

loan forgiveness is tantamount to asking me to participate in buying out someone else's loan a loan used to buy a degree a degree which isn't generating enough income to pay off the loan if you buy out other underperforming assets like foreclosed homes, there is a discount...where is the discount on these underperforming degrees? why do I want your underperforming asset? I already have a degree, but thanks!

mempko 3y ago
That is not how money works. Your income is other people going into debt. Your salary rise means more money in the system. Loan forgiveness means more income to you.
- amadeuspagel 3y ago
  Woah, we should just forgive all loans then.
- jallen_dot_dev 3y ago
  > Loan forgiveness means more income to you. But is it more in real or nominal terms?
  - mempko 3y ago
    In real terms.
EatingWithForks 3y ago
Frankly I think the problem of student debt is so large and so burdensome on the younger population that I don't really care if they're considered "underperforming assets" or whatever. The more money this generation spends on debt the less they have to buy houses and have children, and I personally will benefit from them being able to buy my house when I'm old and want to downsize and them having children so that there will be income into social security when I'm retired. All in all I would consider it an investment into my future retirement by ensuring the younger generation can support me.

idiotsecant 3y ago

An alternate headline for this story might be 'Students temporarily relieved of crushing lifelong debt slavery actually able to get mortgages and achieve a basic level of human dignity that would have been commonplace 50 years ago'. The education system needs a stupendous amount of reform, not the least of which is the ridiculous debt load we put on young adults in what should be the years they're laying the foundation for a productive, happy life.

j_walter 3y ago
To be fair this is debt they take on willingly. Now if the government should be letting 18-year olds take on huge amounts of debt without understanding the long term consequences...thats a different story.
- willis936 3y ago
  This seems like a result of Sallie Mae going private. Can someone explain the reason why Sallie Mae is no longer a GSE?
  - j_walter 3y ago
    There are many reasons, but mainly that we are letting people take loans for significantly over what tuition is. When you write a check to an 18-year old for $5-10K every 3-4 months above and beyond what tuition costs...they aren't always the best at spending it wisely. Certainly government ownership and distribution of student loans that changed in 2009 was also a driver of the huge increase in loans, people going to college and thus rising costs.
  - adventured 3y ago
    It's not. The US student loan debt explosion began in the 1990s. It's a result of the US Government guaranteeing loans of ever greater sums regardless of the ability to pay them back. It's an extraordinarily obvious outcome to that foolish approach. Try it in real-estate or any other sector and see what happens. If they tried it in healthcare, a new US Government guaranteed healthcare loan program (need a $1 million loan (at 9% that you can't discharge) for your surgery? step right up), it's similarly obvious what would happen. The only solution being offered by the left is to generate a lot more debt in one of a few different ways (and the right is largely proposing no solutions at all; both sides are captive morons (to their dogma) when it comes to solving the student loan mess that the government created).

germamme 3y ago

Loan forgiveness is not a workable solution, it rewards one generation of students at the expense of the older folk who have paid and the younger folk who are not in college yet.

rootusrootus 3y ago
It's especially not workable if it doesn't involve a correction to the system that let the debt accumulate to begin with. It just becomes an expectation for future generations. If anything it'll drive the debt higher, faster.
- Ekaros 3y ago
  Game theory would be to leverage to max with student loans and then invest the money you would have spend on tuition... Sounds like an other transfer to wealthy from poor.
  - anonymouskimmer 3y ago
    Some students did this with crypto or other ventures in the last decade or so.
hikingsimulator 3y ago
The former is a sunk cost fallacy, and the latter is solved by changing how education is financed -- making public universities free like most of the developped world. I took up debt to study at the graduate level, I won't use that past painpoint to defend forcing people to enter into debt now.
- HDThoreaun 3y ago
  Forgiving the loans destroys the incentive to fix the system. Who's advocating for that now? Certainly no serious politician.
- rocqua 3y ago
  It doesn't need to be free, just manageable. Cap it to 3000 a year, and things are much better. That's how the dutch system works.

deleted 3y ago

[deleted]

endisneigh 3y ago

I don't know how anyone can support student loan forgiveness. it's simply a fact that college graduates and people who even partially completed college make more money than those who never attended. there's really no argument that would justify forgiving peoples' loans vs giving the same amount of money to the poorest people in reverse order (poorest getting richer). if for some odd reason the poorest people also happened to be college participants (though to be clear, this is not true) then fine; still no broad student loan forgiveness required. I've asked people who support student loan forgiveness for their response and I get blank stares. and yes, we shouldn't give the rich tax breaks either.

skinnymuch 3y ago
Everyone could get the same tax credit that is also itself taxed. Forgive the loans of people and get poor people crucial money. No one has said that to you?
- endisneigh 3y ago
  no because it is nonsensical. you still could give even more money to poor people if you didn't forgive the loans of college participants. what you are saying isn't really a response, it's an ambiguation of the issue.
  - skinnymuch 3y ago
    What you’re saying doesn’t exclude my policy specifications. The end result is the same. Every person of age gets up to $X in the way of loan debt payoff and/or tax credits. The results will be filed in taxes. A progressive tax rate based on wealth can be up to 100% for this specific money. If this is still an ambiguation of the issue to you, I can clarify further.
    - endisneigh 3y ago
      It’s not progressive because you’re unnecessarily giving rich people money. Is it that hard to understand? No rich person will have 100% taxation, thus they have benefited unnecessarily from your scheme. Simply give poor money people exclusively.

purpleblue 3y ago

Loan forgiveness is a temporary solution to appease voters with debt. It doesn't solve the root cause because in 10 years, the number of people with crushing student debt will be back to up to the same levels. You solve the problem by re-allowing student debt to be dischargeable through bankruptcy again. This is the root cause of the problem. The fact Clinton and Bush allowed this to happen is disgusting. All it did was allow banks to give loans to EVERYONE without any fears. Then schools could raise rates knowing kids would still pay the predatory prices, and that's how we get into the mess we are in now. By allowing student debt to be dischargeable, banks are now taking a risk of losing their money, which means that they won't give loans to people who frankly are wasting their money. A parent at my workplace was asking how she could afford to pay her daughter's $80k/yr tuition for a sociology degree. The fact that this completely stupid idea was even being considered shows the depths to which society is fucked up.

rocqua 3y ago
That would cause a massive interest rate hike, no?
- purpleblue 3y ago
  No, why?
  - rocqua 3y ago
    Banks would need to price the risk of failing to get the loans back. Part of that might be refusing loans, but part of that would be raising the price. Even the most creditworthy student is more risky to loan to when a bankruptcy would cancel the debt. So even they should get a marginally higher interest rate.
    - purpleblue 3y ago
      If you look at historical rates, the dischargeability of student loans via bankruptcy had NO effect on student loan interest rates. https://www.savingforcollege.com/article/historical-federal-student-interest-rates-and-fees https://www.savingforcollege.com/article/historical-federal-...

panzagl 3y ago

As someone who has is currently enjoying the pause (on PLUS loans for my daughters' college- on a side note whatever happened to college being the parents' responsibility) the ideal solution to me is to resume payments with either no interest or relatively low interest (the rate was 7-8% even when credit was cheap). That way the loans are being paid back, but the students are not immediately burdened with crushing debt payments (basically the equivalent of a pretty low car payment). This seems so blindingly obvious to me that I'm really worried I've become totally disconnected from reality that no one else has floated the idea.

D13Fd 3y ago
That's just partial loan forgiveness - forgiving the interest but not the underlying debt.

beej71 3y ago

This might be true for some or even most, but I know someone who was able to pay off a pile of horrid credit card debt due to the pause.