Author Topic: Student loan forgiveness  (Read 613 times)


dragoncar

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Re: Student loan forgiveness
« Reply #1 on: August 13, 2019, 01:15:27 PM »
All I can think of about these SL convos is that clearly, some people feel that poor people don't deserve educations.

As for “deserving” an education, I don’t think anything I’ve said supports your assertion.  Maybe you are referring to someone else.  I think basic education should be provided by society.  In fact, it currently is.

I’m also not opposed to providing need based higher education, or providing higher education for all going forward.

I don’t like the warrens proposal because of the stated dramatic disincentives for people to meet their financial obligations.

If her proposal was limited to those who really could not afford their loans, then that’s fine with me.  But IBR and 25 year forgiveness is already a thing for people who literally can’t make minimum payments.  Possibly lower the forgiveness time.



dragoncar

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Re: Student loan forgiveness
« Reply #2 on: August 13, 2019, 01:16:16 PM »

On a practical level, in a past 19th century model, those "prudent" people who already have no debts will not only have no debts in the future, but also already a foundation for their nest egg.
Also practical that those who have crushing debts no longer have the hammer over them and can actually start to behave rationally.
And not to forget the practical side that the looming threat that now prevents many poor people from studying (which is likely a big reason for that system) will be away.

The student debt crisis in the US now is the result of a totally borked system. Change the system. And then you have to clean up the fallout, aka the debts, which is done by forgiveness.
Expensive? Yes. But that is the result of an insane system. It's not like you weren't warned a quarter century ago.

So because we were warned a quarter century ago we should have to pay up.  But what about the people who took out the loans?  We’re they not also “warned”?

charis

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Re: Student loan forgiveness
« Reply #3 on: August 13, 2019, 02:23:04 PM »

On a practical level, in a past 19th century model, those "prudent" people who already have no debts will not only have no debts in the future, but also already a foundation for their nest egg.
Also practical that those who have crushing debts no longer have the hammer over them and can actually start to behave rationally.
And not to forget the practical side that the looming threat that now prevents many poor people from studying (which is likely a big reason for that system) will be away.

The student debt crisis in the US now is the result of a totally borked system. Change the system. And then you have to clean up the fallout, aka the debts, which is done by forgiveness.
Expensive? Yes. But that is the result of an insane system. It's not like you weren't warned a quarter century ago.

So because we were warned a quarter century ago we should have to pay up.  But what about the people who took out the loans?  We’re they not also “warned”?

I agree that the student loan crisis is a result of a bad system.  Yes, a number of borrowers ALSO made bad individual choices.  Mostly young, ignorant people tend to do that.  In this case, many borrowers were set up to fail.  I do know people who paid off their student loans early.  But the majority who didn't have student loan debt were funded by their families.  Not because they were "warned" and made better decisions.  People tend to approach this issue from an emotional and moral position, but the "I paid my loans so they should have to" thing isn't working.  People have already stopped meeting their financial obligations.

therethere

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Re: Student loan forgiveness
« Reply #4 on: August 13, 2019, 02:53:09 PM »
But I paid my loans and you should too. Yeah it sucked. And I got suckered into them by the system and my parents. But that's just what reality was at the time. Now face the consequences.

I worked through school to keep my loans low. 3 jobs during the summers. I skipped my graduation because I needed to start my career ASAP to pay my student loan bills. I stayed in jobs that weren't a good fit for years too long, because I had student loans. I worked in retail for 2 years with an engineering degree during the recession, so I could continue to pay my student loans. I never took vacations, haven't bought a house, didn't have kids. Because I have loans. A lot of people who still have loans have not done those things. If you haven't prioritized their paying your loans they should not get forgiven.  You made a choice and should face the consequences. And if they do get forgiven maybe the amount should be taken out of their capital gains on housing, child tax credits, or their social security or something.   

I have sympathy for SOME people who have student loans and can't get ahead. But blanket loan forgiveness is just asking to create more division between people. Not to mention, what's the point of forgiving them if we still haven't fixed the system? Fix the system first. Then consider loan forgiveness for extreme situations like those from the scammy online schools or parents stuck with their deceased child's loans. Blanket loan forgiveness is just more entitlement.

Dabnasty

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Re: Student loan forgiveness
« Reply #5 on: August 13, 2019, 03:01:21 PM »
I wonder what effect the discussion of student loan forgiveness is having right now.

As in, how many people have cut back to minimum payments, found ways to delay payment, or otherwise changed their behavior based on the possibility that their loans may be forgiven.

dragoncar

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Re: Student loan forgiveness
« Reply #6 on: August 13, 2019, 03:52:54 PM »
I have total sympathy for people who made bad decisions young, or somehow made the "right" decision and got screwed.  I also have empathy for the people who have personally sacrificed to pay off their debt only to be told "too bad, you already paid them off nothing for you".

I thought this might get better traction on this, the MMM forum.  Because we know that the average american budget has a LOT of excess and waste.  The vast majority of people with student debt could pay it off if they were serious about it.

This site gives various estimates for student debt as a percentage of first-year income (https://www.valuepenguin.com/average-student-loan-debt).  It varies, but lets be generous and assume someone graduates with student debt equal to 100% of their first-year income.  I did a quick calculation, and at 6% interest with a 10-year repayment schedule, the annual loan servicing makes up around 13% of the debt (and thus, 13% of income).  We all know 13% is a pretty low savings rate for mustachians, although for the average consumer sucker it could be seen as crippling.

Now none of this takes into account the outliers.  People who make incomes far above or below their education debt.  For those people who are struggling, it's great to have programs in place to help them.   I'm open to seeing other statistics, change my mind with some numbas.

On another note, the immediate effect of the government simply paying for everybody's higher education is not going to be that great.  I just don't think we currently have enough quality educators to send every single HS graduate to college in a way that actually enriches their lives and society.  But sure, we have to start somewhere and market forces would likely increase the number of people going into education.

« Last Edit: August 13, 2019, 03:57:38 PM by dragoncar »

Alternatepriorities

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Re: Student loan forgiveness
« Reply #7 on: August 13, 2019, 04:09:56 PM »
The current student loans system is insane but it is so because the government got involved in the first place. There is already a good system in place to address the problem of people who can't repay their debts... We should allow people who are overwhelmed by debt to discharge it using the bankruptcy system just like any other debt.

I think people who have spent most their career making a salary and/or doing something they love tend to forget that many of us literally traded hours of our lives for the dollars we used to pay back our loans. I started life with an actual dirt floor. My family didn't have electricity until I was 7 and on demand hot water didn't come until 7th grade. My first job at 14 included cleaning up dog poop and cigarette butts (I preferred the poop). I had no family help with school or the loans but I did pay back everything I borrowed. It took 5 years of hard work at university (working part time and no parting) and two more years of mustachian living while working full time to pay for it. To just forgive the loans of all the people who went to college just to have a good time and figure out what they wanted in life is a slap in the face to people like me. It punishes me for prioritizing paying off my student loans above buying a nice car, a house, or traveling. It also penalizes all my friends who chose to work jobs they didn't love rather that borrowing money to go to college... It penalizes every family making less that 100k a year who could have borrowed the money but chose to sacrifice other things to pay for school.

Worst of all it does nothing to address the underlying problem created by the federal government guaranteeing a loan for any college degree regardless to it's quality. Imagine if they did that with home loans... Wait, we tried that already. We need to address the underlying problems, but Elizabeth Warren would rather buy votes. That's the real purpose of this proposal.

Alternatepriorities

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Re: Student loan forgiveness
« Reply #8 on: August 13, 2019, 04:20:13 PM »
I have total sympathy for people who made bad decisions young, or somehow made the "right" decision and got screwed.  I also have empathy for the people who have personally sacrificed to pay off their debt only to be told "too bad, you already paid them off nothing for you".

I thought this might get better traction on this, the MMM forum.  Because we know that the average american budget has a LOT of excess and waste.  The vast majority of people with student debt could pay it off if they were serious about it.

This site gives various estimates for student debt as a percentage of first-year income (https://www.valuepenguin.com/average-student-loan-debt).  It varies, but lets be generous and assume someone graduates with student debt equal to 100% of their first-year income.  I did a quick calculation, and at 6% interest with a 10-year repayment schedule, the annual loan servicing makes up around 13% of the debt (and thus, 13% of income).  We all know 13% is a pretty low savings rate for mustachians, although for the average consumer sucker it could be seen as crippling.

Now none of this takes into account the outliers.  People who make incomes far above or below their education debt.  For those people who are struggling, it's great to have programs in place to help them.   I'm open to seeing other statistics, change my mind with some numbas.

On another note, the immediate effect of the government simply paying for everybody's higher education is not going to be that great.  I just don't think we currently have enough quality educators to send every single HS graduate to college in a way that actually enriches their lives and society.  But sure, we have to start somewhere and market forces would likely increase the number of people going into education.

I graduated with student loans about 110% of my first year salary. My estimate of paying for school in 2 years of work is based on continuing the same lifestyle and expense I had in college.

If it were suddenly free I would probably go back to school for a masters in either economics or nuclear engineering, but since I wouldn't need a job when I finished that probably wouldn't have a very good ROI for the economy as a whole.

therethere

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Re: Student loan forgiveness
« Reply #9 on: August 13, 2019, 04:29:18 PM »
I graduated with loans 128% of my starting salary. DH graduated with loans 158% of his starting salary AND his parents took out another 20k in PLUS loans.

It was shocking to me to see that the majority of student loans are relatively low balances (<25k). That's less than or equal to a new car. My guess is, there are a high percentage of people prioritizing a new car over extra loan payments.
« Last Edit: August 13, 2019, 04:39:07 PM by therethere »

dragoncar

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Re: Student loan forgiveness
« Reply #10 on: August 13, 2019, 04:35:48 PM »
I graduated with loans 128% of my starting salary. DH graduated with loans 158% of his starting salary AND his parents took out another 20k in PLUS loans.

Nice anecdote.  Was it crippling?

Alternatepriorities

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Re: Student loan forgiveness
« Reply #11 on: August 13, 2019, 04:42:18 PM »
I wonder what effect the discussion of student loan forgiveness is having right now.

As in, how many people have cut back to minimum payments, found ways to delay payment, or otherwise changed their behavior based on the possibility that their loans may be forgiven.

It's made us reconsider DW paying off her student loans. We were planning to wipe them our this year because the interest rate is higher than the likely returns for the stock market (I thought the same thing when I paid paid off my loans a few years ago which is as good an argument against market timing as any). I'd be pissed if we paid them off instead of saving the money and then this loan forgiveness happens though... Money is fungible so I see no difference to me between that scenario and government skimming the same amount from our bank account.

Alternatepriorities

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Re: Student loan forgiveness
« Reply #12 on: August 13, 2019, 04:48:49 PM »
On a related topic the current administration's apparent decision to make it extra difficult to get through the hoops for the existing loan forgiveness programs where people worked lower paying jobs in exchange for reducing their loans is complete BS. It's probably contributing to talk of blanket forgiveness...


therethere

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Re: Student loan forgiveness
« Reply #13 on: August 13, 2019, 04:51:36 PM »
I graduated with loans 128% of my starting salary. DH graduated with loans 158% of his starting salary AND his parents took out another 20k in PLUS loans.

Nice anecdote.  Was it crippling?

Hard? Yes. Crippling? No. Getting paralyzed is crippling. Saying no to excessive spending and forgoing purchases and opportunities just sucks. But, we had to live within the parameters of our life at the time (i.e. REALITY). Sure I would have loved to do whatever I wanted without abandon. But we did the math, set our priorities, and stuck with it.
We paid at least one of our salaries towards loans every year for 8+ years. Many years of $3000+/month payments. We also endured bouts of unemployment and still paid them down.


Also, we are keeping all our sub 5% loans by applying the investment order. The talk of loan forgiveness was not the reason, but it would be a nice bonus. We would be over the income limit as stated currently. But I actually think we would consider a sabbatical for a year to lower our income if we could get some forgiveness. Mainly for spite.

dragoncar

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Re: Student loan forgiveness
« Reply #14 on: August 13, 2019, 04:58:38 PM »
But I actually think we would consider a sabbatical for a year to lower our income if we could get some forgiveness. Mainly for spite.

Haha, I'm sure you're not the only ones!

soccerluvof4

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Re: Student loan forgiveness
« Reply #15 on: August 21, 2019, 04:50:16 AM »
This is tough subject as I myself didnt go to College but got myself in pretty good debt like alot of young people do but worked my way out of it by working several jobs and took a few years but at the end of day I did it and didnt get any relief or never would of considered following bankruptcy. Roll 30 years later and I have kids in college and like so many parents these days focus on hammering the message graduate with as little debt as possible. What I have also found is like the average debt is 30k which to me doesnt seem to be that much as Back in the early 80's I was way further in debt then that. So my point is what should be your debt ? the equivalent to what your potential earnings are one year? 2 years?

Debt forgiveness imo should always be based on a case by case decision and not a blanket one. When I go visit my kids I see so many kids living the high life and again I am of the opinion kids need for lack of better term suffer a bit in college. I dont know what the answer is to all this but to much of what i see is just like the housing crisis where people are taking and getting loans to do something there are smarter ways to do it.