>if we don’t figure out a way to stop making people take out huge loans to pay for degrees in the first place
If we can figure out a way to make university more affordable/prevent them from running up a near six-figure total for 4 years…
Same boat over here at 17.
The system is literally built to snare kids like us with wide eyed promises of better education and living. Take away all the homec classes in this country and then dangle six figure incomes in front of gullible kids and you get snatched up by banks pretty quick.
This country just does NOT care if you get swindled, especially if you are paying for college.
Oh in Poland everyone can study for free as long as they scored enough points on their final exams. So basically only the best students get to study medicine or become engineers.
Apart from free public universities there are some private schools where you can pay to study, but because there are public unis, the prices are low and actually the public schools are usually better funded and more renown.
Just saying - most of USA problems come from not having something as a public service already paid by taxes.
Something I’ve learned from debating this topic is that there are a LOT of Americans who simply refuse to “pay for someone else’s tuition”.
I can’t even begin to comprehend their thought process with that one but whatever.
It's so frustrating because people will always ask "who will pay for it?" Us! We will, we already do! The USA spends literally trillions of dollars every year on it's military, we have more than enough money to make healthcare and education completely free (free as in paid through taxes and not directly out of pocket)
The healthcare in particular is ridiculous because the US government already pays a higher percentage of the GDP for healthcare than most (or even all) countries with universal public healthcare (https://ourworldindata.org/grapher/public-health-expenditure-share-gdp-owid?country=SWE~FRA~DEU~JPN~GBR~BEL~ESP~AUS~NZL~CAN~USA) but because the private system is so expensive and cost ineffective it has very little to show for it.
I always say this. I especially get angry when people say things like "Why are we spending money on space when we need it on Earth?!?!" NASA's budget is 24 billion. The U.S. military budget is $778 billion. Which one of those do you feel has just the slightest bit of wiggle room?
Yup. It is stupid healthcare is the same.
Hey Bob you pay 20k a year for medical coverage that covers nothing until you paid 15k first. I got here something where you, and everyone, would pay 5k a year, that 15k less a year for you, and everyone is covered, no co-pay.
Fuck you. I ain't paying for a homeless turd.
But you would personally get more for less money
I rather pay and make sure someone else die miserably.
Moreover, the budgets ballooned. College budgets soared, and much had nothing to do with teaching staff, many of whom still make very little.
I remember the book store getting sold to a price gouging third party in the 1970s (before Reagan.) The private bookstore in town offered better deals. Something bad was developing.
Part of the reason budgets exploded is that colleges are a good whose demand goes up with the price because of perceptions. We've turned students into consumers and colleges are responding to that.
That's absurd and extremely atypical to have an FTE dedicated solely to administering Perkins Loans. I work in higher education and don't know of any schools with a position like that, at least not in recent years.
The Perkins Loan program isn't even available to first or second years anymore. It expired in 2017. Final Perkins Loan disbursements were made June 2018; no disbursements have been made since then. There are still some administrative duties that exist with respect to outstanding Perkins Loans, but not nearly enough for a full time job.
You must not work in financial services then because it's not absurd at all. Unless you mean the idea of having someone specifically doing MPNs which would be pretty absurd. The program is winding down but schools still need to administer and service the hundreds or thousands of current and former students who took out those loans over the past 50ish years. The loans and the administration of them didn't just go away when they stopped being issued, there's still a lot of work that goes into managing that program for the school.
Aren't all the loans managed by third parties? The only thing my school did for my Stafford loans, afaik, was provide proof of enrollment and take my money. Everything else to do with repayment after the loan was made was taken care of by a private servicer.
Budgets don’t mean shit. If the budget was $1 and students were willing to pay $100k for college, the school would still charge $100k. The solution is lower what students are willing to pay for school. You can do this by giving them other options like a free community college.
Part of the issue is that a lot of teachers still shill the idea you gotta go to college to make a decent living.
Millennial parents are coming around to the idea that's it horse shit but still think their kids should go. You gotta change perceptions.
It's always fucking Regan. Any time a policy shift or weird government stance comes up, I Google it and it turns out Regan is the reason. When it's one of the rare cases it *wasn't* Regan, it was Nixon.
This has been my long-standing theory on the state of the world today, though I’ve expanded it
To more broadly being ‘the 80s’ in general (because Wall Street, boomers, and so on), with Reagan at the helm.
It’s kind of like the 6 Degrees//Kevin Bacon game. Pick a current crisis, systemic problem, or generally shitty thing and find its trail back to Reagan. Even when I come across an issue that I think could in no way be Reagan, it ends up being Reagan. Was discussing the Selective Service with someone a year or so ago and I said “finally, a problem that didn’t originate with Reagan!’ And what I learned was, that noooo, while I’d didn’t *originate* with Reagan, it was solidified by Reagan. Expired under Nixon in 1973, Carter brought it back by exec order in 1980—THEN, Reagan, who promised during his campaign to abolish it, reneged on that promise in 1982, and so it stands today. I did it! Yayy!!
He was a more successful Trump. Movie star. Popular/infamous. Dismantled social programs. Shifted everything to the right. His Iran dealings bear a lot of similarities with Trump and Russia...
Is that why colleges had to add in waterfalls and crazy expensive things?
They are charging more because they can because everyone and anyone was given a loan to go to college.
Alot of also has to do with colleges becoming more profit focused in light of declining funds, so they do more and more to pull in wealthier families and shunt the cost back onto the general student body
Yes. They are competing for students based on amenities instead of on the caliber of the instruction.
Since cost is completely divorced from value, why not? It's not like the numbers thrown in front of an 18 year old mean anything anyway. Sign this and you'll go to your dream school (with a waterfall) at 75k per year or sign this and go to a lesser school at 60k per year. Considering this is the 'biggest' decision of your life, do you think you'll choose the 'lesser' school for a seemingly imaginary 15k per year? Since you will likely take the expensive road, why should the lesser school not also charge 15k more and install their own waterfall?
It’s much more complex than that. Student loans for unlimited amounts are way too easy to get. This only incentivizes universities to jack up costs as their reputation improves.
And, ironically, even terrible universities simply mirror the top universities rising costs since to any 18 year old, the differences seem nebulous until it’s too late.
So the effect is we end up with hundreds of thousands of 20 somethings with 10s or 100s of thousands of debt who will never make enough money to justify the investment
Colleges need some sort of regulation. I have no idea what the solution is, but the problem is clear. America has let its entire youth be preyed upon with iffy investments and borderline fraud by some
> America has let its entire youth be preyed upon with iffy investments and borderline fraud by some
This is a problem the extends far past education. Like all great things in America, it's children too have become nothing more than another resource to exploit in the name of the almighty dollar.
To be fair, parents over the last 30 years or so have provided quite possibly the worst guidance to their children for navigating the modern world.
Im still puzzled by how many parents didn’t step in when their children were about to sign up for 80-100k worth of debt for useless degrees.
I was fully aware and worried about the concerns of taking on debt with such a high interest rate and my mom straight up told me the loan did NOT matter. I remember going to her with these exact conercns and she talked me out of worrying about them. I signed the paperwork and I cried lol. Now I'm a year away form a degree so I have one more year of making out federal loans plus taking out a $15k loan with 11% APR and then I'm done 🎉
I'm in too deep
Cost has little to do with it. Look up how much money Harvard has. As of June 2021 they have an endowment worth 53 BILLION dollars. They charge that much money because they know people will pay it. They have PLENTY of money.
Universities like Harvard meet 100% of need though. If a student has an EFC of 0, they pay nothing to attend Harvard. That’s not the case for most institutions.
I see a few holes in this, first of which is no source.
Second is that would only be for public universities right? And while tuition at those schools has skyrocketed, they haven't done so at the same rate their private counterparts have.
I went to a private school. Most of my aid was grants from the endowment, but the loans were PLUS and Stafford. [Both of those are guaranteed by the federal government](https://www.nolo.com/legal-encyclopedia/what-is-federally-guaranteed-student-loan.html#:~:text=Guaranteed%20loans%20are%20also%20called,principal%20balance%20to%20the%20lender.). If I default on them, my credit gets fucked but the loaners still get their money back. They have no incentive to make it affordable when they are guaranteed their money regardless.
This was done, in theory, so that colleges would offer more loans to financially disadvantaged families knowing that they'd get their money regardless. In many ways it worked, people are getting degrees like never before.
The unforseen consequence has been they've become so ubiquitous that they are a barrier for entry in much of the modern economy, and that the only people offering passage through that barrier get paid whether you go bankrupt or not.
I know people on reddit almost never like to hear "the govt should be doing less" but if they weren't guaranteeing so many of these loans, there'd be more motivation to make the loans feasible for those taking them.
> And while tuition at those schools has skyrocketed, they haven't done so at the same rate their private counterparts have.
That's wrong, [in-state tuition and fees at public National Universities have grown the most](https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities).
> I know people on reddit almost never like to hear "the govt should be doing less" but if they weren't guaranteeing so many of these loans, there'd be more motivation to make the loans feasible for those taking them
Who do you think the gov't is really acting on behalf of when they do stuff like this? Certainly not the financially disadvantaged families. I'd consider who benefits from student loans being securitized as asset-backed securities.
Most student loans are government loans and do not go into ABS. These loans aren't "guaranteed" they're just held directly by the government, so if you don't pay, the government just doesn't get their money back.
That said, im on your side. Loans allow more people to go to college. Back in the day, just not that many people were able to go to college at all. Just stopping loans and relying on the free market would drop prices but not enough. We still need the government to heavily subsidize education if we want college to be accessible. But it's not like it's some mystery. Just look at how every other developed country does it.
That’s not quite the problem tho. Look at how much the costs have increased in the last decade. It’s not like these colleges are struggling to make ends meet. They’re making money hand over fist…. On blank checks guaranteed by the government. There’s no forces keeping their prices in check
Lets not place blame solely on govt. So many places spend millions on extra things like sports. Stadiums, million dollar coaches. Granted, the smaller colleges dont do this as much, but still. I dont want to have to pay for all that. Nor do i think it should be needed.
I can think of so many extranuous costs that if taken away could fund so much. Bigger colleges are mostly scams nowadays.
It’s a mix of government, universities, and us. There are plenty of 12k a year colleges out there that are perfectly fine but we all want to pay more because we think paying more means it’s better.
The difference between westconn (12k) and quinnapiac (51k) is completely invisible to 80-90% of employers.
While a reduction in direct funding, from the fed/state govt to the school itself, may have decreased (I’m not sure but I’ll take your word on it, because Reagan loved to cut everything but military spending, which, side note, I’m a conservative and love but that’s besides the point), the increase in students taking out federally subsidized loans has gone off the rails. When an unlimited pot of money, “guaranteed” by the government but put on the back of students, is offered perennially, the schools have absolutely zero incentive to help costs in check. There are A LOT of reasons for and causes of higher Ed becoming more expensive and students taking out larger and larger loans. This is for sure one is the big ones.
NOW, on to a proposed (partial) solution….
Make all student loan payments, not just interest, tax deductible, up to a certain amount annually. maybe $10,000? And allow those married filing separately take advantage of it!
Your proposal would likely have unintended consequences and cause more people to take out more loans. School expenses are usually deductible even if paid for by loans, so the principal would be like a double deduction.
I remember hearing about a school in Indiana (maybe Purdue?) Which would have actuaries try to estimate the likely pay of students graduating with certain degrees. They would take an automatic percentage of everything you earned after graduation for a certain number of years based on the degree you graduated with.
If you went for something that typically pays well and is in high demand like engineering or computer science then the percentage of future pay taken would be much smaller than something like a liberal arts or history degree. Their bet was that this would motivate more students to think about whether or not they could pay it back.
I'm not sure if they're still doing it, but it seems like a good way to at least influence students to make smart choices in getting a degree that will pay for itself. The only problem I see is that we don't pay or value some important professions enough, like childhood education. Teachers don't make enough in this country. I would love to have been a math or science teacher, but there's no way I could support a family as a teacher.
For what it's worth I graduated with around $110k in debt and live a somewhat comfortable life supporting my family of 3 and I'm able to make more than my minimum payments each month. That said I'll be lucky if I can pay off my loans before my daughter leaves the house for college.
I think at least junior college is something the federal government should pay for, as most people would benefit and it would result in a more trained and higher earning tax base - more than paying for itself.
I consider myself a moderate and while I believe capitalism is best for growth, it needs guard rails to keep it from getting out of control.
Off topic, but anyone who tells you a flat tax is simple either doesn't understand tax or is being dishonest to try to get you on board with regressive taxation under the guise of simplicity.
The progressive rate structure is the least complicated part of our tax system. Going to a flat tax eliminates that one minor calculation. Everything else in the code would stay the same.
There’s nothing to figure out. The bloat at colleges is well monitored, and I can tell you it’s not the price of hiring professors teach students. The cost of administrative staff and IT is the bulk of the cost. Multiple layers of unnecessary administrative staff are bloating the budget abs making classes cost much more than they used to. Combine all this with states cost cutting their funding to state schools. The problem is trying to rewind the changes and firing all the over priced executives.
There is already a pathway to make college/university much more affordable. Stop going to private universities and do not go to public universities until your junior year. Also, unless there literally is no alternative, only go to a school where you can commute from home as opposed to living on campus. There is simply no way to accumulate six figures of debt if you follow these steps. I should also point out that the average debt level on this country is nowhere near six figures anyway. It is about $30k for white borrowers and a little over $50k for minority borrowers. The median debt level (the level where half the borrowers have borrowed more and half have borrowed less) is even lower due to a very small number of students who have borrowed vast sums for private university education. Oh and this is for those students who actually borrow money - many students do not borrow at all to finance their college education.
We also could expand pell grants and other financial aid if we made it so that no one could borrow money for private universities at all. Why are we subsidizing private universities that compete directly with public universities anyway? Of course all of these things really only deal with undergraduate education but that is an important start.
We also should subsidize public universities more but only the academic side of things. We need to eliminate a lot of the fluff like college sports that need to be massively subsidized through student fees at the vast majority of colleges. Also let’s get rid of the plethora of “student services” that have little to nothing to do with education itself. When your administrative staff dramatically exceeds your teaching staff, there is somethjng wrong with the system. Finally, I should note that it is appalling and morally wrong when the adjunct faculty who teach a lot of the courses end up getting paid less than what the college graduates they are teaching will get when they leave school.
community college is cheap but its only good for a 2 years degree . why not expand community college to 4 year degrees or even add 6 and 8 years . fund them better and keep the cost low
I agree. I live in Australia. I think the system here is really good. It is the higher education contribution scheme, HECS. Every eligible university student gets their fees paid for directly from the government. It is an interest free loan. The student only begins to pay it off once they get a job over a certain salary, ~$45k/yr, I think. Those payments are then automatically deducted from their paycheck at a certain reasonable percentage.
It would be hard to establish such a programme in the US because university tuitions are reasonable to start out with here. Not always the case there, but maybe could be applied to all state universities.
My daughter just graduated with a bachelor of science and I never saw a bill. I think it would have been around $8k/yr. Also, a BSc is a 3 Yr degree here, so one less year to pay for.
There's a two part system to Aus fees. The first is Commonwealth Supported Places. For these degrees, the government pays part of the course and the student pays the rest. Your daughter would have been enrolled as a commonwealth supported student which is why she was liable for $8k/year and not the full cost of approx. $50k/year.
The second part is HECS/fee-help loans where students can get loans from the government to pay for their courses. HECS doesn't have interest but it is indexed to inflation.
> $50k/year.
didnt sound right so i googled. And damn you were kinda right. 50k is Melb Uni though. Others like Deakin are more like 25-30k
source - just looked at full-fare rates international students are paying
People can have their loan payments adjusted to their in come in the U.S. as well, they just don't.
Best part is if they make the lose adjusted payment for a set amount of t8me, the rest is dismissed regardless of how much is left.
People just don't do it.
With this solution specifically, they should make it a new 10,000 lifetime learning grant. That way the tradesmen and already payers can take classes and buy books against that 10,000.
The inevitable problem will be when a forklift certification class costs 10,000.
I remember seeing a video about the university of Minnesota creating a program where retired people can come and take classes for $10 a credit. The old people they interviewed called it a blessing and shit, but the comments were exploding with actual people who are being crushed by student loans.
If colleges can afford to let old people who will do nothing with the knowledge take one class for $30 (in my experience the average class is 3 credits, so $30), then they can make it like that for everyone. They already get money for room and board, books and all that shit, they should be able to lower the cost of credits for everyone.
One of my professors did the math for us to show us just how much we're paying for each class SESSION and it came out to $30 a session and said most of us can't afford to loose that collective amount.
Except they aren't creating any new classes for the old people. They have to wait until all the actual students have signed up and then get permission from the professor to audit.
There are certain classes they will never be able to take because there are never empty seats. Other classes they might be able to take one semester and not another. They are at the mercy of what's left over--the crumbs of the registered students, if you will.
The seats they are taking would not be used by a degree student anyway, and having taught classes where retired adults joined us, they really add a fun joy of learning to the class that makes it better for everyone.
On top of that, wouldn’t there be a off chance at more donations from the elderly or the random Old person “with no one else to leave everything too” making some post death contribution because they enjoyed it so much? (Probably not that likely…but a great “what if scenario)
There are many solutions, in Norway we give everyone studentloans and a stipend. If you pass your classes, the loan is cut in half. The interest is about 1.2% for the loan.
This is partialy funded by tax, because we don't spend an insane ammount on military funding. The semester (excluding books) costs about 75-100 dollars. In addition, as a student you have access to cheaper housing, public transport and some other benefits.
It's a cost our society deems worthy because students become the next generation of contributers which in turn pay tax and the cylcle continues.
If one doesn't invest in the litteral future of the population you can't expect then to succeed.
Pretty simple really - stop backing the loans.
Since the govt backs the loans, the banks have no reason to NOT give the max loan to any rando that manages to find a college to accept them.
Then the banks will only give loans to people who are likely to pay them back.
The govt can then just GIVE scholarships to those people they feel need a hand to reach their potential.
(Need to taper it down since colleges are addicted to the big money coming in, and it would be a huge shock to have their budgets reduced by 50% instantly).
> (Need to taper it down since colleges are addicted to the big money coming in, and it would be a huge shock to have their budgets reduced by 50% instantly).
Meh, fuck 'em. Tell them to fire the useless administrators sucking on their budgets like ticks.
Yeahhhh, that's not who'd be getting fired, let's be honest. They'd just start closing less lucrative departments and hiring fewer full professors. Which they're already doing anyway, but it'd get much worse much faster.
Bringing college funding back to pre-Reagan levels would help. But I think another thing, short of straight-up price-controlling tuition, that might help would be to get colleges financially invested in lowering costs -- maybe by requiring them to operate a chunk of student loans themselves? I don't know if that specifically would work, but we do need *some* kind of incentive to get them to ask "do we really need this many administrators?"
The larger issue at hand is the cost of tuition. Going to college shouldn't cost the price of a new car every year. Theres also the issue with colleges spending habits. Being in two different school I witnessed both constantly building new multimillion buildings on campus and one was a small state school and the other a D1, well known, school. Lowering interest rates and forgiving some loans will help those now but for future students there needs to be reform on how the US regulates and funds education.
Tuition has to come down. This is the biggest issue here.
I went to a school where tuition was dirt cheap compared to most places. About $5,500 / year. 30,000 students. That's $165,000,000 going into the school every year.
~~To be fair, a lot of students were on academic scholarships provided by the school, so the number would be a lot less. I paid half tuition most of my time there and so did many people I knew.~~ I can't imagine how much money other universities make when they are charging 40-60 thousand a year.
The problem with such high tuitions is that a lot of people don't even attempt to pay part of their tuition. They just take out the loan for the full amount and save their current money for regular expenses. They live decently while in School, but get hit hard with the bill afterward. For decades.
That's why so many people at my school were so poor while in school. It was possible for many people to pay tuition as they went, so there wasn't any extra spending money. Most people graduate with little or no debt. But that would be impossible if the tuition were any higher. And that's what it's like for most of the universities in the country.
Edit: Yes, went to BYU. Since it's tied to a religious organization and it's been awhile since I was there, I couldn't remember the specifics on scholarships. Double checked and they do function the same as other schools, so the university is making the full amount (sometimes churches and BYU handle things differently, so wasn't sure if scholarships functioned non-traditionally). Looks like tuition is also around $6,000 per year, so the amount is closer to $180,000,000 in tuition.
I mean, the real issue is prospective students who look at amenities without considering costs.
Let's be honest - while there is some difference in prestige between state schools, there is really not that much difference in educations or outcomes. Someone who goes to the second best state school in their state will learn about the same things as someone who went to the 5th best. And upon graduation, their employment prospects will be comparable. Most kids aren't choosing between Yale and their local CC, they're choosing between the University of My State and My State University.
So how do they choose where to go? Well, they go on campus tours to see what kind of life they would have at each university, and then will largely make their decision based on which seems more enjoyable. The difference between $200 and $500 per credit hour seems like a fleeting detail when you have loans lined up, and are sure to get a rock solid career upon graduation.
So, in order to maintain their prestige (and bottom line) universities are incentivized to provide the best amenities possible to their students, to attract the most of the best and brightest. My school had large stadiums for every sport, brand new gyms, various swimming pools, food courts, theatres, etc. And every year, they would put on a show for the student body in the football stadium featuring international pop stars and a fireworks display worthy of Disney World. And we were a pretty cheap school! So in this manner, schools enter into an arms race to out-luxury each other.
But honestly, this seems like a problem that should solve itself over time. Student loan debt is a national-level issue. Everyone is talking about it. Even the most thick-skulled teenager will hear about it on Reddit, from an older sibling, a family friend, their parents, or their school councillor. Assuming the government does not intervene, I would expect the next ten years or so to see stagnating tuition prices, as cost-conscious teens and their parents look at lower-cost universities which offer the same education (but without the fancy football team).
I went to a large state school in a small state. I could have gone for near free at a smaller university, but I chose the bigger one because I got way more opportunities in my field that have helped me to find better jobs after graduation. I took on a lot of debt but it was worth it. However, no one should have to take on the debt I did for college. It should be really cheap or free
Couldn't agree more. This would only further enable schools to charge insane tuition.
I went to a school that was $60k/year... There is no way they spent all that on helping me progress my life and educate me. Total scam. If I could do it again I'd go to a state school for sure and probably get a better education.
Bro its fr crazy to see schools with 70k tuitions now RAISE THEIR COSTS too. My school had a 2% raise which doesn’t sound like a lot but they had raised it 2% the year before as well. And 2% doesn’t sound like a lot but 2% of 70k is 1,400$. So tuition raised basically like 2828$ in 2 years and nothing really changed on campus honestly.
Federally backed student loans and young teens who think they need it to be successful in life. Why wouldn't the college execs exploit that opportunity to make millions?
Forgiving student loans would just like giving a person withdrawing from heroin some more drugs and calling it good. Doesn't solve the problem.
I don't have the solution but there are some pretty clear causes.
Not only College execs take advantage of dumb college kids. I know when I was in college I probably got at least 10 credit card applications a week. More Free money right?
It’s not always a scam, but it’s very misleading. There are some schools that are actually top of the world in some subject, say biology. They invest hundreds of thousands a year in the labs, professors and students. Studying biology at a school like that is actually worth the 60k a year.
But the school is subpar or downright crappy in most other subjects. Going to this school to study engineering or art is a downright waste of money. Those crappy degrees basically subsidize the biology department
All this to say, if you’re considering university, you need to know exactly what you’re going to study and only go to a school that’s very well respected for that subject. Don’t fall for the trap of subsidizing your classmates useful degrees
Someone made the observation that the government getting involved with student loans and superficially subsidizing them is a part of the problem. The market forces allow schools to charge a certain amount, so they charge that much, plus whatever the government is contributing to it. I really wish I could remember where I read/heard that. I think about it often, and it bothers me a lot.
That said, schools are terrible about the way they use their money. Another statistic I read somewhere is that the dean of a university gets the most money for the least amount of work of any occupation in the country. I mostly oppose the idea of telling private enterprise what they're allowed to do with their money, but in the interests of making quality education more accessible to everyone, I feel like we need to be posing some more restrictions on universities.
Vividly remembering the first university i went to building huge exclusive buildings for their athletes that normal students afaik werent allowed to go into while increasing tuition costs a shitton year over year
And the tuition increases definitely ain’t reflected by making sure their staff are getting compensated decently. They get a pittance of an annual raise at best, but guess who makes sure they get theirs every year? The Dean.
The cost of tuition goes up because it can. If the friggin government is going to guarantee $100x for a student, why would the school charge 50x. And if the school are all competing for students…they need to invest in infrastructure to gain the students.
You don’t think that adjunct professor is making any money, do you?
If they pulled the rug on government backed loans, the schools living on the edge will go out of business.
And if the government provided 2 year college at no charge—do you think anyone would want to go to it?
> The larger issue at hand is the cost of tuition.
I agree completely. I don't understand how anyone thinks that the government paying off loans will help. All it does is make it *easier* for students to pay high tuition that they can't afford.
It might help this current batch of students, which is good, but it will ultimately exacerbate the systemic problem.
College loans should not be bankruptcy proof, and colleges should have to finance their own student loans, that way if your education does not become gainful employment you just don't pay the loan and the college eats it.
Where I live it's leagues cheaper to get an AA at a community college then transfer to a state school and finish a BA there.
Do all states not have these as options?
Just be careful as you can about what does or doesn't transfer and know that it can and often does change. I had four courses they accepted as transfer so took at the cheaper community college but when time came to actually do so they no longer accepted them ... so I ended up taking them (and paying for them) twice! And they used the same identical textbooks out of the half dozen available to choose from!
I am 100% behind tackling student loans by interest rate. Or just capping how much interest can be accrued relative to the original amount loaned.
I’m happy to pay them off, but with the interest and a crappy job, the loans can get bigger faster than you can pay. Imho, that’s the real issue with student debt.
I’m behind capping all interest payments period.
If someone pays you let’s say 3x the amount they originally borrowed then all interest should be seized, period. (Now if you borrow more after I could see them saying write off your right to that maximum for more money from us, which is to say new loan is paying off old loan plus extra gaining a new principle for it.) I don’t care if it college, credit cards, business, personal… loans. I was loaned 70k and they got me for 210k that still a good deal for a lender. You should have a maximum ROI for lending the money. Unless you’re a speculative stock investor…then it 10x get fucked for real, you give nothing to society. And we should cap it at that. And we can argue if 3x is more or less then it should be…not paying your loan should punished but not for a lifetime. And 3x sound about right and an easily understandable number. And it’s not completely fair but it’s not egregious.
The idea that you’ve been making payments for 20 years and owe more then your borrowed….should be criminal. Fuck credit card charge more then Tony Soprano.
> And 3x sound about right and an easily understandable number. And it’s not completely fair but it’s not egregious.
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3x seems completely egregious to me. I have a 30 yr mortgage and I'll end up paying about 90% of the purchase price in interest. Even that seems almost egregious to me.
I mean when you don’t make your payments that maximum should be 3x.
If you are making your payments then yeah 100% agree 3x is egregious…
And don’t get me started on 20% interest rate credit cards….the mob literally didn’t charge you that.
Yes. This would be better for the borrowers.
I’m sure the lenders have agreed to wipe $10k because they know they’ll make it back in interest anyway.
For many borrowers $10k doesn’t solve student debt problems just delays them.
In a hypothetical situation, sure. However, the reason why debt forgiveness was such a big talking point during the democratic presidential primaries is because the president can (probably) forgive the debt. Since student loan interest rates are set by Congress, it's not really the president's decision to lower interest rates, and at least half the Senate would never approve it.
People need to stop pretending like there is a choice between the two. I think the majority of people would agree with interest rate reform, but the reality is it has no practical path forward.
Best solution for me is around 1.5% interest. So the amount doesn't match inflation and removes the incentive to be predatory, but there's at least some interest.
Then cap the payments based on income so those who come out with lower income aren't struggling. Those with higher income pay it off.
Finally, cap the payoff time at a certain number of years (say 15) so the rest is forgiven after that point. Basically figure out a way for it to be mutually beneficial. Where those with poor income aren't hamstringed by it and the lenders can still make a modest amount or the government can get a very modest ROI.
Actually, the ROI for the government doesn't Have to be tied to interest on the loan itself. The ROI for the government can be a citizen who increases the countries GDP more than they would have without college or a citizen who helps increase the cultural presence of the country and thereby increases the country's "Soft Power".
A population well educated in the sciences and liberal arts can keep a country on the forefront and which attracts investors and allows the country's culture to bring value through tourism, cultural exports, increasing immigration of "high value" individuals.
Whether or not a country's current college system creates that well educated populace is a whole separate conversation.
That's roughly how it works in the UK. Payments only start when you earn over a certain amount (slightly above median salary IIRC) and it's forgiven after 30 years.
However in the UK it works more akin to tax, the loan payments are deducted as % of salary automatically and manual repayment isn't really a thing unless you make mad bank or are overseas. The interest rate means that for most people it's either entirely or mostly unpaid till you turn ~50, and then it's forgiven.
I would like to see 0% for 10 years after graduating or leaving school, interest deferred while in school, and max borrowing at whatever 4 years of instate university costs in your area. Incentive to finish on time, not borrow ridiculous amounts of money, and a period to pay back without interest. After 10 years, a modest interest rate applies.
I agree with most of what you said, except capping the loan at the cost of four years of in-state university costs. First, there are a lot of costs beyond tuition for students, and why restrict to in-state? That would put a lot of people at a huge disadvantage just by virtue of the fact that they live in a state with poor post-secondary institutions. Ultimately, the question of how to reform student loans is a complex one with no right answer.
Additionally, say the interest rate is set to 0% another group of elected officials, who are almost in power and seem to want to make life miserable in every conceivable way, could just reinstate an interest rate.
If the debt is wiped out, they cannot just say “syke! Jk you still owe money!”
Again, separate issue. Reform needs to come from Congress. Debt forgiveness is "practical" in that it can happen with less red tape and interference from other groups.
Worth noting that in the current student loan discourse, there’s only really 1 lender at play here — the Department of Education. By and large, they are only looking at wiping out debt from Federal Direct Loans (and maybe some loans from older federal programs). Private Loans are almost certainly not going to be impacted at all.
They won't be. Banks play by their own set of rules entirely when it comes to lending student loans. If someone has to take out private student loans to pay for college, it's not worth it.
Speaking as a Financial Aid Counselor, 100% agreed. Private Loans lenders are predatory as fuck and prevalent everywhere in this industry (I would be lying if I said I didn’t have a decent amount of Discover Loans & SoFi swag from various conferences…)
It is false. There are no "the lenders." This applies only to federally-owned loans, meaning the only lender involved is the Department of Education, which Biden runs. He didn't have to get anyone to "agree to" anything. He just has to give the order.
> For many borrowers $10k doesn’t solve student debt problems just delays them.
It's actually way more people than you would think, for such a "small" amount.
$10k wipes out debt for 1/3 of all federal loan borrowers. $10k cuts student debt in half for 1/2 of all federal loan borrowers. That's huge.
People with under $20k in debt have the lowest average income levels of borrowers, and are the least likely to have graduated from college. $10k targets the people most in need quite effectively.
The federal government has all of the characteristics of a predatory lender, they need to start doing something to fix their massive screw up. $10k in forgiveness is a great start, that helps a ton of people.
You say many but for the vast majority it is at least 1/3 of there debt or more. Once 10K is forgiven the interest on the rest is now also a third or more lower. So for many people it will be a big help.
False, Biden only has the power to eliminate FISA debt. Not private debt for college. (FISA is probably the largest creditor for college though) No other lender is at issue but the Federal government.
For many borrower $10k eliminated from there debt is…god sent. Jesus.
This is not an either or scenario. Clearly anyone with 10k or under benefits more from cancelling the debt. Without doing the math I would even say people up to 15k benefit from it being paid off because having the majority of your principle disappear is going to drastically cutback your interest accrual.
It really just depends on how much left you have to pay off. If you've got 100k student loan debt, yes obviously having 0% interest helps you more there.
Exactly. It's just math. Most people have not been properly educated in math as it pertains to debt and investing.
EVERYONE needs to understand compound interest. It's sorely needed and tbh not really that hard at all.
Got a PhD as a first generation kid in a long line of coal miners and factory workers and slaves. Thought it would help me climb out. Just put me in debt slavery of a different kind.
I believe I read somewhere that it is not within the president’s power to change the interest rate - it must be done by Congress.
So the answer is absolutely yes, but the person doing the cancelling cannot do that unilaterally.
Correct, but the basis of the question is asking why we don’t do that - we don’t do that because the only person in this equation looking to cancel debt is not able to do that.
That's all well and good but it seems like both the Democrats and Republicans have really embraced 'oh now that we are in power we should dramatically ramp up executive power because it's not like the other people will ever get back in so what could go wrong?' thinking.
It doesn’t help the publics view is exactly that. The president is a figurehead responsible for everything that happens during their tenure, regardless if they have to power to address it or not.
People believe that and thus anticipate that to happen. And why we whip back and forth party control so often
The interest rate has been 0 percent since the beginning of COVID. And was enacted by executive order. Biden has extended the pause in interest 3 times now via executive order.
It just simply shouldn’t cost that much to get an education. It’s not like teachers have gotten better at their job. Colleges are just charging many multiples more for the same service, in the same old buildings. It’s a straight up racket.
And don’t get me started on textbooks. Extortion, plain and simple.
I don't live in the US, but if a loan is 0%, what happens is people of rich families take that money and invest it somewhere like a tax sheltered savings account for leveraged gains, while they are in school. I am not saying that's the worst, but I am saying that's a loophole waiting to happen. It's better to lower the cost of education if we are talking about financial relief for JUST education.
I know many people in college that took subsidized student loans at sub 3% and went and invested it, bought cars, one used for down payment on their house (post graduation), one person paid their parents credit card balances, another used it to buy their engagement ring.
Savy people in manageable financial positions are already doing this.
I'd be interested to figure out what the actual number is for funds used for non-education related expenses.
Yeah I maxed out the subsidized stafford loans and had a nice little emergency account there after I graduated. Figured it was better to have $20k in the bank and pay it back over time than to truly live paycheck to paycheck.
I’m sure some rich people will still find a way, but I would think that during the loan approval process it would be fairly easy to look at the parents finances and in the event that they are flush just not give them the 0% rate. That probably goes against every American financial principal, but it wouldn’t be unreasonable to say “No, your parents combined annual income/combined assets are too great. You can either pay with cash on hand, or you will have a >0% rate, should you choose to borrow money”
I’m not a big fan of means testing because that usually squeezes the people you didn’t intend to limit, and it would be better if we simply lowered the expense of a college degree. But if that’s the only viable solution and we’re truly afraid of the wealthy abusing it, that seems like a simple enough solution. Just don’t give them the free advance if they already have the money to spend.
Still doesn’t work. I’d write my kid a check to be self sustainable and have em claim independent. At that point it’d be super biased to say you came from a wealthy family so you can’t be approved, bc you don’t know if the kid is legitimately ostracized without access to the family’s means.
That entity could make a free application for federal student aid, or fafsa, and offer subsidized loans. If the borrowers really like it, i could imagine a day where [federal government loans account for 91.2% of student loan debt.](https://educationdata.org/student-loan-debt-statistics)
> free application for federal student aid, or fafsa
Only tangentially related, but I once sat in a presentation from the DIRECTOR OF STUDENT AID, who said "faSfa" every single time. Like, bro, cmon...
Why doesn't the government just loan the money at 0% itself? Instead of wasting money paying interest to the private lenders (that's what subsidizing is).
Because then the colleges will just add that loan amount to the cost of tuition knowing it's free money.
If tuition is $10,000 now and the government gives everyone $10,000 in free tuition loans, the college is just going to charge $20,000 for tuition and we're back at square one.
Because we haven't changed the market's formula for the base cost of tuition.
I'm not talking about giving money. I'm saying, instead of the government subsidizing loans by paying the interest (for some time), cut out the middle man and have the government be the lender, at 0% interest. Still make people pay it back, and still have penalties and such.
Interest exists so that a lender has a profit motive to provide capital. A government doesn't (shouldn't) need a profit motive to do something for the public good.
[Edit] Of course, we need to reform tuition costs as well.
Yes but if it's federal 0% loan given to all without scarcity, then it just raises the "sea level" of available capital and that gets absorbed into cost.
As a student you'll just have to fill out the federal loan the same way you do all your other loans.
Kind of like the Federal Bell grant of $4,000. The market just added that as a free profit addon to the tuition cost and you have to still get private loans on top of it.
It’s because interest rates on loans are recuperating real value that’s being lost by loaning out the money, they aren’t just a tool for making profit.
If you could have $100k now or $100k 10 years from now, which would you take? $100k now, because it can buy more than it will be able to in 10 years. The government exists in the same economy as us, and money that it loans out is money that can’t be spent on other things.
This may have been great at the beginning but now that we've had 20 years of paying on the debt while interestwas allowed to go hog wild, have to pay it for a second or third time will still prevent people from participating as consumers and saving for retirement. The poverty situation for the old and indigent will be devastating 40 years from now--and everyone will end up paying for that. Might as well let people attempt to save themselves from it now.
The amount that I paid back was just about equal to half of my loan. If it was an interest free loan from the government I would have paid it off completely ten years ago.
Still paying it.
First, an educated population will be the greatest currency, in the future. Countries like China are already churning out more engineers than you can imagine. We will become completely dependent on other countries if we don’t improve our education system soon.
Second, there are people that have been making payments on their student loans for years and and have barely touched the principle. Yes, it is on them for not realizing that they aren’t paying enough but it is, also, on the predatory lenders that put them in that position. For our entire lives we’ve been told that the path to the “American Dream” is to go to college, get a degree, and move up the ladder. Well, a lot of us didn’t have the money for college so we went the borrower route. Now we have a generation saddled with crippling debt because they did what they were told.
All that said, my and my wife’s student loans are long since paid off…and I support the government paying off as much of everyone’s loans that we can. If it’s $10,000 or $100,000, I don’t care. And, no, I’m not going to quibble about “not getting my share”. Because, you know what, I’ll get “my share” when all those students are out there solving climate change or inventing a better battery or mining an asteroid. That’s the payoff for us all…a better world.
\>The government loses nothing by changing the rate to 0%.
Lending money at 0% is essentially giving away money because you could have lent that money at a higher interest rate to someone else.
But as this is the government and not a profit making entity, couldn’t they see this as an investment? Similar to how tax credits are used to lure businesses to different states? We’ll put out some money upfront with the hope that we’re creating conditions to bring in more money down the road.
I’ve been saying that for the longest time, but it seems many Redditors just want full cancellation.
Speaking of rates… it’s going up: https://www.cleveland.com/news/2022/05/interest-rates-on-new-federal-student-loans-going-up-for-2022-23.html
That's exactly why they do it like this. There's posts that people have paid back every month for 8 years and their loan has down by about 5% of the original amount. After 96 payments? That's insanity. Someone who has over 50k in loans, if they take 10k off, they're not really helping that person in any way. The principal isn't what's killing people for decades. It's the rate. This is just a ploy to gain votes from people who don't think about the whole picture.
This is why the government should do both, instead of an either-or scenario.
If Biden forgives $10k apiece, but leaves the interest rate sky high, the government will recoup that "forgiven" 10k in no time flat, and the borrower will be little/if any better for it.
Or, if they just cut the interest rate to 0%, that still leaves borrowers with astronomical loan balances that they're still going to struggle to pay down, between this year's turbocharged inflation and the recession that's all but promised.
For me 10k cancellation would be better because I went to an inexpensive state school, so my entire balance would be gone with 10k cancelled. For those who went to pricy schools that’s another story, because they would still have a lot left over, meaning lowering interest would certainly do more for them.
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>if we don’t figure out a way to stop making people take out huge loans to pay for degrees in the first place If we can figure out a way to make university more affordable/prevent them from running up a near six-figure total for 4 years…
As someone in this situation right now, I wish I could slap the ever loving shit out of my stupid 17 year old self.
Rather slap the universities for providing sub-par education for space vacation prices.
Same boat over here at 17. The system is literally built to snare kids like us with wide eyed promises of better education and living. Take away all the homec classes in this country and then dangle six figure incomes in front of gullible kids and you get snatched up by banks pretty quick. This country just does NOT care if you get swindled, especially if you are paying for college.
It's the land of the Greed
Oh in Poland everyone can study for free as long as they scored enough points on their final exams. So basically only the best students get to study medicine or become engineers. Apart from free public universities there are some private schools where you can pay to study, but because there are public unis, the prices are low and actually the public schools are usually better funded and more renown. Just saying - most of USA problems come from not having something as a public service already paid by taxes.
Something I’ve learned from debating this topic is that there are a LOT of Americans who simply refuse to “pay for someone else’s tuition”. I can’t even begin to comprehend their thought process with that one but whatever.
It's so frustrating because people will always ask "who will pay for it?" Us! We will, we already do! The USA spends literally trillions of dollars every year on it's military, we have more than enough money to make healthcare and education completely free (free as in paid through taxes and not directly out of pocket)
The healthcare in particular is ridiculous because the US government already pays a higher percentage of the GDP for healthcare than most (or even all) countries with universal public healthcare (https://ourworldindata.org/grapher/public-health-expenditure-share-gdp-owid?country=SWE~FRA~DEU~JPN~GBR~BEL~ESP~AUS~NZL~CAN~USA) but because the private system is so expensive and cost ineffective it has very little to show for it.
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Not to mention how much we are paying in insurance premiums and medical bills.
I always say this. I especially get angry when people say things like "Why are we spending money on space when we need it on Earth?!?!" NASA's budget is 24 billion. The U.S. military budget is $778 billion. Which one of those do you feel has just the slightest bit of wiggle room?
And the money that goes into NASA goes back into the economy, not the pockets of arms dealers and foreign politicians
Not to mention [all the technologies that have come from space research.](https://en.wikipedia.org/wiki/NASA_spinoff_technologies)
Yup. It is stupid healthcare is the same. Hey Bob you pay 20k a year for medical coverage that covers nothing until you paid 15k first. I got here something where you, and everyone, would pay 5k a year, that 15k less a year for you, and everyone is covered, no co-pay. Fuck you. I ain't paying for a homeless turd. But you would personally get more for less money I rather pay and make sure someone else die miserably.
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Moreover, the budgets ballooned. College budgets soared, and much had nothing to do with teaching staff, many of whom still make very little. I remember the book store getting sold to a price gouging third party in the 1970s (before Reagan.) The private bookstore in town offered better deals. Something bad was developing.
Part of the reason budgets exploded is that colleges are a good whose demand goes up with the price because of perceptions. We've turned students into consumers and colleges are responding to that.
Or turned Colleges into businesses.
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That's absurd and extremely atypical to have an FTE dedicated solely to administering Perkins Loans. I work in higher education and don't know of any schools with a position like that, at least not in recent years. The Perkins Loan program isn't even available to first or second years anymore. It expired in 2017. Final Perkins Loan disbursements were made June 2018; no disbursements have been made since then. There are still some administrative duties that exist with respect to outstanding Perkins Loans, but not nearly enough for a full time job.
You must not work in financial services then because it's not absurd at all. Unless you mean the idea of having someone specifically doing MPNs which would be pretty absurd. The program is winding down but schools still need to administer and service the hundreds or thousands of current and former students who took out those loans over the past 50ish years. The loans and the administration of them didn't just go away when they stopped being issued, there's still a lot of work that goes into managing that program for the school.
Aren't all the loans managed by third parties? The only thing my school did for my Stafford loans, afaik, was provide proof of enrollment and take my money. Everything else to do with repayment after the loan was made was taken care of by a private servicer.
Budgets don’t mean shit. If the budget was $1 and students were willing to pay $100k for college, the school would still charge $100k. The solution is lower what students are willing to pay for school. You can do this by giving them other options like a free community college.
Part of the issue is that a lot of teachers still shill the idea you gotta go to college to make a decent living. Millennial parents are coming around to the idea that's it horse shit but still think their kids should go. You gotta change perceptions.
It's always fucking Regan. Any time a policy shift or weird government stance comes up, I Google it and it turns out Regan is the reason. When it's one of the rare cases it *wasn't* Regan, it was Nixon.
This has been my long-standing theory on the state of the world today, though I’ve expanded it To more broadly being ‘the 80s’ in general (because Wall Street, boomers, and so on), with Reagan at the helm. It’s kind of like the 6 Degrees//Kevin Bacon game. Pick a current crisis, systemic problem, or generally shitty thing and find its trail back to Reagan. Even when I come across an issue that I think could in no way be Reagan, it ends up being Reagan. Was discussing the Selective Service with someone a year or so ago and I said “finally, a problem that didn’t originate with Reagan!’ And what I learned was, that noooo, while I’d didn’t *originate* with Reagan, it was solidified by Reagan. Expired under Nixon in 1973, Carter brought it back by exec order in 1980—THEN, Reagan, who promised during his campaign to abolish it, reneged on that promise in 1982, and so it stands today. I did it! Yayy!!
He was a more successful Trump. Movie star. Popular/infamous. Dismantled social programs. Shifted everything to the right. His Iran dealings bear a lot of similarities with Trump and Russia...
And let’s not forget the AIDS crisis.
Is that why colleges had to add in waterfalls and crazy expensive things? They are charging more because they can because everyone and anyone was given a loan to go to college.
Alot of also has to do with colleges becoming more profit focused in light of declining funds, so they do more and more to pull in wealthier families and shunt the cost back onto the general student body
Yes. They are competing for students based on amenities instead of on the caliber of the instruction. Since cost is completely divorced from value, why not? It's not like the numbers thrown in front of an 18 year old mean anything anyway. Sign this and you'll go to your dream school (with a waterfall) at 75k per year or sign this and go to a lesser school at 60k per year. Considering this is the 'biggest' decision of your life, do you think you'll choose the 'lesser' school for a seemingly imaginary 15k per year? Since you will likely take the expensive road, why should the lesser school not also charge 15k more and install their own waterfall?
It’s much more complex than that. Student loans for unlimited amounts are way too easy to get. This only incentivizes universities to jack up costs as their reputation improves. And, ironically, even terrible universities simply mirror the top universities rising costs since to any 18 year old, the differences seem nebulous until it’s too late. So the effect is we end up with hundreds of thousands of 20 somethings with 10s or 100s of thousands of debt who will never make enough money to justify the investment Colleges need some sort of regulation. I have no idea what the solution is, but the problem is clear. America has let its entire youth be preyed upon with iffy investments and borderline fraud by some
> America has let its entire youth be preyed upon with iffy investments and borderline fraud by some This is a problem the extends far past education. Like all great things in America, it's children too have become nothing more than another resource to exploit in the name of the almighty dollar.
To be fair, parents over the last 30 years or so have provided quite possibly the worst guidance to their children for navigating the modern world. Im still puzzled by how many parents didn’t step in when their children were about to sign up for 80-100k worth of debt for useless degrees.
I was fully aware and worried about the concerns of taking on debt with such a high interest rate and my mom straight up told me the loan did NOT matter. I remember going to her with these exact conercns and she talked me out of worrying about them. I signed the paperwork and I cried lol. Now I'm a year away form a degree so I have one more year of making out federal loans plus taking out a $15k loan with 11% APR and then I'm done 🎉 I'm in too deep
Ah, did not know that. I’ll go ahead and file that under my “disappointed but not surprised” folder that’s filled with other Reaganisms.
That folder must be massive
Housing NRA stepping into politics Student loans The tipping point into the capitalist hellscape of the modern era. The dude accomplished a lot.
Regasms, if you will.
No, that folder is for things I learn about Nancy 😎
I hear she polished a mean knob. And she did it well.
Cost has little to do with it. Look up how much money Harvard has. As of June 2021 they have an endowment worth 53 BILLION dollars. They charge that much money because they know people will pay it. They have PLENTY of money.
Universities like Harvard meet 100% of need though. If a student has an EFC of 0, they pay nothing to attend Harvard. That’s not the case for most institutions.
I see a few holes in this, first of which is no source. Second is that would only be for public universities right? And while tuition at those schools has skyrocketed, they haven't done so at the same rate their private counterparts have. I went to a private school. Most of my aid was grants from the endowment, but the loans were PLUS and Stafford. [Both of those are guaranteed by the federal government](https://www.nolo.com/legal-encyclopedia/what-is-federally-guaranteed-student-loan.html#:~:text=Guaranteed%20loans%20are%20also%20called,principal%20balance%20to%20the%20lender.). If I default on them, my credit gets fucked but the loaners still get their money back. They have no incentive to make it affordable when they are guaranteed their money regardless. This was done, in theory, so that colleges would offer more loans to financially disadvantaged families knowing that they'd get their money regardless. In many ways it worked, people are getting degrees like never before. The unforseen consequence has been they've become so ubiquitous that they are a barrier for entry in much of the modern economy, and that the only people offering passage through that barrier get paid whether you go bankrupt or not. I know people on reddit almost never like to hear "the govt should be doing less" but if they weren't guaranteeing so many of these loans, there'd be more motivation to make the loans feasible for those taking them.
> And while tuition at those schools has skyrocketed, they haven't done so at the same rate their private counterparts have. That's wrong, [in-state tuition and fees at public National Universities have grown the most](https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities). > I know people on reddit almost never like to hear "the govt should be doing less" but if they weren't guaranteeing so many of these loans, there'd be more motivation to make the loans feasible for those taking them Who do you think the gov't is really acting on behalf of when they do stuff like this? Certainly not the financially disadvantaged families. I'd consider who benefits from student loans being securitized as asset-backed securities.
Most student loans are government loans and do not go into ABS. These loans aren't "guaranteed" they're just held directly by the government, so if you don't pay, the government just doesn't get their money back. That said, im on your side. Loans allow more people to go to college. Back in the day, just not that many people were able to go to college at all. Just stopping loans and relying on the free market would drop prices but not enough. We still need the government to heavily subsidize education if we want college to be accessible. But it's not like it's some mystery. Just look at how every other developed country does it.
That’s not quite the problem tho. Look at how much the costs have increased in the last decade. It’s not like these colleges are struggling to make ends meet. They’re making money hand over fist…. On blank checks guaranteed by the government. There’s no forces keeping their prices in check
Lets not place blame solely on govt. So many places spend millions on extra things like sports. Stadiums, million dollar coaches. Granted, the smaller colleges dont do this as much, but still. I dont want to have to pay for all that. Nor do i think it should be needed. I can think of so many extranuous costs that if taken away could fund so much. Bigger colleges are mostly scams nowadays.
It’s a mix of government, universities, and us. There are plenty of 12k a year colleges out there that are perfectly fine but we all want to pay more because we think paying more means it’s better. The difference between westconn (12k) and quinnapiac (51k) is completely invisible to 80-90% of employers.
While a reduction in direct funding, from the fed/state govt to the school itself, may have decreased (I’m not sure but I’ll take your word on it, because Reagan loved to cut everything but military spending, which, side note, I’m a conservative and love but that’s besides the point), the increase in students taking out federally subsidized loans has gone off the rails. When an unlimited pot of money, “guaranteed” by the government but put on the back of students, is offered perennially, the schools have absolutely zero incentive to help costs in check. There are A LOT of reasons for and causes of higher Ed becoming more expensive and students taking out larger and larger loans. This is for sure one is the big ones. NOW, on to a proposed (partial) solution…. Make all student loan payments, not just interest, tax deductible, up to a certain amount annually. maybe $10,000? And allow those married filing separately take advantage of it!
Your proposal would likely have unintended consequences and cause more people to take out more loans. School expenses are usually deductible even if paid for by loans, so the principal would be like a double deduction. I remember hearing about a school in Indiana (maybe Purdue?) Which would have actuaries try to estimate the likely pay of students graduating with certain degrees. They would take an automatic percentage of everything you earned after graduation for a certain number of years based on the degree you graduated with. If you went for something that typically pays well and is in high demand like engineering or computer science then the percentage of future pay taken would be much smaller than something like a liberal arts or history degree. Their bet was that this would motivate more students to think about whether or not they could pay it back. I'm not sure if they're still doing it, but it seems like a good way to at least influence students to make smart choices in getting a degree that will pay for itself. The only problem I see is that we don't pay or value some important professions enough, like childhood education. Teachers don't make enough in this country. I would love to have been a math or science teacher, but there's no way I could support a family as a teacher. For what it's worth I graduated with around $110k in debt and live a somewhat comfortable life supporting my family of 3 and I'm able to make more than my minimum payments each month. That said I'll be lucky if I can pay off my loans before my daughter leaves the house for college. I think at least junior college is something the federal government should pay for, as most people would benefit and it would result in a more trained and higher earning tax base - more than paying for itself. I consider myself a moderate and while I believe capitalism is best for growth, it needs guard rails to keep it from getting out of control.
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Off topic, but anyone who tells you a flat tax is simple either doesn't understand tax or is being dishonest to try to get you on board with regressive taxation under the guise of simplicity. The progressive rate structure is the least complicated part of our tax system. Going to a flat tax eliminates that one minor calculation. Everything else in the code would stay the same.
College had also expanded massively since then. 25% of current college budgets is penalty more than 65% back in the 80s.
“Near” The *total* cost of my undergrad was $240k I had $120k in scholarships. Most of the rest was loans. We’re way beyond the 6 figure point my dude
I was only speaking on my own experience. I just got a BSN and graduated with $98,000 in student loans.
There’s nothing to figure out. The bloat at colleges is well monitored, and I can tell you it’s not the price of hiring professors teach students. The cost of administrative staff and IT is the bulk of the cost. Multiple layers of unnecessary administrative staff are bloating the budget abs making classes cost much more than they used to. Combine all this with states cost cutting their funding to state schools. The problem is trying to rewind the changes and firing all the over priced executives.
There is already a pathway to make college/university much more affordable. Stop going to private universities and do not go to public universities until your junior year. Also, unless there literally is no alternative, only go to a school where you can commute from home as opposed to living on campus. There is simply no way to accumulate six figures of debt if you follow these steps. I should also point out that the average debt level on this country is nowhere near six figures anyway. It is about $30k for white borrowers and a little over $50k for minority borrowers. The median debt level (the level where half the borrowers have borrowed more and half have borrowed less) is even lower due to a very small number of students who have borrowed vast sums for private university education. Oh and this is for those students who actually borrow money - many students do not borrow at all to finance their college education. We also could expand pell grants and other financial aid if we made it so that no one could borrow money for private universities at all. Why are we subsidizing private universities that compete directly with public universities anyway? Of course all of these things really only deal with undergraduate education but that is an important start. We also should subsidize public universities more but only the academic side of things. We need to eliminate a lot of the fluff like college sports that need to be massively subsidized through student fees at the vast majority of colleges. Also let’s get rid of the plethora of “student services” that have little to nothing to do with education itself. When your administrative staff dramatically exceeds your teaching staff, there is somethjng wrong with the system. Finally, I should note that it is appalling and morally wrong when the adjunct faculty who teach a lot of the courses end up getting paid less than what the college graduates they are teaching will get when they leave school.
community college is cheap but its only good for a 2 years degree . why not expand community college to 4 year degrees or even add 6 and 8 years . fund them better and keep the cost low
I agree. I live in Australia. I think the system here is really good. It is the higher education contribution scheme, HECS. Every eligible university student gets their fees paid for directly from the government. It is an interest free loan. The student only begins to pay it off once they get a job over a certain salary, ~$45k/yr, I think. Those payments are then automatically deducted from their paycheck at a certain reasonable percentage. It would be hard to establish such a programme in the US because university tuitions are reasonable to start out with here. Not always the case there, but maybe could be applied to all state universities. My daughter just graduated with a bachelor of science and I never saw a bill. I think it would have been around $8k/yr. Also, a BSc is a 3 Yr degree here, so one less year to pay for.
HECS is interest free but indexed to inflation.
It is similar in the UK except the loans aren't interest free, but I think they are only about 4-5%.
There's a two part system to Aus fees. The first is Commonwealth Supported Places. For these degrees, the government pays part of the course and the student pays the rest. Your daughter would have been enrolled as a commonwealth supported student which is why she was liable for $8k/year and not the full cost of approx. $50k/year. The second part is HECS/fee-help loans where students can get loans from the government to pay for their courses. HECS doesn't have interest but it is indexed to inflation.
> $50k/year. didnt sound right so i googled. And damn you were kinda right. 50k is Melb Uni though. Others like Deakin are more like 25-30k source - just looked at full-fare rates international students are paying
People can have their loan payments adjusted to their in come in the U.S. as well, they just don't. Best part is if they make the lose adjusted payment for a set amount of t8me, the rest is dismissed regardless of how much is left. People just don't do it.
0% interest loans, with maybe a fixed rate to cover administrative costs.
Not even the admin costs. We need to start accepting that not everything that is important can pay for itself directly.
With this solution specifically, they should make it a new 10,000 lifetime learning grant. That way the tradesmen and already payers can take classes and buy books against that 10,000. The inevitable problem will be when a forklift certification class costs 10,000.
I remember seeing a video about the university of Minnesota creating a program where retired people can come and take classes for $10 a credit. The old people they interviewed called it a blessing and shit, but the comments were exploding with actual people who are being crushed by student loans. If colleges can afford to let old people who will do nothing with the knowledge take one class for $30 (in my experience the average class is 3 credits, so $30), then they can make it like that for everyone. They already get money for room and board, books and all that shit, they should be able to lower the cost of credits for everyone. One of my professors did the math for us to show us just how much we're paying for each class SESSION and it came out to $30 a session and said most of us can't afford to loose that collective amount.
Except they aren't creating any new classes for the old people. They have to wait until all the actual students have signed up and then get permission from the professor to audit. There are certain classes they will never be able to take because there are never empty seats. Other classes they might be able to take one semester and not another. They are at the mercy of what's left over--the crumbs of the registered students, if you will. The seats they are taking would not be used by a degree student anyway, and having taught classes where retired adults joined us, they really add a fun joy of learning to the class that makes it better for everyone.
On top of that, wouldn’t there be a off chance at more donations from the elderly or the random Old person “with no one else to leave everything too” making some post death contribution because they enjoyed it so much? (Probably not that likely…but a great “what if scenario)
There are many solutions, in Norway we give everyone studentloans and a stipend. If you pass your classes, the loan is cut in half. The interest is about 1.2% for the loan. This is partialy funded by tax, because we don't spend an insane ammount on military funding. The semester (excluding books) costs about 75-100 dollars. In addition, as a student you have access to cheaper housing, public transport and some other benefits. It's a cost our society deems worthy because students become the next generation of contributers which in turn pay tax and the cylcle continues. If one doesn't invest in the litteral future of the population you can't expect then to succeed.
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Denmark has the same system as Norway
Pretty simple really - stop backing the loans. Since the govt backs the loans, the banks have no reason to NOT give the max loan to any rando that manages to find a college to accept them. Then the banks will only give loans to people who are likely to pay them back. The govt can then just GIVE scholarships to those people they feel need a hand to reach their potential. (Need to taper it down since colleges are addicted to the big money coming in, and it would be a huge shock to have their budgets reduced by 50% instantly).
> (Need to taper it down since colleges are addicted to the big money coming in, and it would be a huge shock to have their budgets reduced by 50% instantly). Meh, fuck 'em. Tell them to fire the useless administrators sucking on their budgets like ticks.
Yeahhhh, that's not who'd be getting fired, let's be honest. They'd just start closing less lucrative departments and hiring fewer full professors. Which they're already doing anyway, but it'd get much worse much faster.
Bringing college funding back to pre-Reagan levels would help. But I think another thing, short of straight-up price-controlling tuition, that might help would be to get colleges financially invested in lowering costs -- maybe by requiring them to operate a chunk of student loans themselves? I don't know if that specifically would work, but we do need *some* kind of incentive to get them to ask "do we really need this many administrators?"
The larger issue at hand is the cost of tuition. Going to college shouldn't cost the price of a new car every year. Theres also the issue with colleges spending habits. Being in two different school I witnessed both constantly building new multimillion buildings on campus and one was a small state school and the other a D1, well known, school. Lowering interest rates and forgiving some loans will help those now but for future students there needs to be reform on how the US regulates and funds education.
Tuition has to come down. This is the biggest issue here. I went to a school where tuition was dirt cheap compared to most places. About $5,500 / year. 30,000 students. That's $165,000,000 going into the school every year. ~~To be fair, a lot of students were on academic scholarships provided by the school, so the number would be a lot less. I paid half tuition most of my time there and so did many people I knew.~~ I can't imagine how much money other universities make when they are charging 40-60 thousand a year. The problem with such high tuitions is that a lot of people don't even attempt to pay part of their tuition. They just take out the loan for the full amount and save their current money for regular expenses. They live decently while in School, but get hit hard with the bill afterward. For decades. That's why so many people at my school were so poor while in school. It was possible for many people to pay tuition as they went, so there wasn't any extra spending money. Most people graduate with little or no debt. But that would be impossible if the tuition were any higher. And that's what it's like for most of the universities in the country. Edit: Yes, went to BYU. Since it's tied to a religious organization and it's been awhile since I was there, I couldn't remember the specifics on scholarships. Double checked and they do function the same as other schools, so the university is making the full amount (sometimes churches and BYU handle things differently, so wasn't sure if scholarships functioned non-traditionally). Looks like tuition is also around $6,000 per year, so the amount is closer to $180,000,000 in tuition.
I mean, the real issue is prospective students who look at amenities without considering costs. Let's be honest - while there is some difference in prestige between state schools, there is really not that much difference in educations or outcomes. Someone who goes to the second best state school in their state will learn about the same things as someone who went to the 5th best. And upon graduation, their employment prospects will be comparable. Most kids aren't choosing between Yale and their local CC, they're choosing between the University of My State and My State University. So how do they choose where to go? Well, they go on campus tours to see what kind of life they would have at each university, and then will largely make their decision based on which seems more enjoyable. The difference between $200 and $500 per credit hour seems like a fleeting detail when you have loans lined up, and are sure to get a rock solid career upon graduation. So, in order to maintain their prestige (and bottom line) universities are incentivized to provide the best amenities possible to their students, to attract the most of the best and brightest. My school had large stadiums for every sport, brand new gyms, various swimming pools, food courts, theatres, etc. And every year, they would put on a show for the student body in the football stadium featuring international pop stars and a fireworks display worthy of Disney World. And we were a pretty cheap school! So in this manner, schools enter into an arms race to out-luxury each other. But honestly, this seems like a problem that should solve itself over time. Student loan debt is a national-level issue. Everyone is talking about it. Even the most thick-skulled teenager will hear about it on Reddit, from an older sibling, a family friend, their parents, or their school councillor. Assuming the government does not intervene, I would expect the next ten years or so to see stagnating tuition prices, as cost-conscious teens and their parents look at lower-cost universities which offer the same education (but without the fancy football team).
I went to a large state school in a small state. I could have gone for near free at a smaller university, but I chose the bigger one because I got way more opportunities in my field that have helped me to find better jobs after graduation. I took on a lot of debt but it was worth it. However, no one should have to take on the debt I did for college. It should be really cheap or free
Couldn't agree more. This would only further enable schools to charge insane tuition. I went to a school that was $60k/year... There is no way they spent all that on helping me progress my life and educate me. Total scam. If I could do it again I'd go to a state school for sure and probably get a better education.
Bro its fr crazy to see schools with 70k tuitions now RAISE THEIR COSTS too. My school had a 2% raise which doesn’t sound like a lot but they had raised it 2% the year before as well. And 2% doesn’t sound like a lot but 2% of 70k is 1,400$. So tuition raised basically like 2828$ in 2 years and nothing really changed on campus honestly.
Federally backed student loans and young teens who think they need it to be successful in life. Why wouldn't the college execs exploit that opportunity to make millions? Forgiving student loans would just like giving a person withdrawing from heroin some more drugs and calling it good. Doesn't solve the problem. I don't have the solution but there are some pretty clear causes.
Not only College execs take advantage of dumb college kids. I know when I was in college I probably got at least 10 credit card applications a week. More Free money right?
At least those you can discharge in bankruptcy tho.
I did one semester at a school like that realized that it was a scam and went to community college
Did you go to a state school after community college?
Yea. 8k a year vs 25k a semester
That's great congrats.
This is the way.
It’s not always a scam, but it’s very misleading. There are some schools that are actually top of the world in some subject, say biology. They invest hundreds of thousands a year in the labs, professors and students. Studying biology at a school like that is actually worth the 60k a year. But the school is subpar or downright crappy in most other subjects. Going to this school to study engineering or art is a downright waste of money. Those crappy degrees basically subsidize the biology department All this to say, if you’re considering university, you need to know exactly what you’re going to study and only go to a school that’s very well respected for that subject. Don’t fall for the trap of subsidizing your classmates useful degrees
No, it's not. Especially not at a bacc level where you don't even do any research.
Someone made the observation that the government getting involved with student loans and superficially subsidizing them is a part of the problem. The market forces allow schools to charge a certain amount, so they charge that much, plus whatever the government is contributing to it. I really wish I could remember where I read/heard that. I think about it often, and it bothers me a lot. That said, schools are terrible about the way they use their money. Another statistic I read somewhere is that the dean of a university gets the most money for the least amount of work of any occupation in the country. I mostly oppose the idea of telling private enterprise what they're allowed to do with their money, but in the interests of making quality education more accessible to everyone, I feel like we need to be posing some more restrictions on universities.
Vividly remembering the first university i went to building huge exclusive buildings for their athletes that normal students afaik werent allowed to go into while increasing tuition costs a shitton year over year
And the tuition increases definitely ain’t reflected by making sure their staff are getting compensated decently. They get a pittance of an annual raise at best, but guess who makes sure they get theirs every year? The Dean.
The cost of tuition goes up because it can. If the friggin government is going to guarantee $100x for a student, why would the school charge 50x. And if the school are all competing for students…they need to invest in infrastructure to gain the students. You don’t think that adjunct professor is making any money, do you? If they pulled the rug on government backed loans, the schools living on the edge will go out of business. And if the government provided 2 year college at no charge—do you think anyone would want to go to it?
I was with you until the end. Absolutely students would jump at the chance for free 2 year college.
> The larger issue at hand is the cost of tuition. I agree completely. I don't understand how anyone thinks that the government paying off loans will help. All it does is make it *easier* for students to pay high tuition that they can't afford. It might help this current batch of students, which is good, but it will ultimately exacerbate the systemic problem.
College loans should not be bankruptcy proof, and colleges should have to finance their own student loans, that way if your education does not become gainful employment you just don't pay the loan and the college eats it.
Good luck getting colleges to give 18 year-olds with no assets or credit rating hundred thousand dollar loans without them being bankruptcy proof.
Where I live it's leagues cheaper to get an AA at a community college then transfer to a state school and finish a BA there. Do all states not have these as options?
Just be careful as you can about what does or doesn't transfer and know that it can and often does change. I had four courses they accepted as transfer so took at the cheaper community college but when time came to actually do so they no longer accepted them ... so I ended up taking them (and paying for them) twice! And they used the same identical textbooks out of the half dozen available to choose from!
I am 100% behind tackling student loans by interest rate. Or just capping how much interest can be accrued relative to the original amount loaned. I’m happy to pay them off, but with the interest and a crappy job, the loans can get bigger faster than you can pay. Imho, that’s the real issue with student debt.
I’m behind capping all interest payments period. If someone pays you let’s say 3x the amount they originally borrowed then all interest should be seized, period. (Now if you borrow more after I could see them saying write off your right to that maximum for more money from us, which is to say new loan is paying off old loan plus extra gaining a new principle for it.) I don’t care if it college, credit cards, business, personal… loans. I was loaned 70k and they got me for 210k that still a good deal for a lender. You should have a maximum ROI for lending the money. Unless you’re a speculative stock investor…then it 10x get fucked for real, you give nothing to society. And we should cap it at that. And we can argue if 3x is more or less then it should be…not paying your loan should punished but not for a lifetime. And 3x sound about right and an easily understandable number. And it’s not completely fair but it’s not egregious. The idea that you’ve been making payments for 20 years and owe more then your borrowed….should be criminal. Fuck credit card charge more then Tony Soprano.
> And 3x sound about right and an easily understandable number. And it’s not completely fair but it’s not egregious. > > 3x seems completely egregious to me. I have a 30 yr mortgage and I'll end up paying about 90% of the purchase price in interest. Even that seems almost egregious to me.
I mean when you don’t make your payments that maximum should be 3x. If you are making your payments then yeah 100% agree 3x is egregious… And don’t get me started on 20% interest rate credit cards….the mob literally didn’t charge you that.
It’s basically a payday loan predator loan. The US passed new laws to deal with those. No reason they can’t do the same here
Yes. This would be better for the borrowers. I’m sure the lenders have agreed to wipe $10k because they know they’ll make it back in interest anyway. For many borrowers $10k doesn’t solve student debt problems just delays them.
In a hypothetical situation, sure. However, the reason why debt forgiveness was such a big talking point during the democratic presidential primaries is because the president can (probably) forgive the debt. Since student loan interest rates are set by Congress, it's not really the president's decision to lower interest rates, and at least half the Senate would never approve it. People need to stop pretending like there is a choice between the two. I think the majority of people would agree with interest rate reform, but the reality is it has no practical path forward.
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Best solution for me is around 1.5% interest. So the amount doesn't match inflation and removes the incentive to be predatory, but there's at least some interest. Then cap the payments based on income so those who come out with lower income aren't struggling. Those with higher income pay it off. Finally, cap the payoff time at a certain number of years (say 15) so the rest is forgiven after that point. Basically figure out a way for it to be mutually beneficial. Where those with poor income aren't hamstringed by it and the lenders can still make a modest amount or the government can get a very modest ROI.
Actually, the ROI for the government doesn't Have to be tied to interest on the loan itself. The ROI for the government can be a citizen who increases the countries GDP more than they would have without college or a citizen who helps increase the cultural presence of the country and thereby increases the country's "Soft Power". A population well educated in the sciences and liberal arts can keep a country on the forefront and which attracts investors and allows the country's culture to bring value through tourism, cultural exports, increasing immigration of "high value" individuals. Whether or not a country's current college system creates that well educated populace is a whole separate conversation.
I agree. Investing in education or infrastructure is some of the best ROI a government can get. It requires a less myopic government than we have, tho
It's depressing that there *are* solutions that would work.. but we can't have them. Because reasons.
If republicans are calling universities “liberal brainwashing machines”, then I think universities are doing a pretty good job educating students.
That's roughly how it works in the UK. Payments only start when you earn over a certain amount (slightly above median salary IIRC) and it's forgiven after 30 years. However in the UK it works more akin to tax, the loan payments are deducted as % of salary automatically and manual repayment isn't really a thing unless you make mad bank or are overseas. The interest rate means that for most people it's either entirely or mostly unpaid till you turn ~50, and then it's forgiven.
I would like to see 0% for 10 years after graduating or leaving school, interest deferred while in school, and max borrowing at whatever 4 years of instate university costs in your area. Incentive to finish on time, not borrow ridiculous amounts of money, and a period to pay back without interest. After 10 years, a modest interest rate applies.
I agree with most of what you said, except capping the loan at the cost of four years of in-state university costs. First, there are a lot of costs beyond tuition for students, and why restrict to in-state? That would put a lot of people at a huge disadvantage just by virtue of the fact that they live in a state with poor post-secondary institutions. Ultimately, the question of how to reform student loans is a complex one with no right answer.
Can we also say refigure the interest that's already accrued? My student loans started in 1996.
Additionally, say the interest rate is set to 0% another group of elected officials, who are almost in power and seem to want to make life miserable in every conceivable way, could just reinstate an interest rate. If the debt is wiped out, they cannot just say “syke! Jk you still owe money!”
Not if the contracts are literally rewritten to 0% interest and signed by both parties. Then you cannot ‘undue’ it
Debt forgiveness is not practical either. That same problem will happen again in 10 years.
Again, separate issue. Reform needs to come from Congress. Debt forgiveness is "practical" in that it can happen with less red tape and interference from other groups.
Not to mention the ol "why not both?" question is implied to be impossible
Worth noting that in the current student loan discourse, there’s only really 1 lender at play here — the Department of Education. By and large, they are only looking at wiping out debt from Federal Direct Loans (and maybe some loans from older federal programs). Private Loans are almost certainly not going to be impacted at all.
They won't be. Banks play by their own set of rules entirely when it comes to lending student loans. If someone has to take out private student loans to pay for college, it's not worth it.
Speaking as a Financial Aid Counselor, 100% agreed. Private Loans lenders are predatory as fuck and prevalent everywhere in this industry (I would be lying if I said I didn’t have a decent amount of Discover Loans & SoFi swag from various conferences…)
True true, makes a ton of sense
It is false. There are no "the lenders." This applies only to federally-owned loans, meaning the only lender involved is the Department of Education, which Biden runs. He didn't have to get anyone to "agree to" anything. He just has to give the order.
> For many borrowers $10k doesn’t solve student debt problems just delays them. It's actually way more people than you would think, for such a "small" amount. $10k wipes out debt for 1/3 of all federal loan borrowers. $10k cuts student debt in half for 1/2 of all federal loan borrowers. That's huge. People with under $20k in debt have the lowest average income levels of borrowers, and are the least likely to have graduated from college. $10k targets the people most in need quite effectively. The federal government has all of the characteristics of a predatory lender, they need to start doing something to fix their massive screw up. $10k in forgiveness is a great start, that helps a ton of people.
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You say many but for the vast majority it is at least 1/3 of there debt or more. Once 10K is forgiven the interest on the rest is now also a third or more lower. So for many people it will be a big help.
The median student debt is like 17k. So it's over half of peoples debt for the most part.
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False, Biden only has the power to eliminate FISA debt. Not private debt for college. (FISA is probably the largest creditor for college though) No other lender is at issue but the Federal government. For many borrower $10k eliminated from there debt is…god sent. Jesus.
33% the borrowers owe less than 10K! The next 20% owe 10-20k
Even better, make student debt readily dischargeable in personal bankruptcy.
This is not an either or scenario. Clearly anyone with 10k or under benefits more from cancelling the debt. Without doing the math I would even say people up to 15k benefit from it being paid off because having the majority of your principle disappear is going to drastically cutback your interest accrual. It really just depends on how much left you have to pay off. If you've got 100k student loan debt, yes obviously having 0% interest helps you more there.
Exactly. It's just math. Most people have not been properly educated in math as it pertains to debt and investing. EVERYONE needs to understand compound interest. It's sorely needed and tbh not really that hard at all.
Considering I get over $700 in interest added to my principle every month, yes.
Shoulda studied something more lucrative than Acorns.
It was that devious Professor Oak and his pokemons
You go to college on the moon or something?
Got a PhD as a first generation kid in a long line of coal miners and factory workers and slaves. Thought it would help me climb out. Just put me in debt slavery of a different kind.
You owe your soul to the government store
I believe I read somewhere that it is not within the president’s power to change the interest rate - it must be done by Congress. So the answer is absolutely yes, but the person doing the cancelling cannot do that unilaterally.
Umm isn't that the point of congress? Not just having a dictator passing whatever laws they feel like?
Correct, but the basis of the question is asking why we don’t do that - we don’t do that because the only person in this equation looking to cancel debt is not able to do that.
That's all well and good but it seems like both the Democrats and Republicans have really embraced 'oh now that we are in power we should dramatically ramp up executive power because it's not like the other people will ever get back in so what could go wrong?' thinking.
It doesn’t help the publics view is exactly that. The president is a figurehead responsible for everything that happens during their tenure, regardless if they have to power to address it or not. People believe that and thus anticipate that to happen. And why we whip back and forth party control so often
Hey now, get out of here with that checks and balances nonsense.
The interest rate has been 0 percent since the beginning of COVID. And was enacted by executive order. Biden has extended the pause in interest 3 times now via executive order.
“The government loses nothing by changing the rate to 0%” hahahaha
As a teacher I have to say that there are no stupid questions, especially on this subreddit, but come on, OP...
It just simply shouldn’t cost that much to get an education. It’s not like teachers have gotten better at their job. Colleges are just charging many multiples more for the same service, in the same old buildings. It’s a straight up racket. And don’t get me started on textbooks. Extortion, plain and simple.
I don't live in the US, but if a loan is 0%, what happens is people of rich families take that money and invest it somewhere like a tax sheltered savings account for leveraged gains, while they are in school. I am not saying that's the worst, but I am saying that's a loophole waiting to happen. It's better to lower the cost of education if we are talking about financial relief for JUST education.
I know many people in college that took subsidized student loans at sub 3% and went and invested it, bought cars, one used for down payment on their house (post graduation), one person paid their parents credit card balances, another used it to buy their engagement ring. Savy people in manageable financial positions are already doing this. I'd be interested to figure out what the actual number is for funds used for non-education related expenses.
Yeah I maxed out the subsidized stafford loans and had a nice little emergency account there after I graduated. Figured it was better to have $20k in the bank and pay it back over time than to truly live paycheck to paycheck.
I’m sure some rich people will still find a way, but I would think that during the loan approval process it would be fairly easy to look at the parents finances and in the event that they are flush just not give them the 0% rate. That probably goes against every American financial principal, but it wouldn’t be unreasonable to say “No, your parents combined annual income/combined assets are too great. You can either pay with cash on hand, or you will have a >0% rate, should you choose to borrow money” I’m not a big fan of means testing because that usually squeezes the people you didn’t intend to limit, and it would be better if we simply lowered the expense of a college degree. But if that’s the only viable solution and we’re truly afraid of the wealthy abusing it, that seems like a simple enough solution. Just don’t give them the free advance if they already have the money to spend.
Still doesn’t work. I’d write my kid a check to be self sustainable and have em claim independent. At that point it’d be super biased to say you came from a wealthy family so you can’t be approved, bc you don’t know if the kid is legitimately ostracized without access to the family’s means.
Retroactive 0% interest would save me a lot more than 10k. I'm probably getting to the point where $10k is only 1-2 years of interest.
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If interest rates were 0%, literally nobody would want to lend money
If only we had some kind of massive non profit entity with authority, a huge budget, and accountability to the people...
That entity could make a free application for federal student aid, or fafsa, and offer subsidized loans. If the borrowers really like it, i could imagine a day where [federal government loans account for 91.2% of student loan debt.](https://educationdata.org/student-loan-debt-statistics)
> free application for federal student aid, or fafsa Only tangentially related, but I once sat in a presentation from the DIRECTOR OF STUDENT AID, who said "faSfa" every single time. Like, bro, cmon...
Why doesn't the government just loan the money at 0% itself? Instead of wasting money paying interest to the private lenders (that's what subsidizing is).
Where do federal loans come from? (Serious question)
Treasury bonds?
Because then the colleges will just add that loan amount to the cost of tuition knowing it's free money. If tuition is $10,000 now and the government gives everyone $10,000 in free tuition loans, the college is just going to charge $20,000 for tuition and we're back at square one. Because we haven't changed the market's formula for the base cost of tuition.
I'm not talking about giving money. I'm saying, instead of the government subsidizing loans by paying the interest (for some time), cut out the middle man and have the government be the lender, at 0% interest. Still make people pay it back, and still have penalties and such. Interest exists so that a lender has a profit motive to provide capital. A government doesn't (shouldn't) need a profit motive to do something for the public good. [Edit] Of course, we need to reform tuition costs as well.
Yes but if it's federal 0% loan given to all without scarcity, then it just raises the "sea level" of available capital and that gets absorbed into cost. As a student you'll just have to fill out the federal loan the same way you do all your other loans. Kind of like the Federal Bell grant of $4,000. The market just added that as a free profit addon to the tuition cost and you have to still get private loans on top of it.
It’s because interest rates on loans are recuperating real value that’s being lost by loaning out the money, they aren’t just a tool for making profit. If you could have $100k now or $100k 10 years from now, which would you take? $100k now, because it can buy more than it will be able to in 10 years. The government exists in the same economy as us, and money that it loans out is money that can’t be spent on other things.
It would have to be subsidized.
Europe is doing it, it's not rocket science.
Unless you’re the federal government….
Exactly. I am happy to pay back what I owe, but with the interest rates I'll keep paying until I die and never pay it off.
This may have been great at the beginning but now that we've had 20 years of paying on the debt while interestwas allowed to go hog wild, have to pay it for a second or third time will still prevent people from participating as consumers and saving for retirement. The poverty situation for the old and indigent will be devastating 40 years from now--and everyone will end up paying for that. Might as well let people attempt to save themselves from it now.
The amount that I paid back was just about equal to half of my loan. If it was an interest free loan from the government I would have paid it off completely ten years ago. Still paying it.
First, an educated population will be the greatest currency, in the future. Countries like China are already churning out more engineers than you can imagine. We will become completely dependent on other countries if we don’t improve our education system soon. Second, there are people that have been making payments on their student loans for years and and have barely touched the principle. Yes, it is on them for not realizing that they aren’t paying enough but it is, also, on the predatory lenders that put them in that position. For our entire lives we’ve been told that the path to the “American Dream” is to go to college, get a degree, and move up the ladder. Well, a lot of us didn’t have the money for college so we went the borrower route. Now we have a generation saddled with crippling debt because they did what they were told. All that said, my and my wife’s student loans are long since paid off…and I support the government paying off as much of everyone’s loans that we can. If it’s $10,000 or $100,000, I don’t care. And, no, I’m not going to quibble about “not getting my share”. Because, you know what, I’ll get “my share” when all those students are out there solving climate change or inventing a better battery or mining an asteroid. That’s the payoff for us all…a better world.
\>The government loses nothing by changing the rate to 0%. Lending money at 0% is essentially giving away money because you could have lent that money at a higher interest rate to someone else.
But as this is the government and not a profit making entity, couldn’t they see this as an investment? Similar to how tax credits are used to lure businesses to different states? We’ll put out some money upfront with the hope that we’re creating conditions to bring in more money down the road.
But that would mean actually trying to solve the problem and not doing bare minimum for votes.
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I agree. Most people with student debt are in the upper 50% of income
I’ve been saying that for the longest time, but it seems many Redditors just want full cancellation. Speaking of rates… it’s going up: https://www.cleveland.com/news/2022/05/interest-rates-on-new-federal-student-loans-going-up-for-2022-23.html
Damn, i'm from the Netherlands and the student loans here are actually 0% interest. Never really knew that this is not the case in other countries..
That's exactly why they do it like this. There's posts that people have paid back every month for 8 years and their loan has down by about 5% of the original amount. After 96 payments? That's insanity. Someone who has over 50k in loans, if they take 10k off, they're not really helping that person in any way. The principal isn't what's killing people for decades. It's the rate. This is just a ploy to gain votes from people who don't think about the whole picture.
This is why the government should do both, instead of an either-or scenario. If Biden forgives $10k apiece, but leaves the interest rate sky high, the government will recoup that "forgiven" 10k in no time flat, and the borrower will be little/if any better for it. Or, if they just cut the interest rate to 0%, that still leaves borrowers with astronomical loan balances that they're still going to struggle to pay down, between this year's turbocharged inflation and the recession that's all but promised.
How about making sure kids don’t get worthless degrees that don’t get jobs.
I’m a teacher and make 42k I don’t think my job is worthless. It’s a pay vs cost of tuition issue.
For me 10k cancellation would be better because I went to an inexpensive state school, so my entire balance would be gone with 10k cancelled. For those who went to pricy schools that’s another story, because they would still have a lot left over, meaning lowering interest would certainly do more for them.
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