I'm a lifelong academic that didn't pay off my student loans until I was 40, although they were modest, not crushing, and ultimately worth it. I'm in favor of canceling some student debt, but would add a few things that should be accounted for if Biden does this:
1) The people most harmed by their student debt are those that racked up some debt without graduating. They should be prioritized. The loan amounts will generally be smaller (say, $10K-20K) to forgive and the effect will be greatest. We have sold the idea that everyone should go to college, and there are a bunch of people that get swept up in that idea that weren't prepared for college, had too many adverse life situations to succeed, etc.
2) Larger amounts of loan forgiveness should be offered to those that are willing to do jobs we need, e.g. K-12 teaching in public schools, nurses, etc.
3) For political and social reasons, I think student loan forgiveness should be accompanied with an offer of free community college or trade school for anyone that wants it.
4) Universities, especially private universities, have profited handsomely off of the current student loan system. As student debt has piled up, universities have massively expanded the ranks of administrators and created a self-perpetuating bureaucracy that does little of value. Simultaneously, university administrators have systematically under-invested in instruction and turned teaching at the university level into part of the gig economy. A majority of university courses are now taught by temporary, insecure, underpaid labor.
Student debt relief should be accompanied by measures to reform this situation. For example, some government-backed student loans could only be available to students that attend universities where the ratio of money spent on education / research vs administration meets a certain threshold.
I would agree with all of this. Also, under the current system, schools have an incentive to try to appeal to the "student experience" (this will be fun!) rather than educational value. All of the incentives are pointing in the wrong direction.
I agree that students who failed to graduate should be a priority. I wonder if that could apply to people who started grad school and failed to finish as well. I know someone who started law school and left after a year and over $100k in debt. She works as a teacher and will have a very hard time with those loans.
Also I think some kind of public and non profit employee relief that is greater than the base amount makes sense. They already have programs that identify those people. I make less than 20k at a nonprofit library and would love to have my 30k in debt erased.
... obviously it won't erase all 30k, but if you're working for a nonprofit employer it will save you at least a few grand after 10 years, and your monthly payments are based on your income.
Agree completely. It's an extraordinarily inefficient system that resembles more of a pay-for-play with employers. I like Matt's idea of doing this in a flurry of executive decisions, as it will undoubtedly be more popular than disliked once Fox news has to move on to something else to bitch about. I think something like free community college is a good idea, as well as a non-military GI bill that allows students to do community service for a year or two after high-school in exchange for tuition-free education from public-universities.
How about a rule that mandates universities to pay off the loans of everyone they accept into their school but who are unable to get a degree? I understand the moral hazard here, but I think the universities should have a lot more skin in the game, and try harder to make sure everyone completes their education.
It's a nice idea but then no one will ever fail. Universities already pressure faculty not to fail students (I only have a single datum on this, but I imagine it's the same other places).
Do people fail now? It's been a long time since I taught in a university, but I remember the hell that was unleashed when I gave a student a really bad grade.
yes. but I'm only speaking for engineering/sciences. it's not something I ever saw in my GEs. I know multiple (smart) people who have had to re-take courses for failing them. Including at the graduate level.
Sure, we can fail students in the sciences, but for many of them, I get multiple emails along the way from the Dean of Students office about why we need to give the student every additional chance and maybe just waive some assignments or tests or at worst, give them an incomplete. It's almost always because the student in question just doesn't show up and/or turn in anything. I have a lot of sympathy for the borderline students who are clearly trying.
That is familiar to me as a professor in Europe as well. We have to be able to fail students because there is a baseline level of knowledge and understanding required to be a functioning scientist. You just aren't going to BS your way through a job at a pharmaceutical company if you cannot do a proper retrosynthetic analysis.
On the other hand, we are pressured to keep pass rates above a certain threshold and give students second and third and fourth chances to pass, as if they are entitled to a degree because they paid tuition. If your pass rate on a plenary, first-year course is 90% no one says a word. If it's 75%, suddenly your inbox fills up with bureaucratic time-sucks and you're dragged into a bunch of pointless meetings. The administrators don't seem to think it is a problem that we graduate masters students that we wouldn't consider hiring as PhD students in our own labs.
I also wonder how many of the people who leave college do so because of failing grade or for other reasons (change in life situation, cold feet about taking on more debt, etc.) I don't have the answer; I'm just wondering.
Even community colleges feel pressure on this. Retention rates are everything. I have a family member that has been told she really shouldn't fail anyone, no matter what. It's all about the numbers. It's understandable *why* community colleges would care about retention, but again, it perverts incentives.
I don't know, I think Matt's suggestions have a bit of Brookings-brain going on. Each individual carveout and exception makes sense and probably polls well but too much of it and you have a partial non-refundible tax credit for qualifying child care expenditures incurred in an economically distressed zip code, with a phase in and phase out. No layperson will understand the thing as a whole.
My preferred loan forgiveness plan would be to focus on interest. Set the interest rate on all federal student loans to zero. But do it retrospectively, too: treat all past payments as payments toward the principal and forgive any portion of someone's debt load attributable to interest.*
This would result in a lot of people having the entirety of their debts forgiven (think of the sob stories of debtors who borrowed $15k, have paid back $20k, and still owe $15k). It alleviates a lot of the sensation of a creeping, looming debt load that I think causes a lot of dissatisfaction. But importantly, it's not as readily susceptible to criticism that it's an unfair handout for elites. Everyone pays back every cent of what they borrowed, but the government doesn't make any money off of them. Some people who already paid off their student loans maybe feel a little bitter, but not nearly to the same degree as full-scale debt forgiveness. And you can say it in a sentence: Biden got rid of past, present, and future interest on student loans. But I think it'd be nice to do a blanket $10k (or more, why not, right?) too; it doesn't have to be an either/or.
*I have not researched the statutory authority here but if debt can be forgiven straight up and Trump can suspend interest unilaterally I anticipate that approach this would be lawful.
Disclosures: am lawyer married to doctor, total debt burden presently exceeds half a mil. So I didn't love the professional school carve out ;)
This is it! I posted a much shorter less clear version of this earlier. It has always baffled me that the federal government sets interest rates so high on student debt. If you bring this into the fold, then you can imagine a lot of middle class folks without college degrees suddenly thinking that 0% interest for their kids in college or about to go to college sounds like a good idea. I think most well-off non college educated people still want to send their kids to college. Need to throw the bone out there for future students. Plus interest on student debt has always been a backwards policy.
I like this a lot and if he’s statutory authority, go for it. I’m not quite that sob story, but somewhere in that range and it drives me nuts. I don’t have super high interest, so mine is not debt stacking up forever and ever, but when you’ve pad $10k on your student loan of $23k and you still have $17k left and another decade until you’ll be finished, it can be anywhere from a mild annoyance but fine, to maddening in what opportunities it limits you too, to the straw that broke the camel’s bank, just depending on how life goes, each of which it’s done to me at different times in my life since college. I like this structure of a foregiveness policy. Lot. Especially the $10 up top part because all that combined would wipe out my debt and hopefully feel fair to more people. It also just really scales to the people who are fucked the absolute worst by high interest rate loans.
I think you’re underestimating the blowback of what is essentially a welfare program for people who can work from home coming from the same party seen as responsible for putting a lot of poorer service industry workers out of work. The better analogy is probably a corporate tax cut in terms of giveaways to already-fortunate people, and it will be resented (from what I recall, this did not help the GOP in the 2018 midterms).
I made a similar comment. The key is probably: what votes (if any) such a policy changes at the margins, on net. A hefty percentage of folks who oppose student loan forgiveness are probably GOP leaners to start with. And a robust, effective program could conceivably help Democrats with moderate 20-40 year old persuadable voters. But it might hurt them with the (supposedly) considerable number of Trump 16/Biden 20 voters in the suburbs.
I basically agree with this. For what it’s worth on the merits I have no strong opinions on the proposal (not well-targeted, but we can afford it as per Matt’s point in the post). I just think it would be political malpractice not to at least poll and research it first; the lesson I took from Trump 2016 (and arguably 2018 midterms and Biden 2020, if you read those elections as a negative reaction to Trump) is that resentment is a very powerful motivator in politics, but I’m open to being proven wrong.
Not clear why sending a lot of new money to people who already vote for you is desirable. It MAY help, mind you, in terms of solidification. But I doubt a lot.
I feel like there is a significant difference between Trump's farm bailout and student debt forgiveness that could make it politically toxic for Democrats. Specifically that student debt forgiveness plays right into the conservative narratives about Democrats: "Democrats are raising taxes on regular hard working Americans to help people who were irresponsible with their money and/or rich liberal elite college grads." As you point out, the only reason Democrats are focusing on this over other forms of spending is that this can actually get done. However, to the average low information voter, it sure seems like Dems prioritizing young, coastal liberals over the needs of "normal Americans."
It seems that way, Jin, because that is exactly what it is.
Matt does a fine job of spinning this as a better-than-nothing stimulus, but people will only see the already-educated, 'front row' class of activists and protesters getting money. Meanwhile, working class people get nothing and folks who have paid on their student loans are suckers. I'm not saying this is completely accurate, but those will be the conclusions of a cynical and divided populace.
OK, so you think this is an issue that is a loser with moderates, and not just with hard-core Republicans. That hasn't been my impression from looking at polls, where it seems that 60+% of people are in favor of forgiving up to $50,000 of student debt.
Yeah, farm subsidies doesn't seem like the best example of something voters might have gotten angry over, because Democrats simply didn't spend a lot of energy trying to make it an issue. It wasn't even on voters' radar. And not many people have a lot of preexisting envy of farmers, so it would be a tougher sell if they'd tried.
My concern is less about the politics. College cost inflation has been an awful disease afflicting America and a one-off debt cancellation is like giving a cancer patient a one time shot of morphine. I guess it’s better than letting them writhe in pain, but shouldn’t we at least be trying to do something about the cancer?
This gets at my biggest concern with the plan, but I think it's much worse than you're saying. If we randomly forgave loans made to everyone before some arbitrary date, but still keep making loans on the same basis we do today, I think future students will be smart enough to realize that all the political forces that drove debt forgiveness today will also apply at some point during their repayment period.
Students already aren't making rational price sensitive decisions (why would you expect a someone with an enormous, deferred payment credit line to do so), and an expectation that their debt might be wiped clean is going to make that much worse. I don't think you can do student debt relief without aggressive federal regulation of the fees charged to students taking them.
And just as a further aside I'd note that the rationality around price goes in both directions - there's a huge number of potential students, particularly low income students, who forgo college due to sticker shock when they could quite reasonably afford the payments under the current system.
I think the scope of this metaphor is off. For the people who are receiving loan forgiveness, the disease is cured, they just haven't eradicated the disease from the world. It's more like giving lots of people with cancer chemotherapy while not curing cancer.
The metaphor is that we are curing cancer for a selection of the population who developed cancer before the Forgiveness Date, and willfully not curing cancer for anyone who developed the disease on Forgiveness Date + 1 Day. I think there will (understandably) either be some resentment or an expectation of future student debt jubilees from the latter group.
But isn't that sort of like a great example of the perfect being the enemy of the good and why everyone hates Democrats? I mean even in this version of the disease metaphor, if Joe Biden had one chance where could actually press a button and cure the cancer of millions of people, like... he should totally press that button, even if he can't do it again anytime soon. Lots of suffering is solved pretty quickly. I don't think anyone disagrees that the system is bad and there should be systemic changes, but it seems weird to not help people who were hurt by that bad system when you can. Biden can't fix everything without congressional approval, but he can make a bunch of people's lives better pretty easily.
I also don't think it's that hard of a speech to write. "Now we know that this doesn't go as far as it needs to. There are millions of bright young minds going right back into the system that caused this mess in the first place, and until congress moves to fix that system, we're doomed to end up right back where we started. But we can't wait to help those folks in the middle class who are struggling to buy a house, raise a family, and keep their head above water, just because they were sold a bad bill of goods when they were 16." Or something like that, I dunno. Then Fox news will run to lie about socialism, but that's sort of baked into the cake at this point - if Democrats continue to make moves solely based on avoiding criticism from Fox News, they won't do anything. This gets tangible help to people who need it who's lives will be changed forever. In the best case scenario it points to why the system needs to be fixed and who is really being obstinate in fixing it and in the worst case scenario lots of people can buy a house now.
because the metaphor was imperfect to begin with. most people didn't get "cancer" in this case– they took out loans, and in return, received higher wages than they otherwise would have. there is no ROI on cancer. that's why the metaphor was a bad one. college has benefited most of us tremendously.
in the cancer metaphor, though, you have to explain to everyone why you won't "cure" them following this one-time relief. I'm not even talking about Fox at this point. I'm talking about the kids who graduate in 2025, but no debt relief is coming to save them. I'm not saying we shouldn't forgive student loans. I'm asking what you're going to say to those people such that they understand that even if they end up in the exact same position many of us are in now, that they won't have their loans forgiven.
And fwiw, college *hasn't* been a bad bill of goods for most people.
I take your point completely, but I’m not sure I agree with your analogy. I think a more accurate analogy would be to say that we’re curing some of the cancer caused by pollution without getting rid of the pollution itself.
It’s less elegant, but my point is that your analogy fails to consider how meaningful this would be on an individual level. Fixing the college system does nothing to save those who have already been harmed by it.
I think that there will be resentment from the same people who support Trump (non-college educated rural whites), a portion of whom the Democratic party needs to win back in the next two years if they want to keep the House and maybe win the Senate. It is not fair, but that is a real cost Democrats will have to pay for passing even a limited and means tested student loan forgiveness. I also have to pick a bone with the comparison to the farmers subsidy; that subsidy was to compensate farmers for the loss they suffered directly because of actions of the US government. But the students took on these loans willingly.
The problem with this topic, student loan forgiveness, is that those pushing the idea are not being honest about their motives.
If the goal of this policy is to help those, mostly poorer people, being crushed by student loan debt; then the obvious solution is to change bankruptcy laws to allow bankruptcy judges to vacate the debt, as they can do for virtually all other types of debt. Why is there so little discussion about the bizarre status of student debt as being untouchable during bankruptcy proceedings?
The reason is that the true motivation for student debt canceling is a first step toward “free” college. Canceling college debt is indistinguishable from college being free.
Now go ahead and agree the pros and cons of free college and if all agree that’s the right thing to do, then there is a certain logic in canceling existing debt in the name of fairness...but let’s be honest about what is trying to be achieved with student loan debt canceling; or at least add bankruptcy reform as a very practical and achievable solution to the problem of people being crushed by student debt.
You make good points but I think Matt is assuming that anything that requires legislation is off the table. So it’s this or nothing. We’re nowhere near policy optimization, this isn’t even the world of the second-best, it’s like hundredth-best. Given that, do we do something on these lines?
Fair point. But I don’t know that I agree with the position that all legislation is off the table. Bankruptcy reform can be bipartisan, especially if presented as an alternative to unilateral debt cancellation by Biden.
My fundamental question is why bankruptcy reform is not being discussed? My suspicion is that it’s because student debt relief is about more that helping people being crushed by debt, yet it’s being presented that way; I appeal for a greater degree of honesty in the discussion.
It is curious, as not much student debt is privately held by banks. Private banks obviously don't want bankruptcy reform because student loans are not collateralized (i.e. you can't take away someone's education in the same way you could repossess a house or car). But why should the federal gov't care if federal loans can be vacated by bankruptcy?
I think it’s important to remember here that the student loan exclusion from discharge (1) applies to private student loans as well as federal ones and (2) predates the termination of federally guaranteed private loans in 2010. Also, the exception is statutory; the federal government can’t waive it on loans it owns. If a debtor with student loans files bankruptcy, the judge has to exclude the loans from discharge unless the debtor satisfies the extremely stringent criteria for the exception to the exception. The federal government could voluntarily cancel the debt, of course, but it can do that inside or outside bankruptcy.
Not saying anything others in the comment section haven't already but I find the idea of student loan forgiveness offensive. I read it as a bribe to increase youth turnout. I might be unique tho in employing non-college technicians who made a business decisions that college wasn't for them. All this would do is reinforce that the game is rigged against the working class. This issue + M4A cost Bernie my vote in the primaries.
I was speaking to my coworker the other day. His daughter is going to University of North Carolina. He saved his whole life to send her there. Last week he applied for a student loan for $20,000K (in her name)
Figured he’s $20,000 richer if they cancel student loans, if not he’ll just pay it back immediately when she graduates. At most he loses fees and interest.
The real problem: what good does canceling student loan one time do?
What happens when the current cohort of students, graduates with a bunch of loans in two years? Four years?
Not only will you have resentment from the people that didn’t go to college, there will be resentment from people that paid off their loans, and resentment from the people who have loans in the future.
The attack ads will be lit.
Show Juan, married with two kids, works is an auto mechanic, gets nothing.
Then show Karen, single, marketing consultant, bullshit degree from some college, from an upper class family, gets $20,000 windfall.
Let’s just say... this has the potential to alienate a lot of people.
Student loan relief should only be done as part of a broader package. And it better include shit for working class people.
The whole subject gets me riled up. It’s like the housing bailout all over again.
I will burn shit! (Just kidding, but I will remember it at election time)
Isn’t our experience from the housing bust kind of telling here though? We didn’t sufficiently bail out individual homeowners, but Republicans went nuts with grievance politics about losers and those people getting all your money anyway. We (the whole country, but also Democrats!) would have been better off actually doing a bailout for real. Many people would have benefitted directly, most would have benefitted from a faster recovery, and the people most animated about “losers” would have found someone else to scapegoat soon enough because they always do. (Plus resentment, while ever present, ebbs and flows. I think the economic boost from debt relief would drain away more bad vibes than any created by the debt relief itself.)
2006. I had a whole lot of equity in my house. I should a. Take out money and buy an expensive car. Or B. Keep paying my mortgage down so I knew the payments were within my budget.
If I did B. And you did A. You would be cool if I got a bailout and basically got a free expensive car?
And the benefits/stimulus of debt relief would go to the middle class people getting it and to the rich corporate fat cats. Do you really think Juan and his family are going to get anything.
I’m tired of Republicans and Democrats caring about the privileged.
You are basically describing trickle down economics. You are Reagan.
How about instead of giving relief to the upper middle class and hoping the working class get some pennies we give money directly to the middle class.
Minimum wage increases. Subsidized Child Care. Child Tax Credit or an actual Child Allowance like in Europe. Let’s support labor unions.
Or... let’s just give Karen some fee money so she can take a vacation to Thailand and hope some of that gets to Juan and people like him like u want.
Is it no longer true that a four year degree has a lifetime benefit of $750,000 to $1,000,000? If college degrees have big benefits for the degree holder, it makes sense to me that they pay for it.
If it's not true and there's no lifetime benefit, I think we need to revisit the whole idea of federal student loan programs.
(I anticipate this post will make me even more unpopular than I already am. :-) )
So there has long been a significant lifetime value to a college education, it isn't a new development that coincided with the significant recent rise in college tuition. Given that we can look back a generation or two and see that there weren't any obvious massive distortionary effects from having cheaper education / higher ROI, why not go back to that paradigm via student loans.
Make Me Smart just did a podcast that touched on this, and after accounting for debt payment, there is NO (like zero) income benefit of a higher ed degree for black (or Latino?) students. It’s just a total lie that a higher ed degree is a means to upward mobility for POC.
I suspect this is one of the cases where looking at the mean or median lifetime cash benefit of a degree tells a misleading story. Some degrees are worth a lot more than others. And, as Matt alluded to in the article, some people with student debt don't have degrees.
So is the reasoning behind this that we should allow costs to rise until there’s no longer a marginal benefit to college? There are more reasons for a society to encourage school than that it raises an individuals salary
It doesn't seem to me that were anywhere near that point. Average student loan debt at graduation from college is approximately $26k. That means student loans have an ROI of 30X. I don't see why we shouldn't expect the borrower to pay their bills.
I'm not sure what these extra reasons for society to encourage schooling are, but I'd be interested in your thoughts.
Not sure what the current state of the research is on this, but one blanket figure (750k-1M) for the value of an undergrad degree is almost certainly going to be wrong for more people, even if it's true *on average*. The fact is that colleges happily charge undergrads who get English majors just as much as they do engineers, who can expect relatively plentiful job opportunities and high paying salaries when compared to a litany of other degree programs. Quite frankly, and this is coming from someone who is just about to finish a graduate degree (data science & IT management), much of higher education exists as a pay-for-play system to get your foot in the door with employers, not because it provides all a highly valuable education - even high ROI programs like the one I am in. You can literally learn anything you want these days for free online. It's not a small bit of a scam that is perpetuated by hiring norms, not because it adds value to people in any *tangible* way. IMO it's just another inefficiency of our economy and the powers that be are far too comfortable misleading young people to take on massive amounts of debt that they will likely carry for decades. It's taking advantage of inexperienced children, quite frankly. This is not all to say it isn't worth it to go to college, it clearly is, in most cases. But the ROI depends entirely on what degree program you take, what financial support you have to do unpaid work (often a pre-req for graduate programs or high-status jobs), and a lot of luck. We should do something about this, and relieving people (especially those who are not high-earners) is a good first step. If it's a principles thing, then we'll have to agree to disagree. I just don't see why we should punish millions of people for choices they made when they were children being pressured by an enormously influential societal institution, as well as their peers and their parents.
I would just like to note that the number of students majoring in the humanities has declined rapidly in recent years. The top undergrad majors at most colleges are now business, marketing, communications, and similar. These programs are cheap to run because adjunct instructors are easy to find (and don't require expensive labs or other resources). However, these degrees are generally low-value because there are so many graduates on the job market with similar degrees.
I generally agree with your post, but I don't think the English or History degrees are nearly as scammy as those coming out of the undergrad business programs. At least the humanities majors learn how to write and read complex texts.
For sure - English was just the first thing that popped into my head. But marketing is probably a much more relevant case today. Many marketing degrees graduate to find a job in NYC that pays them 40-50k.
Right. I'd like to know the origin of the lifetime earning stat. I suspect it's driven by outliers, but so is student loan debt in general as Matt described.
However, if we assume it's true for a second, it's just not the case that millions of people were pressured to do something harmful. They were pressured to do something that was in their best interest!
That was in *some* of their best interest, is what I'm saying. For many, it was certainly not. Regardless, my point is not that over the course of their life it makes sense doesn't make sense in a crude economic way, but that many are signing up for a decade+ of paying off debt and interest simply to gain access to the market, not because their degree provided them with skills. Even if that meant when I'm 40, I'm better off, that is discounting youthful years of life dramatically. I would argue that lifetime earnings does not capture the opportunity costs of being a young person with a heavy debt burden. It limits what truly makes people happy - choice. Choice of where they can work, where they can live, if they can travel, when they can buy a house, when/if they can afford to have kids, etc. etc. etc. It also suppresses people's ability to take financial risks, which trying to do something innovative always entails. Life is about so much more than salary. And we have constructed a system that forces people to discount their youth for expected earnings later in life when they have less energy, time, and motivation to enjoy them. It's a kind of system that squeezes young people for narrow economic contributions and limits their ability to do what they want until they're older. Many many young people are depressed, anxious, overworked, and generally unsatisfied with their lives. Is debt the only reason for this? Of course not, but we should ask ourselves, is this the kind of society we want? Would eliminating some student debt, freeing many young people to make better choices for themselves, be a step towards a happier society? I think so.
There doesn't seem to be any way out of the fact that certain types of success require one to begin investing time/energy from a relatively young age. In particular, advance knowledge-based work (which is becoming an ever-bigger slice of the economy) often requires many years of training and are pretty impractical. Moreover, this is true of many professional roles as well (doctor, lawyer, etc.). Note that this is a restriction placed on us by the nature of reality (it takes a long time to learn complicated things and people who have invested more time/energy are generally better at it/have more acquired knowledge) not by the nature of our social system.
How are we to prepare young students for this reality? You emphasize choice, but one's choices will naturally narrow with time no matter what. Trying to preserve one's freedom of choice necessarily involves failing to take the action necessary for many of the paths I've described. So everyone faces choices from a very young age that will strongly influence what choices are available even decades into the future.
My own experiences are that the importance and value of these early life choices were made fairly clear by society's focus on academics (though I grew up in a rural low-income area where education wasn't as emphasized, we got these sorts of messages even if only from network nightly news). What should we do differently to prepare young people to make these critical decisions, knowing that they will have life-long consequences?
Beyond just the question of what the ROI of a college degree is, which I think has been adequately discussed, I don't think the number is at all relevant to what a college degree should cost.
Running most college programs just isn't that expensive. There's a few outliers where instructors can command high salaries elsewhere or the training is capital intensive (medicine being the classic example of both), but for the most part we're talking about a classroom with a reasonably high student:teacher ratio and teachers that aren't particularly well paid. (Yes, there's labs and libraries and so on but these things are not that insanely expensive everywhere.)
Current fees are driven by the high perceived ROI and the availability of easy, subsidized credit from the federal government, and administrators will find ways to fill that space with new expenses that they'll credibly claim are in the student's interests, but the federal government is the one providing all that easy credit and there's no reason for them to take those administrators word for it.
As a well paid lawyer with huge student debt I object on the following grounds:
(1) part of this is generational unfairness. Lawyers have always made high salaries, but I owe 300,000 in debt while people who graduated 20 years before me owed well less than half of that even in inflation adjusted terms
(2) I took on huge debt because I came from a middle class family who could not put me through law school. The people who went with me to law school who don’t have debt are absurdly rich and are only going to be more rich because they make the salary and don’t have the debt
(3) while I make a very good salary, I’m only realistically going to do so for about 5-6 years before I’m kicked out of a big firm by the up-or-out system. That’s not enough time to even get myself in the black
(4) I only am working at this big evil firm because I owe huge amounts of money, and I hate the job and my life. I don’t want to have to do this!
You've compared yourself to previous-generation lawyers and classmates to justify having your loans forgiven.
Instead, compare yourself to the local laborer or truck driver who didn't take on $300K in debt so they could earn a high salary. Or the classmates who have sacrificed and did what they 'didn't want to have to do' to pay back their loans and see how your indignation seems more than a bit elitist to them.
You’re right, nothing should ever get better for me if anyone else is worse off anywhere. And also no problem should ever be solved if someone has overcome it
The argument is that politically people will object to well-paid lawyers getting relief when other people are worse off. Especially from a party associated (unfairly!) with know-it-all and scolding elites, journalists, professionals, and academics who went to expensive schools or programs.
I get Matt's point on this is better than nothing but the in's and out's of what is constitutionally possible are not common-knowledge to most Americans, and Republicans can easily warp this.
People will probably forget this ever happened before the next midterm and in any event who cares? The republicans seem to be able to deliver for their constituencies even when things are unpopular
Oh and I also object on the ground that there is no real reason for school to have cost that much other than that greedy gatekeepers are sucking as much blood out of the young as they can, and it’s not fair that I should pay the costs of a system that I am not able to fix yet as a young person
Dumping more money on the system (even in terms of loan forgiveness) creates a moral hazard for universities. They will see a green light to continue raising costs. This dynamic needs to be broken, and part of the solution is to make federal money contingent on strict metrics and cost controls or to get out of the business altogether.
Completely agree, but you can’t just implement that solution while at the same time saying ‘eh everyone who got screwed will just have to stay screwed.’
There's an idea up above to allow for student loan debt to be discharged in bankruptcy. I could get behind that (with a moratorium to address the concern they'll declare it right after graduation).
(2) doesn’t make much sense. Just because you know people with rich parents isn’t really a reason you should get $300k. People with rich parents are gonna be richer.
Exactly. I think Matt misses these dynamics or under weights their importance.
It actually matters whether Big Law, Big Finance, Big Consulting etc. have people from diverse socioeconomic backgrounds entering in. Otherwise you just get Don Jr. types instead of Kamala Harris types and Sherri’s Brown types becoming professionals. That’s way more feeders into the Federalist Society than I think is socially tenable! 😉
I actually suspect the socioeconomic situation there would get worse without loans. I would much rather go to my home state and work at a medium sized firm, and would feel far more comfortable culturally. I find NYC big Law very alienating. But, that’s where the moolah is
You do not need to work in New York City to make money in law. If you are able to get a big law job there, you can get hired at a bigger firm in a Midwestern city and make $160,000 as a first year associate and pay way, way less in living expenses.
I'm 39, I've been practicing for 14 years, and a partner at a mid-sized Midwestern firm. I would encourage you to hold on. Your first five-ish years of practice absolutely suck no matter your financial situation. I recall feeling very trapped and unhappy a decade ago, but that eventually passed.
My dad (a recently retired lawyer) has long bemoaned the fact that a lot of people who go into law wanting to work at lower-paying public-sector or non-profit jobs often get stuck in stressful corporate jobs they do not want because they have debt to pay off. So I have a lot of sympathy for that.
That said, "generational unfairness" of the type you describe is specifically something those of us who believe economic inequality is a huge problem are trying to *engineer for*, in these high-pay professions. Not in the sense that we want today's law school graduates to be overburdened with debt or miserable, obviously. But addressing wealth and income inequality will necessarily mean that the economic position of high-paid professions like law moving forward will look "worse" relative the rest of society, than it has in the past.
This is all to say, I suppose, that I think there is a case for some sort of program specific to the legal profession that is not simply debt relief. Something along the lines of debt forgiveness for service in non-profit or public sector jobs. But I think Matt's comments on general debt relief for highly-paid professions are correct.
I largely agree, as I’m also a middle class, newly minted law grad with lots of debt. But I’m counting on PSLF, not going to sell my soul and break my back to help the government’s balance sheet. You shouldn’t do anything that makes you miserable, especially for 5-6 years. Saw happier people in every government office I’ve ever been in than I did during my summer of BL.
Yeah I am strongly considering this though, as I’m sure you know, good government jobs are harder to get than big Law in many instances. If I’d qualified for DOJ honors out of law school I would’ve done that
Depends to some extent on how picky you are. There are state level govt jobs, many of which pay decently. NY and NJ AG’s offices are neat places to work and can lead to policy-facing positions. Other federal agencies hire quite a bit from big law, although it sounds like maybe you’re not that many years in. I haven’t found clerking to be bad at all lifestyle wise, and it can open doors even if you’re not a new grad (and fed clerkships pay more than you would guess, especially with experience). You probably know all of this but I’m just throwing stuff out there.
Wishing you the best, you’re in a tough situation. I’m just trying to express my view that your happiness is worth making financial sacrifices for and that government work plus IBR/PSLF is the route that I’ve chosen out of a similar situation.
This truly sucks for you and I have sympathy. My question, though, is whether you would have pursued a career you apparently hate if you didn't have the opportunity to rack up $300,000 in debt. Is there something else that might have brought you more satisfaction?
I ask because, as a reader of Paul Campos, I'm aware of his jeremiads against how many lawyers we produce and the racket that is law schools in this country.
Is the policy you’re talking about a one-time thing? Or is there talk about how to deal with people who take out a loan the day after their debt would have been canceled?
This is my biggest problem. I don’t see how something like this could be politically advantageous without just saying all undergraduate Stafford loans going forward are essentially now grants. It really screws over the *next* generation of students who were just unlucky enough to be born too late to have their debt cancelled.
Could you elaborate? Like are saying saying they're "screwed" because they just missed the boat, or because private lenders will change their behavior after something like this and either raise interest rates or make it harder for someone to get a loan?
On a purely PR level, this would be a huge boon to the GOP and show what an elitist party the Democrats really are. Most working class people don't even want to go to college for a variety of reasons. Even your dumb ethnic studies major graduate is likely miles ahead on writing skills, reading, and future income potential than her peers who only have a shitty public school high school diploma and yet she gets "free" and the peers pay for it?
Agreed. I have student loan debt, but I dont think you can just forgive it without also creating a solution to the problem. Lets say my debt gets forgiven but my son who will be a college senior next year still goes and gets loans for his degree. How does this make sense?
Politically, I think it should be some level of forgiveness + the other reforms Biden talked about. Maybe he cant do them at the same time, but I think there is a big risk in only doing forgiveness.
Meanwhile, doubling the pell grant, capping costs, etc like he proposed would be a huge political winner. Esp if its messaged as college + trade schools + apprenticeships
I don't see the individual tax implications of debt relief income being discussed much. It seems like the biggest actual problem with this plan. Are we in danger of an Oprah effect, giving folks tax liability they can't afford from phantom income they can't spend? Does the Biden admin's authority to forgive debt extend to its treatment as income by the IRS?
As an account, I’m very curious about this too. People might be rejoicing about $10k debt relief but as far as the IRS goes, tax is due on that relief. Knowing how well they crafted the Trump tax break (s/), this will definitely be a shock to most people.
I guess there's a couple of possible approaches there - one would be that there's One Weird Trick for the administration to avoid creating tax liabilities, another would be to have the IRS create a deferred payment structure, which I believe is in their power (don't know what the interest rate implications would be tho)?
But presumably if they can't do it without creating an immediate tax liability they'd structure forgiveness as something you have to apply for and then hopefully tell you a million times in the process what it's going to do to your tax situation... There's a lot of people it's probably still advantageous for, if they have low incomes and relatively low debt.
I just find it hard to accept that student loan forgiveness won’t cost anyone else anything. It seems like it will cost the amount of the forgiven loans - it’s just a straight transfer to people with debt from people without.
I know the bonds are negative interest rates, but the government still does have to pay them back at some point (just less than they borrowed).
I don’t really understand why - given your argument that basically any way for the government to spend money is good - you don’t endorse canceling all student debt. What’s bad about giving a bunch of money to rich people, if government spending is better-than-free right now? What’s the limiting principle?
Also, I thought the arguments about not means testing programs in One Billion Americans were persuasive and they (mostly) apply to this. You could just keep the forgiveness to fairly small amounts per household and it would be less regressive.
Democrats have the disadvantage of needing to insist they're not bailing out high-earners. Every careful argument in support of loan relief for lawyers/doctors - "there are middle-class people in those jobs who should get some marginal relief" - also applied to GOP's recent corporate tax cuts. Since Democrats were not nuanced in critiquing GOP corporate tax cuts (because politics), the GOP can comfortably ignore that nuance in return. And polarization continues apace.
I'm a lifelong academic that didn't pay off my student loans until I was 40, although they were modest, not crushing, and ultimately worth it. I'm in favor of canceling some student debt, but would add a few things that should be accounted for if Biden does this:
1) The people most harmed by their student debt are those that racked up some debt without graduating. They should be prioritized. The loan amounts will generally be smaller (say, $10K-20K) to forgive and the effect will be greatest. We have sold the idea that everyone should go to college, and there are a bunch of people that get swept up in that idea that weren't prepared for college, had too many adverse life situations to succeed, etc.
2) Larger amounts of loan forgiveness should be offered to those that are willing to do jobs we need, e.g. K-12 teaching in public schools, nurses, etc.
3) For political and social reasons, I think student loan forgiveness should be accompanied with an offer of free community college or trade school for anyone that wants it.
4) Universities, especially private universities, have profited handsomely off of the current student loan system. As student debt has piled up, universities have massively expanded the ranks of administrators and created a self-perpetuating bureaucracy that does little of value. Simultaneously, university administrators have systematically under-invested in instruction and turned teaching at the university level into part of the gig economy. A majority of university courses are now taught by temporary, insecure, underpaid labor.
Student debt relief should be accompanied by measures to reform this situation. For example, some government-backed student loans could only be available to students that attend universities where the ratio of money spent on education / research vs administration meets a certain threshold.
I would agree with all of this. Also, under the current system, schools have an incentive to try to appeal to the "student experience" (this will be fun!) rather than educational value. All of the incentives are pointing in the wrong direction.
I agree that students who failed to graduate should be a priority. I wonder if that could apply to people who started grad school and failed to finish as well. I know someone who started law school and left after a year and over $100k in debt. She works as a teacher and will have a very hard time with those loans.
Also I think some kind of public and non profit employee relief that is greater than the base amount makes sense. They already have programs that identify those people. I make less than 20k at a nonprofit library and would love to have my 30k in debt erased.
Hi Paul, I'm also a library professional... I assume you're aware of PSLF? https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service If you're not working toward it yet, I'd encourage you to start
yes. i just started it. it will help a lot.
... obviously it won't erase all 30k, but if you're working for a nonprofit employer it will save you at least a few grand after 10 years, and your monthly payments are based on your income.
Agree completely. It's an extraordinarily inefficient system that resembles more of a pay-for-play with employers. I like Matt's idea of doing this in a flurry of executive decisions, as it will undoubtedly be more popular than disliked once Fox news has to move on to something else to bitch about. I think something like free community college is a good idea, as well as a non-military GI bill that allows students to do community service for a year or two after high-school in exchange for tuition-free education from public-universities.
How about a rule that mandates universities to pay off the loans of everyone they accept into their school but who are unable to get a degree? I understand the moral hazard here, but I think the universities should have a lot more skin in the game, and try harder to make sure everyone completes their education.
It's a nice idea but then no one will ever fail. Universities already pressure faculty not to fail students (I only have a single datum on this, but I imagine it's the same other places).
Do people fail now? It's been a long time since I taught in a university, but I remember the hell that was unleashed when I gave a student a really bad grade.
yes. but I'm only speaking for engineering/sciences. it's not something I ever saw in my GEs. I know multiple (smart) people who have had to re-take courses for failing them. Including at the graduate level.
Sure, we can fail students in the sciences, but for many of them, I get multiple emails along the way from the Dean of Students office about why we need to give the student every additional chance and maybe just waive some assignments or tests or at worst, give them an incomplete. It's almost always because the student in question just doesn't show up and/or turn in anything. I have a lot of sympathy for the borderline students who are clearly trying.
That is familiar to me as a professor in Europe as well. We have to be able to fail students because there is a baseline level of knowledge and understanding required to be a functioning scientist. You just aren't going to BS your way through a job at a pharmaceutical company if you cannot do a proper retrosynthetic analysis.
On the other hand, we are pressured to keep pass rates above a certain threshold and give students second and third and fourth chances to pass, as if they are entitled to a degree because they paid tuition. If your pass rate on a plenary, first-year course is 90% no one says a word. If it's 75%, suddenly your inbox fills up with bureaucratic time-sucks and you're dragged into a bunch of pointless meetings. The administrators don't seem to think it is a problem that we graduate masters students that we wouldn't consider hiring as PhD students in our own labs.
I'm really sorry to hear the problem is the same over there! "bureaucratic time-sucks" indeed.
I also wonder how many of the people who leave college do so because of failing grade or for other reasons (change in life situation, cold feet about taking on more debt, etc.) I don't have the answer; I'm just wondering.
Even community colleges feel pressure on this. Retention rates are everything. I have a family member that has been told she really shouldn't fail anyone, no matter what. It's all about the numbers. It's understandable *why* community colleges would care about retention, but again, it perverts incentives.
All of these ideas are great.
I don't know, I think Matt's suggestions have a bit of Brookings-brain going on. Each individual carveout and exception makes sense and probably polls well but too much of it and you have a partial non-refundible tax credit for qualifying child care expenditures incurred in an economically distressed zip code, with a phase in and phase out. No layperson will understand the thing as a whole.
My preferred loan forgiveness plan would be to focus on interest. Set the interest rate on all federal student loans to zero. But do it retrospectively, too: treat all past payments as payments toward the principal and forgive any portion of someone's debt load attributable to interest.*
This would result in a lot of people having the entirety of their debts forgiven (think of the sob stories of debtors who borrowed $15k, have paid back $20k, and still owe $15k). It alleviates a lot of the sensation of a creeping, looming debt load that I think causes a lot of dissatisfaction. But importantly, it's not as readily susceptible to criticism that it's an unfair handout for elites. Everyone pays back every cent of what they borrowed, but the government doesn't make any money off of them. Some people who already paid off their student loans maybe feel a little bitter, but not nearly to the same degree as full-scale debt forgiveness. And you can say it in a sentence: Biden got rid of past, present, and future interest on student loans. But I think it'd be nice to do a blanket $10k (or more, why not, right?) too; it doesn't have to be an either/or.
*I have not researched the statutory authority here but if debt can be forgiven straight up and Trump can suspend interest unilaterally I anticipate that approach this would be lawful.
Disclosures: am lawyer married to doctor, total debt burden presently exceeds half a mil. So I didn't love the professional school carve out ;)
This is it! I posted a much shorter less clear version of this earlier. It has always baffled me that the federal government sets interest rates so high on student debt. If you bring this into the fold, then you can imagine a lot of middle class folks without college degrees suddenly thinking that 0% interest for their kids in college or about to go to college sounds like a good idea. I think most well-off non college educated people still want to send their kids to college. Need to throw the bone out there for future students. Plus interest on student debt has always been a backwards policy.
I like this a lot and if he’s statutory authority, go for it. I’m not quite that sob story, but somewhere in that range and it drives me nuts. I don’t have super high interest, so mine is not debt stacking up forever and ever, but when you’ve pad $10k on your student loan of $23k and you still have $17k left and another decade until you’ll be finished, it can be anywhere from a mild annoyance but fine, to maddening in what opportunities it limits you too, to the straw that broke the camel’s bank, just depending on how life goes, each of which it’s done to me at different times in my life since college. I like this structure of a foregiveness policy. Lot. Especially the $10 up top part because all that combined would wipe out my debt and hopefully feel fair to more people. It also just really scales to the people who are fucked the absolute worst by high interest rate loans.
I think you’re underestimating the blowback of what is essentially a welfare program for people who can work from home coming from the same party seen as responsible for putting a lot of poorer service industry workers out of work. The better analogy is probably a corporate tax cut in terms of giveaways to already-fortunate people, and it will be resented (from what I recall, this did not help the GOP in the 2018 midterms).
I made a similar comment. The key is probably: what votes (if any) such a policy changes at the margins, on net. A hefty percentage of folks who oppose student loan forgiveness are probably GOP leaners to start with. And a robust, effective program could conceivably help Democrats with moderate 20-40 year old persuadable voters. But it might hurt them with the (supposedly) considerable number of Trump 16/Biden 20 voters in the suburbs.
I basically agree with this. For what it’s worth on the merits I have no strong opinions on the proposal (not well-targeted, but we can afford it as per Matt’s point in the post). I just think it would be political malpractice not to at least poll and research it first; the lesson I took from Trump 2016 (and arguably 2018 midterms and Biden 2020, if you read those elections as a negative reaction to Trump) is that resentment is a very powerful motivator in politics, but I’m open to being proven wrong.
This proposal sends a lot of money to the Dem base, so you're underestimating how effective it would be.
Not clear why sending a lot of new money to people who already vote for you is desirable. It MAY help, mind you, in terms of solidification. But I doubt a lot.
I feel like there is a significant difference between Trump's farm bailout and student debt forgiveness that could make it politically toxic for Democrats. Specifically that student debt forgiveness plays right into the conservative narratives about Democrats: "Democrats are raising taxes on regular hard working Americans to help people who were irresponsible with their money and/or rich liberal elite college grads." As you point out, the only reason Democrats are focusing on this over other forms of spending is that this can actually get done. However, to the average low information voter, it sure seems like Dems prioritizing young, coastal liberals over the needs of "normal Americans."
It seems that way, Jin, because that is exactly what it is.
Matt does a fine job of spinning this as a better-than-nothing stimulus, but people will only see the already-educated, 'front row' class of activists and protesters getting money. Meanwhile, working class people get nothing and folks who have paid on their student loans are suckers. I'm not saying this is completely accurate, but those will be the conclusions of a cynical and divided populace.
I think on this strategy front, the question is whether this will actually animate anyone who isn't already a rock-solid partisan.
OK, so you think this is an issue that is a loser with moderates, and not just with hard-core Republicans. That hasn't been my impression from looking at polls, where it seems that 60+% of people are in favor of forgiving up to $50,000 of student debt.
Yeah, farm subsidies doesn't seem like the best example of something voters might have gotten angry over, because Democrats simply didn't spend a lot of energy trying to make it an issue. It wasn't even on voters' radar. And not many people have a lot of preexisting envy of farmers, so it would be a tougher sell if they'd tried.
My concern is less about the politics. College cost inflation has been an awful disease afflicting America and a one-off debt cancellation is like giving a cancer patient a one time shot of morphine. I guess it’s better than letting them writhe in pain, but shouldn’t we at least be trying to do something about the cancer?
This gets at my biggest concern with the plan, but I think it's much worse than you're saying. If we randomly forgave loans made to everyone before some arbitrary date, but still keep making loans on the same basis we do today, I think future students will be smart enough to realize that all the political forces that drove debt forgiveness today will also apply at some point during their repayment period.
Students already aren't making rational price sensitive decisions (why would you expect a someone with an enormous, deferred payment credit line to do so), and an expectation that their debt might be wiped clean is going to make that much worse. I don't think you can do student debt relief without aggressive federal regulation of the fees charged to students taking them.
And just as a further aside I'd note that the rationality around price goes in both directions - there's a huge number of potential students, particularly low income students, who forgo college due to sticker shock when they could quite reasonably afford the payments under the current system.
I think the scope of this metaphor is off. For the people who are receiving loan forgiveness, the disease is cured, they just haven't eradicated the disease from the world. It's more like giving lots of people with cancer chemotherapy while not curing cancer.
The metaphor is that we are curing cancer for a selection of the population who developed cancer before the Forgiveness Date, and willfully not curing cancer for anyone who developed the disease on Forgiveness Date + 1 Day. I think there will (understandably) either be some resentment or an expectation of future student debt jubilees from the latter group.
But isn't that sort of like a great example of the perfect being the enemy of the good and why everyone hates Democrats? I mean even in this version of the disease metaphor, if Joe Biden had one chance where could actually press a button and cure the cancer of millions of people, like... he should totally press that button, even if he can't do it again anytime soon. Lots of suffering is solved pretty quickly. I don't think anyone disagrees that the system is bad and there should be systemic changes, but it seems weird to not help people who were hurt by that bad system when you can. Biden can't fix everything without congressional approval, but he can make a bunch of people's lives better pretty easily.
I also don't think it's that hard of a speech to write. "Now we know that this doesn't go as far as it needs to. There are millions of bright young minds going right back into the system that caused this mess in the first place, and until congress moves to fix that system, we're doomed to end up right back where we started. But we can't wait to help those folks in the middle class who are struggling to buy a house, raise a family, and keep their head above water, just because they were sold a bad bill of goods when they were 16." Or something like that, I dunno. Then Fox news will run to lie about socialism, but that's sort of baked into the cake at this point - if Democrats continue to make moves solely based on avoiding criticism from Fox News, they won't do anything. This gets tangible help to people who need it who's lives will be changed forever. In the best case scenario it points to why the system needs to be fixed and who is really being obstinate in fixing it and in the worst case scenario lots of people can buy a house now.
because the metaphor was imperfect to begin with. most people didn't get "cancer" in this case– they took out loans, and in return, received higher wages than they otherwise would have. there is no ROI on cancer. that's why the metaphor was a bad one. college has benefited most of us tremendously.
in the cancer metaphor, though, you have to explain to everyone why you won't "cure" them following this one-time relief. I'm not even talking about Fox at this point. I'm talking about the kids who graduate in 2025, but no debt relief is coming to save them. I'm not saying we shouldn't forgive student loans. I'm asking what you're going to say to those people such that they understand that even if they end up in the exact same position many of us are in now, that they won't have their loans forgiven.
And fwiw, college *hasn't* been a bad bill of goods for most people.
I take your point completely, but I’m not sure I agree with your analogy. I think a more accurate analogy would be to say that we’re curing some of the cancer caused by pollution without getting rid of the pollution itself.
It’s less elegant, but my point is that your analogy fails to consider how meaningful this would be on an individual level. Fixing the college system does nothing to save those who have already been harmed by it.
I think that there will be resentment from the same people who support Trump (non-college educated rural whites), a portion of whom the Democratic party needs to win back in the next two years if they want to keep the House and maybe win the Senate. It is not fair, but that is a real cost Democrats will have to pay for passing even a limited and means tested student loan forgiveness. I also have to pick a bone with the comparison to the farmers subsidy; that subsidy was to compensate farmers for the loss they suffered directly because of actions of the US government. But the students took on these loans willingly.
The subsidies to farmers was also an order of magnitude less than what's being thrown around here.
You know what might be more analogous (and acceptable)? Forgiving (or at least minimizing) the student loan interest (as suggested below).
The problem with this topic, student loan forgiveness, is that those pushing the idea are not being honest about their motives.
If the goal of this policy is to help those, mostly poorer people, being crushed by student loan debt; then the obvious solution is to change bankruptcy laws to allow bankruptcy judges to vacate the debt, as they can do for virtually all other types of debt. Why is there so little discussion about the bizarre status of student debt as being untouchable during bankruptcy proceedings?
The reason is that the true motivation for student debt canceling is a first step toward “free” college. Canceling college debt is indistinguishable from college being free.
Now go ahead and agree the pros and cons of free college and if all agree that’s the right thing to do, then there is a certain logic in canceling existing debt in the name of fairness...but let’s be honest about what is trying to be achieved with student loan debt canceling; or at least add bankruptcy reform as a very practical and achievable solution to the problem of people being crushed by student debt.
You make good points but I think Matt is assuming that anything that requires legislation is off the table. So it’s this or nothing. We’re nowhere near policy optimization, this isn’t even the world of the second-best, it’s like hundredth-best. Given that, do we do something on these lines?
Fair point. But I don’t know that I agree with the position that all legislation is off the table. Bankruptcy reform can be bipartisan, especially if presented as an alternative to unilateral debt cancellation by Biden.
My fundamental question is why bankruptcy reform is not being discussed? My suspicion is that it’s because student debt relief is about more that helping people being crushed by debt, yet it’s being presented that way; I appeal for a greater degree of honesty in the discussion.
It is curious, as not much student debt is privately held by banks. Private banks obviously don't want bankruptcy reform because student loans are not collateralized (i.e. you can't take away someone's education in the same way you could repossess a house or car). But why should the federal gov't care if federal loans can be vacated by bankruptcy?
I think it’s important to remember here that the student loan exclusion from discharge (1) applies to private student loans as well as federal ones and (2) predates the termination of federally guaranteed private loans in 2010. Also, the exception is statutory; the federal government can’t waive it on loans it owns. If a debtor with student loans files bankruptcy, the judge has to exclude the loans from discharge unless the debtor satisfies the extremely stringent criteria for the exception to the exception. The federal government could voluntarily cancel the debt, of course, but it can do that inside or outside bankruptcy.
Not saying anything others in the comment section haven't already but I find the idea of student loan forgiveness offensive. I read it as a bribe to increase youth turnout. I might be unique tho in employing non-college technicians who made a business decisions that college wasn't for them. All this would do is reinforce that the game is rigged against the working class. This issue + M4A cost Bernie my vote in the primaries.
Well everyone below covered what I feel.
I was speaking to my coworker the other day. His daughter is going to University of North Carolina. He saved his whole life to send her there. Last week he applied for a student loan for $20,000K (in her name)
Figured he’s $20,000 richer if they cancel student loans, if not he’ll just pay it back immediately when she graduates. At most he loses fees and interest.
The real problem: what good does canceling student loan one time do?
What happens when the current cohort of students, graduates with a bunch of loans in two years? Four years?
Not only will you have resentment from the people that didn’t go to college, there will be resentment from people that paid off their loans, and resentment from the people who have loans in the future.
The attack ads will be lit.
Show Juan, married with two kids, works is an auto mechanic, gets nothing.
Then show Karen, single, marketing consultant, bullshit degree from some college, from an upper class family, gets $20,000 windfall.
Let’s just say... this has the potential to alienate a lot of people.
Student loan relief should only be done as part of a broader package. And it better include shit for working class people.
The whole subject gets me riled up. It’s like the housing bailout all over again.
I will burn shit! (Just kidding, but I will remember it at election time)
Isn’t our experience from the housing bust kind of telling here though? We didn’t sufficiently bail out individual homeowners, but Republicans went nuts with grievance politics about losers and those people getting all your money anyway. We (the whole country, but also Democrats!) would have been better off actually doing a bailout for real. Many people would have benefitted directly, most would have benefitted from a faster recovery, and the people most animated about “losers” would have found someone else to scapegoat soon enough because they always do. (Plus resentment, while ever present, ebbs and flows. I think the economic boost from debt relief would drain away more bad vibes than any created by the debt relief itself.)
2006. I had a whole lot of equity in my house. I should a. Take out money and buy an expensive car. Or B. Keep paying my mortgage down so I knew the payments were within my budget.
If I did B. And you did A. You would be cool if I got a bailout and basically got a free expensive car?
And the benefits/stimulus of debt relief would go to the middle class people getting it and to the rich corporate fat cats. Do you really think Juan and his family are going to get anything.
I’m tired of Republicans and Democrats caring about the privileged.
You are basically describing trickle down economics. You are Reagan.
How about instead of giving relief to the upper middle class and hoping the working class get some pennies we give money directly to the middle class.
Minimum wage increases. Subsidized Child Care. Child Tax Credit or an actual Child Allowance like in Europe. Let’s support labor unions.
Or... let’s just give Karen some fee money so she can take a vacation to Thailand and hope some of that gets to Juan and people like him like u want.
I know where your allegiance belongs.
Sure, but all that stuff is impossible so long as Republicans control any branch of government.
B vs A was backwards.
Is it no longer true that a four year degree has a lifetime benefit of $750,000 to $1,000,000? If college degrees have big benefits for the degree holder, it makes sense to me that they pay for it.
If it's not true and there's no lifetime benefit, I think we need to revisit the whole idea of federal student loan programs.
(I anticipate this post will make me even more unpopular than I already am. :-) )
So there has long been a significant lifetime value to a college education, it isn't a new development that coincided with the significant recent rise in college tuition. Given that we can look back a generation or two and see that there weren't any obvious massive distortionary effects from having cheaper education / higher ROI, why not go back to that paradigm via student loans.
Make Me Smart just did a podcast that touched on this, and after accounting for debt payment, there is NO (like zero) income benefit of a higher ed degree for black (or Latino?) students. It’s just a total lie that a higher ed degree is a means to upward mobility for POC.
I cannot for the life of me find a link to the transcript. This is on a very similar vein, though: https://www.marketplace.org/2020/10/27/student-loan-debt-adds-to-racial-wealth-disparities-research-finds/
I suspect this is one of the cases where looking at the mean or median lifetime cash benefit of a degree tells a misleading story. Some degrees are worth a lot more than others. And, as Matt alluded to in the article, some people with student debt don't have degrees.
Here's a (somewhat low quality, I think) article on the value of differently degrees. https://www.payscale.com/college-salary-report/majors-that-pay-you-back/bachelors
I agree with your point about distribution, I'd be interested in seeing some more data on this
So is the reasoning behind this that we should allow costs to rise until there’s no longer a marginal benefit to college? There are more reasons for a society to encourage school than that it raises an individuals salary
It doesn't seem to me that were anywhere near that point. Average student loan debt at graduation from college is approximately $26k. That means student loans have an ROI of 30X. I don't see why we shouldn't expect the borrower to pay their bills.
I'm not sure what these extra reasons for society to encourage schooling are, but I'd be interested in your thoughts.
Cheers.
Not sure what the current state of the research is on this, but one blanket figure (750k-1M) for the value of an undergrad degree is almost certainly going to be wrong for more people, even if it's true *on average*. The fact is that colleges happily charge undergrads who get English majors just as much as they do engineers, who can expect relatively plentiful job opportunities and high paying salaries when compared to a litany of other degree programs. Quite frankly, and this is coming from someone who is just about to finish a graduate degree (data science & IT management), much of higher education exists as a pay-for-play system to get your foot in the door with employers, not because it provides all a highly valuable education - even high ROI programs like the one I am in. You can literally learn anything you want these days for free online. It's not a small bit of a scam that is perpetuated by hiring norms, not because it adds value to people in any *tangible* way. IMO it's just another inefficiency of our economy and the powers that be are far too comfortable misleading young people to take on massive amounts of debt that they will likely carry for decades. It's taking advantage of inexperienced children, quite frankly. This is not all to say it isn't worth it to go to college, it clearly is, in most cases. But the ROI depends entirely on what degree program you take, what financial support you have to do unpaid work (often a pre-req for graduate programs or high-status jobs), and a lot of luck. We should do something about this, and relieving people (especially those who are not high-earners) is a good first step. If it's a principles thing, then we'll have to agree to disagree. I just don't see why we should punish millions of people for choices they made when they were children being pressured by an enormously influential societal institution, as well as their peers and their parents.
I would just like to note that the number of students majoring in the humanities has declined rapidly in recent years. The top undergrad majors at most colleges are now business, marketing, communications, and similar. These programs are cheap to run because adjunct instructors are easy to find (and don't require expensive labs or other resources). However, these degrees are generally low-value because there are so many graduates on the job market with similar degrees.
I generally agree with your post, but I don't think the English or History degrees are nearly as scammy as those coming out of the undergrad business programs. At least the humanities majors learn how to write and read complex texts.
For sure - English was just the first thing that popped into my head. But marketing is probably a much more relevant case today. Many marketing degrees graduate to find a job in NYC that pays them 40-50k.
Right. I'd like to know the origin of the lifetime earning stat. I suspect it's driven by outliers, but so is student loan debt in general as Matt described.
However, if we assume it's true for a second, it's just not the case that millions of people were pressured to do something harmful. They were pressured to do something that was in their best interest!
That was in *some* of their best interest, is what I'm saying. For many, it was certainly not. Regardless, my point is not that over the course of their life it makes sense doesn't make sense in a crude economic way, but that many are signing up for a decade+ of paying off debt and interest simply to gain access to the market, not because their degree provided them with skills. Even if that meant when I'm 40, I'm better off, that is discounting youthful years of life dramatically. I would argue that lifetime earnings does not capture the opportunity costs of being a young person with a heavy debt burden. It limits what truly makes people happy - choice. Choice of where they can work, where they can live, if they can travel, when they can buy a house, when/if they can afford to have kids, etc. etc. etc. It also suppresses people's ability to take financial risks, which trying to do something innovative always entails. Life is about so much more than salary. And we have constructed a system that forces people to discount their youth for expected earnings later in life when they have less energy, time, and motivation to enjoy them. It's a kind of system that squeezes young people for narrow economic contributions and limits their ability to do what they want until they're older. Many many young people are depressed, anxious, overworked, and generally unsatisfied with their lives. Is debt the only reason for this? Of course not, but we should ask ourselves, is this the kind of society we want? Would eliminating some student debt, freeing many young people to make better choices for themselves, be a step towards a happier society? I think so.
There doesn't seem to be any way out of the fact that certain types of success require one to begin investing time/energy from a relatively young age. In particular, advance knowledge-based work (which is becoming an ever-bigger slice of the economy) often requires many years of training and are pretty impractical. Moreover, this is true of many professional roles as well (doctor, lawyer, etc.). Note that this is a restriction placed on us by the nature of reality (it takes a long time to learn complicated things and people who have invested more time/energy are generally better at it/have more acquired knowledge) not by the nature of our social system.
How are we to prepare young students for this reality? You emphasize choice, but one's choices will naturally narrow with time no matter what. Trying to preserve one's freedom of choice necessarily involves failing to take the action necessary for many of the paths I've described. So everyone faces choices from a very young age that will strongly influence what choices are available even decades into the future.
My own experiences are that the importance and value of these early life choices were made fairly clear by society's focus on academics (though I grew up in a rural low-income area where education wasn't as emphasized, we got these sorts of messages even if only from network nightly news). What should we do differently to prepare young people to make these critical decisions, knowing that they will have life-long consequences?
Beyond just the question of what the ROI of a college degree is, which I think has been adequately discussed, I don't think the number is at all relevant to what a college degree should cost.
Running most college programs just isn't that expensive. There's a few outliers where instructors can command high salaries elsewhere or the training is capital intensive (medicine being the classic example of both), but for the most part we're talking about a classroom with a reasonably high student:teacher ratio and teachers that aren't particularly well paid. (Yes, there's labs and libraries and so on but these things are not that insanely expensive everywhere.)
Current fees are driven by the high perceived ROI and the availability of easy, subsidized credit from the federal government, and administrators will find ways to fill that space with new expenses that they'll credibly claim are in the student's interests, but the federal government is the one providing all that easy credit and there's no reason for them to take those administrators word for it.
Right. Any student loan forgiveness should be paired with big haircuts for the college
As a well paid lawyer with huge student debt I object on the following grounds:
(1) part of this is generational unfairness. Lawyers have always made high salaries, but I owe 300,000 in debt while people who graduated 20 years before me owed well less than half of that even in inflation adjusted terms
(2) I took on huge debt because I came from a middle class family who could not put me through law school. The people who went with me to law school who don’t have debt are absurdly rich and are only going to be more rich because they make the salary and don’t have the debt
(3) while I make a very good salary, I’m only realistically going to do so for about 5-6 years before I’m kicked out of a big firm by the up-or-out system. That’s not enough time to even get myself in the black
(4) I only am working at this big evil firm because I owe huge amounts of money, and I hate the job and my life. I don’t want to have to do this!
You've compared yourself to previous-generation lawyers and classmates to justify having your loans forgiven.
Instead, compare yourself to the local laborer or truck driver who didn't take on $300K in debt so they could earn a high salary. Or the classmates who have sacrificed and did what they 'didn't want to have to do' to pay back their loans and see how your indignation seems more than a bit elitist to them.
You’re right, nothing should ever get better for me if anyone else is worse off anywhere. And also no problem should ever be solved if someone has overcome it
The argument is that politically people will object to well-paid lawyers getting relief when other people are worse off. Especially from a party associated (unfairly!) with know-it-all and scolding elites, journalists, professionals, and academics who went to expensive schools or programs.
I get Matt's point on this is better than nothing but the in's and out's of what is constitutionally possible are not common-knowledge to most Americans, and Republicans can easily warp this.
People will probably forget this ever happened before the next midterm and in any event who cares? The republicans seem to be able to deliver for their constituencies even when things are unpopular
Oh and I also object on the ground that there is no real reason for school to have cost that much other than that greedy gatekeepers are sucking as much blood out of the young as they can, and it’s not fair that I should pay the costs of a system that I am not able to fix yet as a young person
Dumping more money on the system (even in terms of loan forgiveness) creates a moral hazard for universities. They will see a green light to continue raising costs. This dynamic needs to be broken, and part of the solution is to make federal money contingent on strict metrics and cost controls or to get out of the business altogether.
Completely agree, but you can’t just implement that solution while at the same time saying ‘eh everyone who got screwed will just have to stay screwed.’
There's an idea up above to allow for student loan debt to be discharged in bankruptcy. I could get behind that (with a moratorium to address the concern they'll declare it right after graduation).
Makes sense to me
(2) doesn’t make much sense. Just because you know people with rich parents isn’t really a reason you should get $300k. People with rich parents are gonna be richer.
Exactly. I think Matt misses these dynamics or under weights their importance.
It actually matters whether Big Law, Big Finance, Big Consulting etc. have people from diverse socioeconomic backgrounds entering in. Otherwise you just get Don Jr. types instead of Kamala Harris types and Sherri’s Brown types becoming professionals. That’s way more feeders into the Federalist Society than I think is socially tenable! 😉
I actually suspect the socioeconomic situation there would get worse without loans. I would much rather go to my home state and work at a medium sized firm, and would feel far more comfortable culturally. I find NYC big Law very alienating. But, that’s where the moolah is
You do not need to work in New York City to make money in law. If you are able to get a big law job there, you can get hired at a bigger firm in a Midwestern city and make $160,000 as a first year associate and pay way, way less in living expenses.
I'm 39, I've been practicing for 14 years, and a partner at a mid-sized Midwestern firm. I would encourage you to hold on. Your first five-ish years of practice absolutely suck no matter your financial situation. I recall feeling very trapped and unhappy a decade ago, but that eventually passed.
It gets better. :-)
"As a well paid lawyer with huge student debt I object..."
It's unclear what you object to. Is it the idea of forgiving debt or of excluding those with high incomes?
My dad (a recently retired lawyer) has long bemoaned the fact that a lot of people who go into law wanting to work at lower-paying public-sector or non-profit jobs often get stuck in stressful corporate jobs they do not want because they have debt to pay off. So I have a lot of sympathy for that.
That said, "generational unfairness" of the type you describe is specifically something those of us who believe economic inequality is a huge problem are trying to *engineer for*, in these high-pay professions. Not in the sense that we want today's law school graduates to be overburdened with debt or miserable, obviously. But addressing wealth and income inequality will necessarily mean that the economic position of high-paid professions like law moving forward will look "worse" relative the rest of society, than it has in the past.
This is all to say, I suppose, that I think there is a case for some sort of program specific to the legal profession that is not simply debt relief. Something along the lines of debt forgiveness for service in non-profit or public sector jobs. But I think Matt's comments on general debt relief for highly-paid professions are correct.
I largely agree, as I’m also a middle class, newly minted law grad with lots of debt. But I’m counting on PSLF, not going to sell my soul and break my back to help the government’s balance sheet. You shouldn’t do anything that makes you miserable, especially for 5-6 years. Saw happier people in every government office I’ve ever been in than I did during my summer of BL.
Yeah I am strongly considering this though, as I’m sure you know, good government jobs are harder to get than big Law in many instances. If I’d qualified for DOJ honors out of law school I would’ve done that
Depends to some extent on how picky you are. There are state level govt jobs, many of which pay decently. NY and NJ AG’s offices are neat places to work and can lead to policy-facing positions. Other federal agencies hire quite a bit from big law, although it sounds like maybe you’re not that many years in. I haven’t found clerking to be bad at all lifestyle wise, and it can open doors even if you’re not a new grad (and fed clerkships pay more than you would guess, especially with experience). You probably know all of this but I’m just throwing stuff out there.
Wishing you the best, you’re in a tough situation. I’m just trying to express my view that your happiness is worth making financial sacrifices for and that government work plus IBR/PSLF is the route that I’ve chosen out of a similar situation.
It’s incredible how expensive law school as become. I graduated 10 years ago and it was basically half the cost it is right now.
This truly sucks for you and I have sympathy. My question, though, is whether you would have pursued a career you apparently hate if you didn't have the opportunity to rack up $300,000 in debt. Is there something else that might have brought you more satisfaction?
I ask because, as a reader of Paul Campos, I'm aware of his jeremiads against how many lawyers we produce and the racket that is law schools in this country.
What are you objecting to, the non-inclusion of grad school debt?
Is the policy you’re talking about a one-time thing? Or is there talk about how to deal with people who take out a loan the day after their debt would have been canceled?
This is my biggest problem. I don’t see how something like this could be politically advantageous without just saying all undergraduate Stafford loans going forward are essentially now grants. It really screws over the *next* generation of students who were just unlucky enough to be born too late to have their debt cancelled.
I’m just more interested in understanding whether canceling student debt is really its own thing, or if it can only be part of a broader strategy.
Could you elaborate? Like are saying saying they're "screwed" because they just missed the boat, or because private lenders will change their behavior after something like this and either raise interest rates or make it harder for someone to get a loan?
On a purely PR level, this would be a huge boon to the GOP and show what an elitist party the Democrats really are. Most working class people don't even want to go to college for a variety of reasons. Even your dumb ethnic studies major graduate is likely miles ahead on writing skills, reading, and future income potential than her peers who only have a shitty public school high school diploma and yet she gets "free" and the peers pay for it?
Agreed. I have student loan debt, but I dont think you can just forgive it without also creating a solution to the problem. Lets say my debt gets forgiven but my son who will be a college senior next year still goes and gets loans for his degree. How does this make sense?
Politically, I think it should be some level of forgiveness + the other reforms Biden talked about. Maybe he cant do them at the same time, but I think there is a big risk in only doing forgiveness.
Meanwhile, doubling the pell grant, capping costs, etc like he proposed would be a huge political winner. Esp if its messaged as college + trade schools + apprenticeships
I don't see the individual tax implications of debt relief income being discussed much. It seems like the biggest actual problem with this plan. Are we in danger of an Oprah effect, giving folks tax liability they can't afford from phantom income they can't spend? Does the Biden admin's authority to forgive debt extend to its treatment as income by the IRS?
As an account, I’m very curious about this too. People might be rejoicing about $10k debt relief but as far as the IRS goes, tax is due on that relief. Knowing how well they crafted the Trump tax break (s/), this will definitely be a shock to most people.
I guess there's a couple of possible approaches there - one would be that there's One Weird Trick for the administration to avoid creating tax liabilities, another would be to have the IRS create a deferred payment structure, which I believe is in their power (don't know what the interest rate implications would be tho)?
But presumably if they can't do it without creating an immediate tax liability they'd structure forgiveness as something you have to apply for and then hopefully tell you a million times in the process what it's going to do to your tax situation... There's a lot of people it's probably still advantageous for, if they have low incomes and relatively low debt.
I just find it hard to accept that student loan forgiveness won’t cost anyone else anything. It seems like it will cost the amount of the forgiven loans - it’s just a straight transfer to people with debt from people without.
I know the bonds are negative interest rates, but the government still does have to pay them back at some point (just less than they borrowed).
I don’t really understand why - given your argument that basically any way for the government to spend money is good - you don’t endorse canceling all student debt. What’s bad about giving a bunch of money to rich people, if government spending is better-than-free right now? What’s the limiting principle?
That it’s generally unpopular to give well off people free money... which is why most of our social programs are mean tested vs universal.
That’s a fine electoral limiting principle, but it’s not an on-the-merits limiting principle.
Also, I thought the arguments about not means testing programs in One Billion Americans were persuasive and they (mostly) apply to this. You could just keep the forgiveness to fairly small amounts per household and it would be less regressive.
Democrats have the disadvantage of needing to insist they're not bailing out high-earners. Every careful argument in support of loan relief for lawyers/doctors - "there are middle-class people in those jobs who should get some marginal relief" - also applied to GOP's recent corporate tax cuts. Since Democrats were not nuanced in critiquing GOP corporate tax cuts (because politics), the GOP can comfortably ignore that nuance in return. And polarization continues apace.