11 ms·

Borrowers Got $127B in Student Loans Canceled

19 points by theoldlove 3y ago

superduty 3y ago
Unless the teachers and schools were required to issue refunds, debt didn’t get “cancelled”, it was shifted to those who had no part in creating or agreeing to the debt. So no, it was not “cancelled”, it was shifted to you, your friends, you mom and dad..
- lvl102 3y ago
  I don’t think you understand how loan securitization work.
  - whatshisface 3y ago
    You can't blame anyone for being wrong about an article that's behind a paywall...
    - hoppyhoppy2 3y ago
      Gift Link: https://www.nytimes.com/2023/11/11/business/student-loans-debt-cancellation.html?unlocked_article_code=1.9kw.juLm.RBR8bwbiIrA5&smid=url-share https://www.nytimes.com/2023/11/11/business/student-loans-de...
  - verteu 3y ago
    The article says: "The cost of that relief is ultimately borne by taxpayers."
  - jcalvinowens 3y ago
    It's a meaningless semantic argument, you're both right. One valid way of looking at this is that the debt cancellation costs nothing: the value of the loan doesn't end up being paid by anybody else, it genuinely ceases to exist. The direct cost is $0. But obviously, you've reduced the future income of the government by that amount: that necessarily means that at some future time, taxes must be raised or spending must be cut (or the deficit increased...) to preserve the status quo and cover the shortfall ($300B - $980B over the next decade for the original plan, according to the CBO). The argument that forgiving the debt has no cost to society is disingenuous. But so is the argument that "the remaining value of the debt will have to be paid by other people". The reality is somewhere in between.
- conk 3y ago
  I’ll happily pay taxes to help other Americans achieve an education that allows them to contribute to society. Seems like a much better ROI vs other federal programs.
  - hotpotamus 3y ago
    But we probably could have developed 1/10th of a really cool bomber with that money.
    - Gibbon1 3y ago
      In the last 15 years the US spent something like 700B on modernizing nuclear weapons. I can see how freeing people from debt so they can do things like buy houses, have kids, buy stuff benefits me. I can't see how the US's vast nuclear arsenal benefits me at all. What's the US going to do with them, kill 500M Chinese? Allow some religious nutter politician to cosplay the end times? No thanks.
      - atonse 3y ago
        The very principle of erasing loans that students willingly made a promise to pay rubs me the wrong way. You entered into an agreement and then borrowed money. But now are expecting the country to pay your loan back? I would’ve been ok with erasing the interest. Just not the principal.
        Gibbon1 3y ago
        What other options and choices did the system make available to them? For many the choice was take on loans and go to college. Or not go to college. With everyone and his dog telling them to pick the first choice. Also if one knows how it all works it's obvious it's just a give away to the banking industry.
        atonse 3y ago
        I can’t find the source so please refute the following but you find evidence suggesting otherwise, but a non-trivial portion of the loans were for graduate degrees which are totally extra and unnecessary in the sense of “what choice did they have” But again, I’d personally like to find that source to verify if this is true. And if it is, those loans had no business getting forgiven.
- sillystuff 3y ago
  It is a matter of priorities. Cancelling debt allows our youth to have a better start in life. Alternatively, we could use that money to murder brown children overseas, as we usually do. Or, provide giveaways to the rich in the form of subsidies and preferential tax treatment for their unearned income which is always a favorite too. Really, we should go back to free higher education like the older boomers had available to them, and is still available in many civilized countries. But, the right and far-right controls policy in the US.
  - superduty 3y ago
    Debt doesn’t get cancelled. It gets forcibly moved to those who had no part in creating it. I worked hard to save for my children’s schooling, as did they, taking part time bd full-time summer jobs. We chose the schools that did not require loans or that required minimal loans.
    - sillystuff 3y ago
      People making low wages work hard (harder than the majority of folks on this site; e.g., there wasn't a single janitor at my last office that didn't have multiple jobs to make ends meet), but it is unlikely they will have excess funds to pay for an advanced degree without taking on substantial debt. Funding education via individual ability to pay vs. taxation perpetuates class divisions from birth-- a defacto caste system. It sounds like you and your children chose your parents sufficiently well that this is not a concern for you. Lucky you. I predict that the "Fuck you, I've got mine," attitude is, in large part, going to be what brings western society crashing down. And, I would argue that this attitude, and the policies that naturally flow from it, absolutely had a part in creating our fucked up system-- where people who did not choose their parents as well as you have to take on debt to get an education, in the first place.
- veec_cas_tant 3y ago
  These programs have existed for many years and at least some portion of borrowers took out loans with the expectation that the government would honor those programs. There is no real reason, outside of ripping off those that can't navigate bureaucracy, to argue against automating and streamlining these programs that already existed: > Many of the programs that the Biden administration is using have existed for years, sometimes decades, but were notoriously troubled, forcing borrowers to navigate complicated bureaucratic hurdles. By adjusting rules and temporarily waiving some requirements, Education Department officials have accelerated long-delayed relief. > Public Service Loan Forgiveness... In 2007, Congress passed a law intended to entice more college graduates into public service careers: Those who worked for government agencies or nonprofit organizations would, after 10 years of monthly loan payments, have their remaining federal student loan balance eliminated... But the program’s complex rules turned it into a quagmire that rejected 99 percent of applicants — and an effort in 2018 to apply patchwork fixes became another debacle. > Income-Driven Repayment Adjustment... Income-driven payment plans are designed to eliminate any remaining balance after a set period of repayment, typically 20 years. Even for borrowers who never enrolled in those plans, the Education Department decided to count virtually any payment, for any amount, as a qualifying one — and it added to its tally many months in which borrowers made no payments at all because they had a long-term deferment or forbearance. The department chose to apply those adjustments automatically for all borrowers, no application needed. The result was that hundreds of thousands of borrowers abruptly discovered that their loans had reached the 20-year mark and been eliminated. The first notification letters were sent on July 14. > Borrower Defense to Repayment and Closed-School Discharge... The Obama administration began to build a system for handling those requests, but it ground to a halt during the Trump administration. When Mr. Biden assumed office, tens of thousands of claims — some that had been languishing for as long as six years — were pending, and over 130,000 others had been summarily rejected. In 2022, the Biden administration agreed to settle a class-action claim that covered 200,000 borrowers who had attended more than 150 schools. > Total and Permanent Disability... Borrowers who are permanently disabled are eligible to have their federal student loans eliminated. The process had long been a bureaucratic obstacle course, requiring doctors’ notes — which were often rejected, with little or no explanation, because of documentation errors — and years of income-monitoring and other compliance requirements. Many who would have qualified for relief never bothered to apply. But two government agencies already had data on people who were fully disabled: the Social Security Administration and the Department of Veterans Affairs. By creating automatic data-matching programs with both agencies and eliminating some income documentation requirements, the Education Department significantly expanded the number of borrowers who gained relief.
- imtringued 3y ago
  Anyone who received a loan under lenient conditions and paid it off benefitted indirectly by being allowed to receive the loan in the first place. Private lenders are selective and would only lend to the best students. So all these people on the margin with say a 85% chance of completing university would have to be denied, because there is no way they could pay the interest to make this lending profitable for the bank. The idea that the loans would be a profit center for the US was a pipe dream to begin with.
- Eddy_Viscosity2 3y ago
  Not entirely true. Some of it yes, but much of the debt wasn't money borrowed, but fees and interest accrued after borrowing.
  - kermatt 3y ago
    Was there ever a serious look at restructuring loans that did not dispose of the principal? That could have been a more responsible solution.
h2odragon 3y ago
Can we get mortgage forgiveness next? Imagine what a boon that will be for the economy.
- FooBarBizBazz 3y ago
  Not unless it includes a free house for everyone who didn't get in on the racket.
- cramjabsyn 3y ago
  If there are demonstrably predatory mortgages in place then yes they should be forgiven, or at the the least converted to a low rate standard loan without mandatory insurance. We need better laws and repercussions against screwing over the working class.
  - aeternum 3y ago
    Ah yes when those too-good-to-be-true variable rate mortgages ramp up the rate due to inflation, we can just relabel them as predatory. It's not like the risk of was ever disclosed to the purchaser. Oh wait. We continue to bail out and incentivize poor decision-making, then wonder why the proportion of poor decisions seems to be increasing.
    - cramjabsyn 3y ago
      Whose poor decision is that? The banks created those products, the banks profit from them massively, and the banks receive the socialized bailout using our money. How exactly is being approved for a loan to buy a first home the fault of the purchaser? We can shop in any grocery store trusting that the products are safe to consume. Meanwhile, banks are allowed to legally sell financial poison? Sure, compare rates, terms, insurance, etc. But financial time bombs like you describe should be illegal. The banks should suffer the consequences of their greed. And the working class should not be left homeless as a consequence.
      - gustavus 3y ago
gustavus 3y ago
For this curious it outlines various ways the loans have been discharged including 1. Discharging loans against colleges that have filed bankruptcy and closed 2. People that have taken jobs in the public service sector qualify for student loan forgiveness 3. Getting rid of fees and loans that were accumulated due to predatory behavior on the part of the servicers. Maybe discuss the specifics rather than the generals of the article.
- lokar 3y ago
  It seems most of it was fixing broken rules that were intended to have forgiven most of this debt years ago.
hoppyhoppy2 3y ago
Gift Article link: https://www.nytimes.com/2023/11/11/business/student-loans-debt-cancellation.html?unlocked_article_code=1.9kw.juLm.RBR8bwbiIrA5&smid=url-share https://www.nytimes.com/2023/11/11/business/student-loans-de...
hackeraccount 3y ago
Why do I think that this will not lower the expectation of Universities that any future students will be able to borrow large amounts of money.

19 points by theoldlove 3y ago

Unless the teachers and schools were required to issue refunds, debt didn’t get “cancelled”, it was shifted to those who had no part in creating or agreeing to the debt. So no, it was not “cancelled”, it was shifted to you, your friends, you mom and dad..

lvl102 3y ago
I don’t think you understand how loan securitization work.
- whatshisface 3y ago
  You can't blame anyone for being wrong about an article that's behind a paywall...
  - hoppyhoppy2 3y ago
    Gift Link: https://www.nytimes.com/2023/11/11/business/student-loans-debt-cancellation.html?unlocked_article_code=1.9kw.juLm.RBR8bwbiIrA5&smid=url-share https://www.nytimes.com/2023/11/11/business/student-loans-de...
- verteu 3y ago
  The article says: "The cost of that relief is ultimately borne by taxpayers."
- jcalvinowens 3y ago
  It's a meaningless semantic argument, you're both right. One valid way of looking at this is that the debt cancellation costs nothing: the value of the loan doesn't end up being paid by anybody else, it genuinely ceases to exist. The direct cost is $0. But obviously, you've reduced the future income of the government by that amount: that necessarily means that at some future time, taxes must be raised or spending must be cut (or the deficit increased...) to preserve the status quo and cover the shortfall ($300B - $980B over the next decade for the original plan, according to the CBO). The argument that forgiving the debt has no cost to society is disingenuous. But so is the argument that "the remaining value of the debt will have to be paid by other people". The reality is somewhere in between.
conk 3y ago
I’ll happily pay taxes to help other Americans achieve an education that allows them to contribute to society. Seems like a much better ROI vs other federal programs.
- hotpotamus 3y ago
  But we probably could have developed 1/10th of a really cool bomber with that money.
  - Gibbon1 3y ago
    In the last 15 years the US spent something like 700B on modernizing nuclear weapons. I can see how freeing people from debt so they can do things like buy houses, have kids, buy stuff benefits me. I can't see how the US's vast nuclear arsenal benefits me at all. What's the US going to do with them, kill 500M Chinese? Allow some religious nutter politician to cosplay the end times? No thanks.
    - atonse 3y ago
      The very principle of erasing loans that students willingly made a promise to pay rubs me the wrong way. You entered into an agreement and then borrowed money. But now are expecting the country to pay your loan back? I would’ve been ok with erasing the interest. Just not the principal.
      - Gibbon1 3y ago
        What other options and choices did the system make available to them? For many the choice was take on loans and go to college. Or not go to college. With everyone and his dog telling them to pick the first choice. Also if one knows how it all works it's obvious it's just a give away to the banking industry.
        atonse 3y ago
        I can’t find the source so please refute the following but you find evidence suggesting otherwise, but a non-trivial portion of the loans were for graduate degrees which are totally extra and unnecessary in the sense of “what choice did they have” But again, I’d personally like to find that source to verify if this is true. And if it is, those loans had no business getting forgiven.
sillystuff 3y ago
It is a matter of priorities. Cancelling debt allows our youth to have a better start in life. Alternatively, we could use that money to murder brown children overseas, as we usually do. Or, provide giveaways to the rich in the form of subsidies and preferential tax treatment for their unearned income which is always a favorite too. Really, we should go back to free higher education like the older boomers had available to them, and is still available in many civilized countries. But, the right and far-right controls policy in the US.
- superduty 3y ago
  Debt doesn’t get cancelled. It gets forcibly moved to those who had no part in creating it. I worked hard to save for my children’s schooling, as did they, taking part time bd full-time summer jobs. We chose the schools that did not require loans or that required minimal loans.
  - sillystuff 3y ago
    People making low wages work hard (harder than the majority of folks on this site; e.g., there wasn't a single janitor at my last office that didn't have multiple jobs to make ends meet), but it is unlikely they will have excess funds to pay for an advanced degree without taking on substantial debt. Funding education via individual ability to pay vs. taxation perpetuates class divisions from birth-- a defacto caste system. It sounds like you and your children chose your parents sufficiently well that this is not a concern for you. Lucky you. I predict that the "Fuck you, I've got mine," attitude is, in large part, going to be what brings western society crashing down. And, I would argue that this attitude, and the policies that naturally flow from it, absolutely had a part in creating our fucked up system-- where people who did not choose their parents as well as you have to take on debt to get an education, in the first place.
veec_cas_tant 3y ago
These programs have existed for many years and at least some portion of borrowers took out loans with the expectation that the government would honor those programs. There is no real reason, outside of ripping off those that can't navigate bureaucracy, to argue against automating and streamlining these programs that already existed: > Many of the programs that the Biden administration is using have existed for years, sometimes decades, but were notoriously troubled, forcing borrowers to navigate complicated bureaucratic hurdles. By adjusting rules and temporarily waiving some requirements, Education Department officials have accelerated long-delayed relief. > Public Service Loan Forgiveness... In 2007, Congress passed a law intended to entice more college graduates into public service careers: Those who worked for government agencies or nonprofit organizations would, after 10 years of monthly loan payments, have their remaining federal student loan balance eliminated... But the program’s complex rules turned it into a quagmire that rejected 99 percent of applicants — and an effort in 2018 to apply patchwork fixes became another debacle. > Income-Driven Repayment Adjustment... Income-driven payment plans are designed to eliminate any remaining balance after a set period of repayment, typically 20 years. Even for borrowers who never enrolled in those plans, the Education Department decided to count virtually any payment, for any amount, as a qualifying one — and it added to its tally many months in which borrowers made no payments at all because they had a long-term deferment or forbearance. The department chose to apply those adjustments automatically for all borrowers, no application needed. The result was that hundreds of thousands of borrowers abruptly discovered that their loans had reached the 20-year mark and been eliminated. The first notification letters were sent on July 14. > Borrower Defense to Repayment and Closed-School Discharge... The Obama administration began to build a system for handling those requests, but it ground to a halt during the Trump administration. When Mr. Biden assumed office, tens of thousands of claims — some that had been languishing for as long as six years — were pending, and over 130,000 others had been summarily rejected. In 2022, the Biden administration agreed to settle a class-action claim that covered 200,000 borrowers who had attended more than 150 schools. > Total and Permanent Disability... Borrowers who are permanently disabled are eligible to have their federal student loans eliminated. The process had long been a bureaucratic obstacle course, requiring doctors’ notes — which were often rejected, with little or no explanation, because of documentation errors — and years of income-monitoring and other compliance requirements. Many who would have qualified for relief never bothered to apply. But two government agencies already had data on people who were fully disabled: the Social Security Administration and the Department of Veterans Affairs. By creating automatic data-matching programs with both agencies and eliminating some income documentation requirements, the Education Department significantly expanded the number of borrowers who gained relief.
imtringued 3y ago
Anyone who received a loan under lenient conditions and paid it off benefitted indirectly by being allowed to receive the loan in the first place. Private lenders are selective and would only lend to the best students. So all these people on the margin with say a 85% chance of completing university would have to be denied, because there is no way they could pay the interest to make this lending profitable for the bank. The idea that the loans would be a profit center for the US was a pipe dream to begin with.
Eddy_Viscosity2 3y ago
Not entirely true. Some of it yes, but much of the debt wasn't money borrowed, but fees and interest accrued after borrowing.
- kermatt 3y ago
  Was there ever a serious look at restructuring loans that did not dispose of the principal? That could have been a more responsible solution.

h2odragon 3y ago

Can we get mortgage forgiveness next? Imagine what a boon that will be for the economy.

FooBarBizBazz 3y ago
Not unless it includes a free house for everyone who didn't get in on the racket.
cramjabsyn 3y ago
If there are demonstrably predatory mortgages in place then yes they should be forgiven, or at the the least converted to a low rate standard loan without mandatory insurance. We need better laws and repercussions against screwing over the working class.
- aeternum 3y ago
  Ah yes when those too-good-to-be-true variable rate mortgages ramp up the rate due to inflation, we can just relabel them as predatory. It's not like the risk of was ever disclosed to the purchaser. Oh wait. We continue to bail out and incentivize poor decision-making, then wonder why the proportion of poor decisions seems to be increasing.
  - cramjabsyn 3y ago
    Whose poor decision is that? The banks created those products, the banks profit from them massively, and the banks receive the socialized bailout using our money. How exactly is being approved for a loan to buy a first home the fault of the purchaser? We can shop in any grocery store trusting that the products are safe to consume. Meanwhile, banks are allowed to legally sell financial poison? Sure, compare rates, terms, insurance, etc. But financial time bombs like you describe should be illegal. The banks should suffer the consequences of their greed. And the working class should not be left homeless as a consequence.
    - gustavus 3y ago

gustavus 3y ago

For this curious it outlines various ways the loans have been discharged including 1. Discharging loans against colleges that have filed bankruptcy and closed 2. People that have taken jobs in the public service sector qualify for student loan forgiveness 3. Getting rid of fees and loans that were accumulated due to predatory behavior on the part of the servicers. Maybe discuss the specifics rather than the generals of the article.

lokar 3y ago
It seems most of it was fixing broken rules that were intended to have forgiven most of this debt years ago.

hoppyhoppy2 3y ago

Gift Article link: https://www.nytimes.com/2023/11/11/business/student-loans-debt-cancellation.html?unlocked_article_code=1.9kw.juLm.RBR8bwbiIrA5&smid=url-share https://www.nytimes.com/2023/11/11/business/student-loans-de...

hackeraccount 3y ago

Why do I think that this will not lower the expectation of Universities that any future students will be able to borrow large amounts of money.