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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 st

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-...
      - rocqua 3y ago
        I am nowhere near well versed in US student-loans to learn much about your claim based on that link. I would love some more explanation of how those data support your claim.
D13Fd 3y ago
You solve the problem by cutting back the availability of student loans. Freely available student loans have pumped enormous amounts of money into the system, and tuition prices increased accordingly, driving the need for yet more loans. In the end what we have is young people taking on unthinkable amounts of debt to get the same level of education that they did 40 years ago, but now with nicer student centers and bigger stadiums (and, somehow, instructors who are paid less than before). If we cut off the endless supply of loans, and instead use limited grants to continue to foster diversity, we can reverse the cycle. Schools will once again have to compete on cost. Then we can talk about loan forgiveness for those who were victimized by the current system. But doing the forgiveness before fixing the system only makes the problem worse.
- purpleblue 3y ago
  Yes, sounds like we are in agreement.
- anonymouskimmer 3y ago
  The availability of student loans also gave governments an excuse to cut back on school funding. https://www.pbs.org/newshour/education/most-americans-dont-realize-state-funding-for-higher-ed-fell-by-billions https://www.pbs.org/newshour/education/most-americans-dont-r... Many state schools have their tuition controlled by the state government.
everybodyknows 3y ago
Banks have made no new loans since 2010, and apparently carried none of the credit risk even before then -- so there's never been any private-risk based discipline to granting of loans. >Initially, private banks provided capital for students loans, with parameters set by the government under the FFEL Program. These loans were owned by lenders and guaranteed by the government; in the case of default, lenders were reimbursed. In 1992, the DL program was created under which loans were directly made by the US Treasury. For many years, both the FFEL and DL programs existed side by side, and colleges could choose the source of funds. Despite the different source of funds and ownership, FFEL and DL loans were otherwise identical in terms of limits, interest rates, and repayment plans available, and many students likely were unaware of the different source of funds when taking loans through their schools’ financial aid offices. In 2010, following analysis and a bribery scandal of college administrators, the Health Care and Education Reconciliation Act of 2010 eliminated new loans under the FFEL program. Since 2010, all federal student loans have been made under the DL program. https://www.nber.org/system/files/working_papers/w31247/w31247.pdf https://www.nber.org/system/files/working_papers/w31247/w312...
- anonymouskimmer 3y ago
  Those are federal student loans. Private student loans continue to be available[1], and important, as GP states, non-dischargeable[2] (until some recent court cases[2, 2nd]). [1] - https://www.forbes.com/advisor/student-loans/best-private-student-loans/ https://www.forbes.com/advisor/student-loans/best-private-st... > Private student loans are best used to pay college costs after you’ve borrowed the maximum you qualify for in both subsidized and unsubsidized federal student loans. Private student loans come from banks, credit unions and online lenders, and unlike federal student loans for undergraduates, they require a credit check. That means most undergrads will need a co-signer in order to qualify. Private loans also are more expensive than federal loans and typically don’t offer the flexible repayment options their federal counterparts do. [2] - https://www.bankrate.com/loans/student-loans/private-student-loan-bankruptcy/#can https://www.bankrate.com/loans/student-loans/private-student... > Before 1976, borrowers could discharge private and federal student loans in a bankruptcy, just like credit card debt or medical debt. But the introduction of the U.S. Bankruptcy Code in 1978 caused a major shift with regard to student debt. > At the time, the intent of Congress was to protect educational loans from bankruptcy abuse. The amended bankruptcy code stated that funds received as an educational benefit would no longer be discharged unless the borrower could demonstrate undue hardship, which is no easy feat. [2, 2nd] > One notable case came to the U.S. Court of Appeals for the 2nd Circuit from the U.S. Bankruptcy Court for the Eastern District of New York. In the original case, U.S. Bankruptcy Judge Elizabeth S. Stong concluded that private student loans were not part of the Bankruptcy Code Section 523(a)(8)(A)(ii), which states that any “obligation to repay funds received as an educational benefit, scholarship or stipend” is typically not eligible for discharge. > She maintained that the section of code did not define student loans or educational benefit, and that referring to a loan as an educational benefit would be “an unconventional way to discuss a loan.” The appeals court affirmed the lower court’s ruling, arguing the U.S. Bankruptcy Code did not prohibit the discharge of a private student loan in bankruptcy. > Some see the 2nd Circuit decision as hope for a loosening of the criteria in private student loan bankruptcy discharge. However, in June 2021, the U.S. Supreme Court refused to hear the case of a Texas woman who sought to have her private student loans discharged under a different standard — so it appears that the undue hardship requirement may still be in effect.
anonymouskimmer 3y ago
> The fact Clinton and Bush allowed this to happen is disgusting. It actually happened under Carter. https://www.bankrate.com/loans/student-loans/private-student-loan-bankruptcy/#how https://www.bankrate.com/loans/student-loans/private-student... > But the introduction of the U.S. Bankruptcy Code in 1978 caused a major shift with regard to student debt. > At the time, the intent of Congress was to protect educational loans from bankruptcy abuse. The amended bankruptcy code stated that funds received as an educational benefit would no longer be discharged unless the borrower could demonstrate undue hardship, which is no easy feat.

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-...
    - rocqua 3y ago
      I am nowhere near well versed in US student-loans to learn much about your claim based on that link. I would love some more explanation of how those data support your claim.

D13Fd 3y ago

You solve the problem by cutting back the availability of student loans. Freely available student loans have pumped enormous amounts of money into the system, and tuition prices increased accordingly, driving the need for yet more loans. In the end what we have is young people taking on unthinkable amounts of debt to get the same level of education that they did 40 years ago, but now with nicer student centers and bigger stadiums (and, somehow, instructors who are paid less than before). If we cut off the endless supply of loans, and instead use limited grants to continue to foster diversity, we can reverse the cycle. Schools will once again have to compete on cost. Then we can talk about loan forgiveness for those who were victimized by the current system. But doing the forgiveness before fixing the system only makes the problem worse.

purpleblue 3y ago
Yes, sounds like we are in agreement.
anonymouskimmer 3y ago
The availability of student loans also gave governments an excuse to cut back on school funding. https://www.pbs.org/newshour/education/most-americans-dont-realize-state-funding-for-higher-ed-fell-by-billions https://www.pbs.org/newshour/education/most-americans-dont-r... Many state schools have their tuition controlled by the state government.

everybodyknows 3y ago

Banks have made no new loans since 2010, and apparently carried none of the credit risk even before then -- so there's never been any private-risk based discipline to granting of loans. >Initially, private banks provided capital for students loans, with parameters set by the government under the FFEL Program. These loans were owned by lenders and guaranteed by the government; in the case of default, lenders were reimbursed. In 1992, the DL program was created under which loans were directly made by the US Treasury. For many years, both the FFEL and DL programs existed side by side, and colleges could choose the source of funds. Despite the different source of funds and ownership, FFEL and DL loans were otherwise identical in terms of limits, interest rates, and repayment plans available, and many students likely were unaware of the different source of funds when taking loans through their schools’ financial aid offices. In 2010, following analysis and a bribery scandal of college administrators, the Health Care and Education Reconciliation Act of 2010 eliminated new loans under the FFEL program. Since 2010, all federal student loans have been made under the DL program. https://www.nber.org/system/files/working_papers/w31247/w31247.pdf https://www.nber.org/system/files/working_papers/w31247/w312...

anonymouskimmer 3y ago
Those are federal student loans. Private student loans continue to be available[1], and important, as GP states, non-dischargeable[2] (until some recent court cases[2, 2nd]). [1] - https://www.forbes.com/advisor/student-loans/best-private-student-loans/ https://www.forbes.com/advisor/student-loans/best-private-st... > Private student loans are best used to pay college costs after you’ve borrowed the maximum you qualify for in both subsidized and unsubsidized federal student loans. Private student loans come from banks, credit unions and online lenders, and unlike federal student loans for undergraduates, they require a credit check. That means most undergrads will need a co-signer in order to qualify. Private loans also are more expensive than federal loans and typically don’t offer the flexible repayment options their federal counterparts do. [2] - https://www.bankrate.com/loans/student-loans/private-student-loan-bankruptcy/#can https://www.bankrate.com/loans/student-loans/private-student... > Before 1976, borrowers could discharge private and federal student loans in a bankruptcy, just like credit card debt or medical debt. But the introduction of the U.S. Bankruptcy Code in 1978 caused a major shift with regard to student debt. > At the time, the intent of Congress was to protect educational loans from bankruptcy abuse. The amended bankruptcy code stated that funds received as an educational benefit would no longer be discharged unless the borrower could demonstrate undue hardship, which is no easy feat. [2, 2nd] > One notable case came to the U.S. Court of Appeals for the 2nd Circuit from the U.S. Bankruptcy Court for the Eastern District of New York. In the original case, U.S. Bankruptcy Judge Elizabeth S. Stong concluded that private student loans were not part of the Bankruptcy Code Section 523(a)(8)(A)(ii), which states that any “obligation to repay funds received as an educational benefit, scholarship or stipend” is typically not eligible for discharge. > She maintained that the section of code did not define student loans or educational benefit, and that referring to a loan as an educational benefit would be “an unconventional way to discuss a loan.” The appeals court affirmed the lower court’s ruling, arguing the U.S. Bankruptcy Code did not prohibit the discharge of a private student loan in bankruptcy. > Some see the 2nd Circuit decision as hope for a loosening of the criteria in private student loan bankruptcy discharge. However, in June 2021, the U.S. Supreme Court refused to hear the case of a Texas woman who sought to have her private student loans discharged under a different standard — so it appears that the undue hardship requirement may still be in effect.

anonymouskimmer 3y ago

> The fact Clinton and Bush allowed this to happen is disgusting. It actually happened under Carter. https://www.bankrate.com/loans/student-loans/private-student-loan-bankruptcy/#how https://www.bankrate.com/loans/student-loans/private-student... > But the introduction of the U.S. Bankruptcy Code in 1978 caused a major shift with regard to student debt. > At the time, the intent of Congress was to protect educational loans from bankruptcy abuse. The amended bankruptcy code stated that funds received as an educational benefit would no longer be discharged unless the borrower could demonstrate undue hardship, which is no easy feat.