Student Loan Forgiveness

[Foggy_Goggles]

Positioning this as university vs trade is a trap. Both are needed. Both should be available as part of comprehensive education system.

That wasn't my intent. Honestly just trying educate myself. An affordable job training program (call it what you want) is needed.

[Cisco Kid]

I have a couple younger friends that equate coding today to the trades of my generation. I can't say they are wrong.

In the grand scheme of the rest of your life, 10-20k ain't much but I do wonder about the message being sent. Is this financial relief for a sector of the population that needs it or is it defacto approval for overpriced college that is not a good investment for anyone?

I think the crux of the "problem" with any issue today is the belief that a program for millions of people should be solved with a binary approach. I do think we can walk and chew gum at the same time. When I was selling I learned something about human nature. Ask the buyer which two of four options they liked and they were confused and indecisive. The buyer was more confident and decisive if given a choice of two options, twice. Yes or no. Blue or green. Good thing/bad thing. Remember the "War on Christmas"? We were asked if it was a good thing or bad thing. Great salesmanship IME.

[Foggy_Goggles]

So what are we supposed to do? Elect better politicians?

The Law of Unintended Consequences seems high with this one.

[Cisco Kid]

Step one. We get rid of all the lawyers. And term limits.

[MultiVerse]

I see no one discussing the going forward implications.

If you weren't considering student loans, it may be worth considering them. In the "income driven repayment" plans, the government proposes to subsidize your payment when your income is insufficient to cover the standard payment. That's a lot of words for "free money." There's 2 subsidies. First, the minimum payment is reduced to 5% of disposable income. Second, the government makes up the difference required so your loan decreases as if you'd paid the amortized amount. There may be a third subsidy to retire the loan when it reaches term, it's not clear.

In theory, today's college student can take out loans, and party while earning a shitty degree. On graduation, they can get a shitty job, and continue to party or surf while the government pays most of their loan. 10 (or 20) years later, the loan is gone.

Also, as near as I can tell, none of this policy is implemented. It's proposed, expected implementation by EOY.

The income-driven repayment plan has by far and away the biggest implications going forward. Unfortunately it's being discussed with the same moral framing as debt forgiveness.

Debt forgiveness is a short-run program that is easy to understand. Income-driven repayment (IDR) changes are going to be implemented and they amount to a massive college subsidy allowing for unlimited borrowing based on income, not the actual amount borrowed:

1. An income increase from 150% to 225% of the federal poverty rate
2. Above the 225% poverty threshold the IDR eligibility rate is reduced from 10% to 5% of income which means even households with over a $million in annual income will qualify
3. No accrual of interest on IDR loans
4. The IDR repayment period is reduced from 20yrs to 10yrs

What this means is for anyone enrolled in IDR $10,000 of student debt is the same thing as $100,000 or $200,000 of student debt. Which also means every school in the country can eventually charge much higher prices because when we subsidize an already overpriced industry costs inevitably go up.

This is going to be a very expensive program. It's only a matter of time before the income-driven repayment program is either ended due to its enormous costs or federal price controls on college costs are put in place.

[LongShortLong]

I have a couple younger friends that equate coding today to the trades of my generation. I can't say they are wrong.

In the grand scheme of the rest of your life, 10-20k ain't much but I do wonder about the message being sent. Is this financial relief for a sector of the population that needs it or is it defacto approval for overpriced college that is not a good investment for anyone?

De facto admission that the current student loan system is broken, in that it's a debt trap for some people. The fundamental problem is people ought to be able to declare bankruptcy about as easily as businesses and get their debts reorganized.

I see this program as good politics, bad policy, maybe also the best policy achievable that does something. The IBR (income based repayment) changes, if implemented in the most generous way, will reduce the debt trap problem for future borrowers. The moral hazard of choosing poor majors or scummy for-profit schools will remain.

[jono]

The moral hazard of choosing poor majors or scummy for-profit schools will be shifted to the public.

FIFY

[dunfree]

The income-driven repayment plan has by far and away the biggest implications going forward. Unfortunately it's being discussed with the same moral framing as debt forgiveness.

Debt forgiveness is a short-run program that is easy to understand. Income-driven repayment (IDR) changes are going to be implemented. And they amount to a massive college subsidy allowing for unlimited borrowing based on income, and not the actual amount borrowed:

1. An income increase from 150% to 225% of the federal poverty rate
2. Above the 225% poverty threshold the IDR eligibility rate is reduced from 10% to 5% of income which means even households with over a $million in annual income will qualify
3. No accrual of interest on IDR loans
4. The IDR repayment period is reduced from 20yrs to 10yrs

What this means is for anyone enrolled in IDR $10,000 of student debt is the same thing as $100,000 or $200,000 of student debt. Which means every school in the country can eventually charge much higher prices because when we subsidize an already overpriced industry costs inevitably go up.

It's only a matter of time before Income-driven repayment program is either ended due to its enormous costs or federal price controls on college costs are put in place.

Undergraduate federal student loans are capped at aggregate $31k for a dependent student and $57.5k for an independent, so not the same.

and it’s only 10 years if your initial loan balance is $12k or less, for balances over that it’s still 20 years, unless it’s graduate debt which is 25 years.

People talking about “poor majors” act like predicting 4-5 years out is some easy transparent thing.

[LongShortLong]

FIFY

True, but the public already bears the cost. The coffee shop philosophy major is a misallocation of an intelligent human. To the degree they become bitter at their loans and the government, and tune out or join the populists, we lose more. Either makes us all poorer.

[Supermoon]

FIFY

Why is it that giving money to people is a moral hazard, but giving money to businesses is seen as necessary for the economy?

[MultiVerse]

Undergraduate federal student loans are capped at aggregate $31k for a dependent student and $57.5k for an independent, so not the same.

and it’s only 10 years if your initial loan balance is $12k or less, for balances over that it’s still 20 years, unless it’s graduate debt which is 25 years.

People talking about “poor majors” act like predicting 4-5 years out is some easy transparent thing.

There are three types of undergrad college loans: 1) subsidized, 2) unsubsidized, and 3) uncapped parent loans.

So consider a family with $500k/yr income and three kids attending expensive schools with $60k/yr annual tuition. The kids each take out $57.5k in total loans with parent loans covering the rest. Together all three kids along with their parents borrow $720k for tuition.

All these loans then get consolidated under the IDR plan loophole created by the changes. The three kids end up paying around $100K each or $300K total spread out over 20 years. After which point the rest is forgiven by the government, resulting in a $420k household/college government subsidy.

[Buster Highmen]

Why is it that giving money to people is a moral hazard, but giving money to businesses is seen as necessary for the economy?

Good question. What was the Morgage bond bailout? 700+ billion with 300 biliion "recovered"?

Pejoratives for liberal arts aside, the system is badly broken with roots in badly structured college loan programs likely leading to tuition bloat 5x the rate of inflation. Once I read an intelligent dissection of that issue, I'll pay more attention. Your petty attacks on liberal arts should be below most of you. Then again, maybe not.

I'm paying $80k/ year now for 1 kid with another in the pipeline.

[jono]

Why is it that giving money to people is a moral hazard, but giving money to businesses is seen as necessary for the economy?

That's an interesting question. I think it's because most people are afraid of moral hazard because they have an aversion to many of the horrible aspects of the major capitalists' personalities. So when a program comes along that might apply to us it seems less hypothetical and so we evaluate it on a different basis.

I'll stand by my assertion that the next leg of debt monetization should be handed to people who haven't had any debt forgiven, held more than $100k of equity in or received a bonus from a bailed-out corp. They'll get to us all eventually.

[MultiVerse]

I'm paying $80k/ year now for 1 kid with another in the pipeline.

Are you paying out of pocket or taking out ParentPLUS loans?

[SumJongGuy]

This is an excellent discussion. Some fine points being mentioned. Some skin in the game. We paid off wife's student loan from before we were a thing 10 years after she graduated. It was definitely hard to do. Now 2 kids in college racking up their own debt beyond what we can afford to pay for their college endeavors.. And that's actually more than half of it after scholarships and grants. They are lucky. We need to do more for kids who lose the birth lottery badly.. Keep the suggestions coming.

[mcski]

Maybe eliminating the bankruptcy exception for student loans would be another option to clear this mess up a little. I’m surprised at how little to none that legal screwing gets in this discussion

[Supermoon]

This is an excellent discussion. Some fine points being mentioned. Some skin int he game. We paid off wife's student loan from before we were a thing 10 years after she graduated. It was definitely hard to do. Now 2 kids in college racking up their own debt beyond what we can afford to pay for their college endeavors.. And that's actually more than half of it after scholarships and grants. They are lucky. We need to do moe for kids who lose the birth lottery badly.. Keep the suggestions coming.

Yeah there are lots of problems that need to be addressed. I think cutting federal and state funding of schools played a big part in the initial transition to student-paid tuitions and the explosion of loans and costs. Making people who have left school more whole is a good start, but more needs to be done for kids going into school now and in the future.

There are certainly good reasons to have research staff, athletics, hospitals, and other non-academic things at schools, so I think cutting costs should be done strategically, not just blanket cuts which would mean the football coaches get theirs, but the grad students breaking ground in their fields get the shaft.

[dunfree]

There are three types of undergrad college loans: 1) subsidized, 2) unsubsidized, and 3) uncapped parent loans.

So consider a family with $500k/yr income and three kids attending expensive schools with $60k/yr annual tuition. The kids each take out $57.5k in total loans with parent loans covering the rest. Together all three kids along with their parents borrow $720k for tuition.

All these loans then get consolidated under the IDR plan loophole created by the changes. The three kids end up paying around $100K each or $300K total spread out over 20 years. After which point the rest is forgiven by the government, resulting in a $420k household/college government subsidy.

$7k per child for the first twenty years of their working lives to make 20% of what the family they grew up in made.

[Buster Highmen]

Are you paying out of pocket or taking out ParentPLUS loans?

OOP.
I made an investment 20 years ago that was smart.

[MagnificentUnicorn]

I wonder what financial impact will be realized by anyone posting in this thread? My guess is close to zero.

[Bunion 2020]

I wonder what impact will be realized by anyone posting in this Forum? My guess is close to zero.

FIFY

[MultiVerse]

Yeah there are lots of problems that need to be addressed. I think cutting federal and state funding of schools played a big part in the initial transition to student-paid tuitions and the explosion of loans and costs. Making people who have left school more whole is a good start, but more needs to be done for kids going into school now and in the future.

There are certainly good reasons to have research staff, athletics, hospitals, and other non-academic things at schools, so I think cutting costs should be done strategically, not just blanket cuts which would mean the football coaches get theirs, but the grad students breaking ground in their fields get the shaft.

$7k per child for the first twenty years of their working lives to make 20% of what the family they grew up in made.

I think the somewhat predictable way this plays out, regardless of the laudable efforts of the income-driven repayment (IDR) plan, is that it leads to people demanding government regulate college costs. When that happens Republicans will call for funding cuts and closing schools while Democrats will experience ever increasing pressure to enact continuous rolling plans for canceling student debt irrespective of how it polls down the road.

[doebedoe]

I wonder what financial impact will be realized by anyone posting in this thread? My guess is close to zero.

Based on what I'm reading I stand to get 9k refunded. That's about 2 months salary. Will it change my long-term future? No. Is it a nice chunk of change -- yes.

If it happens, it means I fill up my Roth this year, fly my niece and nephew out to go skiing for the first time and fix some galvanized pipe in my house.

It will reduce my wife's IDR payment significantly which is nice given the price of housing these days.

[MagnificentUnicorn]

Based on what I'm reading I stand to get 9k refunded. That's about 2 months salary. Will it change my long-term future? No. Is it a nice chunk of change -- yes.

If it happens, it means I fill up my Roth this year, fly my niece and nephew out to go skiing for the first time and fix some galvanized pipe in my house.

It will reduce my wife's IDR payment significantly which is nice given the price of housing these days.

Guess that’s good, I really meant for the people complaining about this EO.

[Hood26]

A good read for how much trouble is coming.

https://www.bloomberg.com/news/artic...6r7jrt7wezdrda