Should Student Debt Be Forgiven?

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The last time I wrote about US politics right after the election, the comments section (and our inbox) immediately filled with rage-spewing MAGA people. Biden didn’t win! The media is corrupt! Something something George Soros!

Well, sorry MAGA people. Biden did win. So let’s take a look at some of his crazy left-wing nutjob policies that will inevitably slide the US into a bankrupt socialist failed state. Specifically, his proposal to cancel part of everyone’s student debt.

While right now, Joe Biden is focusing mostly on vaccinations and COVID-related stimulus, part of his agenda is to tackle the student loan crisis.

Americans owe more than 1.5 Trillion dollars in student debt, and the problem is getting worse. The numbers we get when people write into us are eye-popping. Nowhere else in the world do people graduate with hundreds of thousands of dollars in debt, and sometimes we even get people who are approaching regular retirement age with student debt still not repaid. It’s nuts!

So his proposal is to forgive part of it.

We don’t know the specifics of this program yet because it’s still being debated inside the Democratic party. The centrists think the program should be limited to $10k, the progressives are arguing it should be closer to $50k, and Bernie Sanders probably wants it delivered by Che Guevera riding a unicorn or something.

While there’s wide consensus that something has to be done about America’s student debt problem, the solution is quite tricky, and a relatively simple solution like forgiving part of it won’t actually solve the underlying problems long term. Let’s dive into the proposal and see what we find, hmm?

The Problems with a Blank Check

Biden’s current solution is to simply write a check. While appealing in its simplicity, this solution would not only be enormously expensive but it has a variety of problems associated with it.

First of all, as a straight stimulative measure, it’s not well targeted. Student debt relief would, by definition, only affect people with student debt. These are not necessarily the people who would benefit the most from government stimulus. Under this proposal, the doctor who has a high-paying job and the unemployed arts major would get the same level of stimulus if they both have student debt. And the barista who never went to college and lost her job due to the pandemic would get nothing. It doesn’t take into account whether the person needs help or not.

Secondly, it incentivizes bad behaviour. If I knew the government was going to ride to the rescue of my student loan balances, guess what? I’d stop paying my student loan. If I were particularly nefarious, I might deliberately get into even more student debt because I know I won’t have to pay for it. And think of the message this sends to people who scrimped and saved to pay off their student loan. It would feel like a slap in the face for being responsible.

And finally, remember that forgiving student debt doesn’t just magically make it disappear. It simply transfers the balance owing from the student onto the government, meaning everyone would be paying for it with their tax dollars. Is that fair? I’m not so sure.

All that, and it doesn’t actually solve the problem, which is figuring out what’s causing people to get into crushing debt to begin with. Why is college so damned expensive? And why are those degrees not allowing people to pay off their loans? A blanket, untargeted loan forgiveness program helps some people bail themselves out a bit, but it doesn’t tackle the underlying issue that’s causing it in the first place.

Make Income-Based Repayment Non-Taxable

The US isn’t the only country with student loans, but other countries have what I like to call the “useless degree escape hatch.” Meaning that if the degree fails to increase the borrower’s earning power, there’s a way for them to eventually get out of paying off the loan.

This system is inheritently more targeted because it only affects people who can’t repay their loans rather than everyone who has an outstanding balance. In Australia, student loan repayments are calculated automatically as a percentage of your paycheck, so if you’re not working, you don’t pay anything. In the UK, the loan gets written off after 25 years. Here in Canada, if your income is too low the government takes over the interest portion of each loan payment, and after 10 years they take over the principal part as well.

The US version of this are the various income-based repayment plans such as IBR or REPAYE. Similar to the Australian system, it limits your student loan payment to a percentage of your disposal income, which sounds good until you realize that it doesn’t prevent the loan from accruing interest. So while it prevents you from technically defaulting, the problem keeps getting worse and worse over time if you don’t make enough money.

Under the Obama administration, these programs were expanded to include a debt forgiveness portion. If you’re enrolled in an income-based repayment plan and you still have a balance after 20 or 25 years (depending on the program), then the loan will be forgiven. But it too has a huge flaw: that loan forgiveness is counted as taxable income. So in the likely situation that the borrower doesn’t have the cash to pay the resulting humongous tax bill, the student loan debt becomes an IRS debt and the misery continues.

So the income-based repayment system has some of the pieces of a workable student loan escape hatch solution, but the missing piece is the fact that loan forgiveness is taxable. That’s the part that has to change. It will cost money to do this, but if the government is going to spend money to fix the student debt issue, I’d argue this is a better way to do this because it targets only people who can’t repay the loan.

But even beefing up the IBR doesn’t solve the underlying issue, which is people graduating with ridiculously high student debt balances. Why is college education so expensive in the US relative to the rest of the world? And why are people graduating with expensive degrees that don’t land them high paying jobs?

Make the Schools Pay For It!

Here’s my proposal: Make the schools pay for selling useless degrees.

Higher education being expensive is fine if it means the borrower makes more money. But if it doesn’t, that’s what creates this huge insurmountable debt crisis.

I think it’s completely immoral that schools charge people north of six figures for fine arts degrees that they know are worthless, and marketing these expensive useless degrees to a population that’s the least capable of making good financial choices: clueless high school students.

Remember when you were 17? How much stupid shit did you do back then? Would you trust that person with making a decision worth hundreds of thousands of dollars? Of course not!

Yet that’s exactly what the current college system does! Trick young, stupid people into taking on massive loans without any regard for whether that loan can ever be repaid. It’s a completely predatory practice!

So here’s what I think should happen. If the degree was useful, then the current system is fine because the loan will get paid back through normal channels. But if the degree wasn’t useful and the loan just keeps ballooning in value with no hope of being paid off, there should be a mechanism where the school has to chip in and shoulder part of the loan.

This can be added onto existing IBR programs, where your required payment is limited to a certain percentage of your paycheck, but after a certain number of years, say 10, the school would have to start covering a percentage of the loan payment. This can start off small, like 10% of the monthly payment, but gradually increasing by 10% per year until after 10 years where the school is now covering 100% of the loan payment.

Here’s why I think this would help. Right now, schools are incentivised to get as many kids enrolled as possible. They don’t particularly care if their degree is useful. By forcing them to have skin in the game, it would change the incentivisation from pure enrolment to making sure the degree is worth what the student paid for it.

Not only would this force bad colleges to reform and improve the quality of their programs to maximize employability, it would also push them into investing in developing internship, job placement, and career counseling programs. Success would no longer be determined by grades alone, but by whether the student is able to get a job in that field. And while this wouldn’t completely eliminate useless expensive degrees (maybe the student comes from a wealthy family and doesn’t care about affordability), it would make the university think long and hard about accepting a student into such a program who needs a loan to afford it.

This model is not a completely new idea. It’s called a Risk-Shared Student Loan, and the last adminstration to consider it is, ironically, the Trump administration. In 2019, Trump issued an executive order to draft a policy reforming student loans into a risk-shared model similar to the one I’m proposing, but the proposal never came to fruition due to the pandemic that swamped all our lives.

But the idea does have merit because it’s the only proposal that even attempts to address the root cause of sky-high student debt in America rather than just put a temporary band-aid on the problem.

What Would You Do?

The student loan crisis is massive in scale, so any solution is bound to be messy. But ignoring it is clearly not an option as the current system dooms millions of borrowers to a lifetime of debt that they can neither repay nor discharge through bankruptcy. But any solution has to take into account who caused this situation to begin with. Is it irresponsible borrowers not choosing their degrees wisely? Is it governments not providing enough financial assistance? Or is it predatory colleges selling useless degrees?

I clearly have an opinion on this, but I’d love to hear yours. Let’s hear it in the comments below! What would you do to fix the student loan crisis in the US?

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71 thoughts on “Should Student Debt Be Forgiven?”

  1. The average college student barely qualifies for a $500 credit limit on an unsecured credit card… why are lenders handing out five and six figure unsecured loans to those same people?

    It’s because the debt can’t easily be discharged through bankruptcy. Fix that loophole, and the lenders will tighten up the money supply, and people will be forced to work their way through school, like I did, and eventually it will put downward pressure on college tuitions. It’ll convince people to go to community college, trade school, or take an apprenticeship, instead of spending six figures partying for four years.

    Fixing the loophole puts pressure on lenders, but declaring bankruptcy also has consequences for the borrower, so it isn’t just free money.

    Seems like a reasonable compromise to me!

    1. Hi from NZ. Here the student loans are interest free for 25yrs, its approval depends on your parents income, ie rich parents kids get zip., n a percentage of your paycheck make the payments.
      I personally worked 2 jobs to support myself through uni so I came out only with a small debt which I paid off in a year.
      I think if u are old enough to drink or drive , u should be old enough to make your choices n the consequences that come with it. So if you took a loan you should be paying off it.
      Personally I would rather have kids get into part time work programs in their last year of school or that should be a pre requirement for uni. Everyone starts work from the bottoms up n if they like it, their company can pay for their education at uni while the kids work parttime at the company. Work n life experience with smaller student loans.

    2. “The average college student barely qualifies for a $500 credit limit on an unsecured credit card…why are lenders handing out five and six figure unsecured loans to those same people?” A-MEN!
      We need to stop giving 17/18/19 year old kids access to going into this much debt!

      The student loan debt crisis is a tough situation and I’m not sure what the right solution is, but I really love what FIRECracker suggested, makes a lot of sense.
      I personally just got a two year degree from a local tech school, paid cash for it by working full time and graduated on time with no debt. Then got a job 3 months after making about $39k/year vs $21k/year I was making while in school. My degree was “cheap” but I make $18k/year more than what I would be, with a lot of potential to earn more. I think trades & technical/community colleges are a great place to at least start or to just go down that path. It makes a lot of sense nowadays!

    3. Brian – well stated and I agree completely. The other factor here is that the govt makes these loans readily accessible to all, which encourages those students who have no money skills to just pile up the debt while in school. If that were eliminated (or reduced) it would be much more difficult to obtain loans in the 1st place. This would also lead to the improved behavior you talk about. Let the free market solve the problem.

    4. I completely agree! This mess began when the government started to back student loans. Banks will no longer give you $100k to earn a degree in “____ studies” if you’re able to default and file for bankruptcy. In addition, universities will be encouraged to cut on admin costs and all the extras that have nothing to do with an education (5+ gyms, non profitable campus events, etc) in order to stay competitive. You can’t fault universities for acting like a business when they are encouraged to with the current system. As always- consumer beware. It’s time to cut the government chord with universities and banks.

      Furthermore, parents need to actively direct their kids. Does Johnny really need to go out of state to earn that degree? Should he start at a community college instead? What will his major be? If he is undecided, maybe he shouldn’t go to college right out of high school?

  2. I totally agree making colleges chip in is a better idea! I also think the root solution could be requiring a financial literacy class in high school to inform the actual decision making rather than just making the options more fair.

  3. I’ve encouraged my children to look at trade schools for this reason. I agree 100% that the source of the problem is not being talked about near enough. These schools are predatory and need to be held accountable for selling useless degrees for more than they’re worth. Sometimes I think business schools (and resulting models in the USA) the ethics classes are extremely lacking or non-existent, and to me it seems this short-sighted attitude for immediate profit has embedded itself into the universities as well.
    The other problem is ideological indoctrination, but that’s a whole other bag of worms for another blog besides this one.

  4. The students signed for the debt, they should pay it. If we have a problem with the system we should work to fix it but, in the meantime, if you can’t pay back the loans don’t get them; go to a cheaper school. I say this as someone who is from a lower middle class background and had to pay back my student loans for over 10 years.

  5. As a long time California resident and observer of the state of the American education system, I can say there’s nothing to worry about..the current system will continue on as is, getting shittier and shittier. There’s an insurmountable level of momentum behind the current bloated system.

    The thing you need to know is that in America, going to college is now a “lifestyle” statement, and has almost nothing to do with education. My prediction is that degrees will continue to get dumber, students will continue to take on more debt, and that Biden might throw a token $10K as “forgiveness”. Students/parents want the “college experience”, colleges want the bloat and tax dollar$, and politicians want to be able to say they’re “saving the children”…

    ….zero chance anything changes.

    1. On that note, I do think we may be moving towards a larger portion of young people seeing what jobs need a degree and what degrees are bullshit, thanks to the rising “gig-economy” and enough people on blogs and youtube talking about their useless degrees… So there may be some hope there. But yeah, I don’t think the system will change any time soon

    2. While I do agree with your statement, I think that there will be a tipping point where people will start to look at the risk/reward of a degree vs. just entering the workforce or taking up a trade. Considering the FIRE movement as made more and more people aware of financial literacy, there’ll be a point where taking hundreds of thousands of dollars worth of debt to maybe land a 40k salary just isn’t worth it anymore. I imagine you’ll see a trend among the next generation (probably after Gen Z) stop seeing college as the go-to choice after high school. This will hopefully have a ripple effect as college admissions drastically reduce which’ll force a restructure of the whole system.

  6. Great topic and solid points!

    I graduated from university with student loans. I worked part-time during school, did co-op work terms (paid), took longer to finish school (3 years extra) and got some scholarships. I paid off my student loans within two years of graduating.

    I have thought about this for a while and I feel that going forward the U.S and Canada governments should cap student loans at $30,000. That’s it. This would then in turn force colleges, universities and other post secondary institutions to come up with innovative solutions and make serious decisions. Parents and students will have to decide which schools and schedules to enrol in. Maybe attend smaller colleges closer to home, especially the first couple of years. Shocked how many people I know many in the U.S who would rather dig ditches by hand then attend a community college. Ivey league or bust mentality needs to change.

    1. Pavi makes great points – I agree. Also, where there’s a will, there’s a way my mother used to say. I worked part time through community college then full time at university to graduate in 4 1/2 years. I always found time to socialize and most important, I graduated debt free. That sweat equity has provided me substantial career opportunities with a six figure income. I would not advocate student loans greater than first year’s expected salary.

  7. This article got me thinking …

    Schools focusing on enrollment sounds a lot like mortgage originators dumping the mortgages on someone else as fast as possible. Like the NINJA (No Income, No Jobs, no Assets) home loans that helped push the 2007 conditions over the edge into the financial crisis, eh?

    1. Oh, absolutely. I’ve been thinking the same thing. I think there is a student debt bubble that is going to burst. I don’t know exactly how or when or how we can avoid this, but yes.

  8. I like the Risk-Share idea. The school should share some responsibilities. If the student can’t find work, they should help out somehow. This will give the school more incentive to help the students find work. Maybe they’ll be more strict with the partying type.

  9. I don’t usually chime in but I do have a 13 year old…

    All I can say is that our household view the school system as a “business”. They do have several “products” they sell to consumers and those are normally referred to as your “field-of-studies”. At the end of the day, and just like any business, you purchase these products at your own risk. Read the fine print as they do NOT have a warranty and/or “money-back” guarantee clause. It is simply NOT their fault for selling you a “defective” item and the onus is on you, the consumer, to ensure you are doing your due-diligence before making an “investment”. Unfortunately, rather than following the “math” and going “beyond-the-numbers” so to speak, the general population (ie the consumers, our young teens, high-school graduates and even parents/guardians themselves) have been blindly influenced for many many years on the premature notion of following your “passion” first. We were technically sold on an ideal concept that if we just simply follow our hearts in selecting our desired “career” path, all the rest is secondary and will eventually follow suit! Essentially, the underlying problem lies in the individual itself NOT the institution!

    There is no rhyme nor reason why both the institution and individual itself can’t profit from this partnership in tandem. As such, we need a new mechanism or “rule-book” to re-educate our kids as to how to properly vet a college or university “product” in an effort to give them the best results ROI long term. I believe both @FIRECracker and @Wanderer already solved that dilemma!

    As for my 13 year old…, he’s now looking at the “POT score” exclusively!


  10. Wanderer,

    You’ve provided a very pragmatic solution here and so have many of the commenters. The problem is the American government is too corrupt to implement sensible solutions and its citizens too fearful and complacent to say “NO” to their kids who want expensive useless college degrees and to the colleges that charge ridiculous tuition.

  11. Wouldn’t the risk sharing model incentivize colleges to shy away from need-blind admissions and only favor applicants who don’t need loans?

    1. Great topic and some really thoughtful and creative replies. I actually think this problem is being aggressively addressed by most of the stakeholders, including many universities.

    2. I think you make a really good point. Ideally, I think it would just make colleges re-think their degree offerings, at least to people who need loans to attend. If people need a loan to go to university, the universities would direct them to high return-on-investment degrees they offer so that the university can reduce their risk. This is good for the student too, since a higher ROI degree will improve their earnings. I do think it would mean that more “frivolous” degrees would only be pursued by the wealthy. But then, maybe those “frivolous” degrees would come down in cost because there is so little demand? I think the risk sharing model is definitely worth investigating further!

  12. I dropped out of university. Never finished. I had a gpa of 4.0 so it wasn’t because I didn’t understand the courses. It was because they were stupid and useless. When you only show up for the test and still get perfect, something’s not right. Got an entry level job as a data entry clerk and worked my way up. I never took on debt. Retired at 44 with a 7 figure FAT FIRE ETF portfolio and 6 figure income from that portfolio. I wouldn’t go back to uni even if they paid me.

    Do you notice most people don’t even work in their field of study? And it’s not like that’s anything new. You would think Liberal Arts degrees should have empty classrooms but instead are bulging full of students.

    I agree with the comment above that uni is a “lifestyle statement”. Very true.

    Also, why is it that so many PHDs can’t spell or have correct grammar? WTF?

    1. Who gets to decide whether a degree is “useful” or “useless?” Is an undergraduate degree in literature useless? (I know a doctor whose BA was in Russian Literature). Is a degree in history useless? (Lots of attorneys have degrees in history, seems odd, but the carryover of research and writing are what makes this a good fit). Is a degree in math or chemistry a guarantee of some brighter economic future?

      Perhaps what you’re really trying to get at is that a degree is “useful” when there’s some sort of plan and endgame associated with it, and “useless” when it’s just filling the time to no predetermined purpose.

  13. Absolutely not. They knew when they took out the loan that they would have to pay it back? Why is this even a discussion? Might as well start paying off peoples cars and mortgages if you’re going to forgive any debt, no matter where it came from. Loan = needs to be paid back.

    1. Normally, I would agree with you 100% that loan = need to be paid back. But, school loans now ARE predatory.

      In my field, graduating with 100k loans is normal. That wouldn’t be a problem, since starting salaries are also 100k .

      However, the interest rates and inability to discharge school loans in bankruptcy are just plain wrong IMO.

      Lenders are charging 8% interest on those loans when the prevailing mortgage rates are 2-3%. If they are going to be charged the interest rates of an unsecured loan, they should also then be dischargeable in bankruptcy.

      Contrast to my experience graduating in 2002: graduated with ~ 42k debt, 1.8% interest rate, starting salary 90K. Loan forgiveness in my situation would be just silly.

  14. Put a cap on tuition rates at any public U.S. university that allows students to enroll while using any type of student loan to pay for tuition. The cap could be–say–$10,000 per year. This would collapse the upward price pressure on tuition because presently students can get huge amounts in loans per year and schools are more than happy to gobble up that money and pay themselves fat salaries, pensions, etc. (but stiff the untenured teaching assistants, btw). The tuition cap would put huge pressure to cut wasteful administrative positions that have ballooned in the past 30 years.

    On a separate note, take a look at what Mitch Daniels has done as the head of Purdue University in Indiana. With a genuine will to freeze tuition increases, it is definitely possible to control costs. Few in the business have the will.

  15. I think its a good idea to get colleges to have skin in the game. I also think USA colleges and universities should not be allowed to have private school get tax break subsides in the billions. just saying.

  16. The situation is very encumbered. While, yes, students are able to take on $120,00 or more in student debt. What I find troubling is the commenters that would have students work through school. I think those commenters that were able to work during school are holding the mentality of “well I did it, so everyone should be able to do it!”.
    This is an over simplification of a solution to a rather complex and mutli-pointed issue. One area FireCracker to address in why is College so expensive. Is that depending on where the student is going to school, living costs are also outrageous. Which for a typical 19 year old college student paying $25000 in tuition. Is also going to be using student loans to cover $10,000 to $20,000 a year in room and board expenses. So for those that were able to work and pay for their degree with little to no loans. I suspect you had help in the room and board area.
    FireCracker, you raise a good point about getting colleges involved in repaying the loans. I like that idea. I also still don’t understand the tuition costs for university in the US. When we look at a timeline of tuition dollar cost over the past decades. We can see an exponential increase starting int the late 80’s early 90’s. What changed? Other than universities realizing that they can charge more. The Government had guaranteed these loans to the banks. So, I agree with FireCracker. A blank check is not the solution. Other ideas made by commenters are interesting. Such as getting universities involved with job placement. I would actually go one step further. I would like to see universities partner with their students and before starting classes. Have students present a plan on how these classes will help them in a job. This is something that employers offering tuition reimbursement require so that they aren’t paying for an underwater basket-weaving class. I recognize that the decision making abilities of a 17/18/19 year old sucks. Another item I would like to see available in the US is parents discussing this issue with their kids and offer alternatives to university. Such as trade schools/military. Or even a gap year.

  17. Thank you Wanderer. It is refreshing to have discussions focused on problem solving real issues without being saturated with political demagoguery and fearmongering (the only tools in today’s corporate media). I agree with your approach. I’ve worked hard and sacrificed in order to put my 2 kids through college to earn degrees that will increase their earnings and hopefully Quit Like a Millionaire some day. I don’t want their tax dollars to pay for someone else’s bad decision. Putting Universities on the hook for huge loans for dead-end degrees would be transformational.

  18. I feel for all those who had to borrow for an education (It was the best gift from my parents). At the time, everything was written out then signed by both parties. To forgive would break contracts, one of the basics in our capitalist system. I am sorry but I don’t agree.

  19. In Australia there is no interest on the student debt. As you are borrowing from the government there is no third party trying to make a business from student loans. There is also a student allowance from the government for those that don’t earn enough while studying. The government has recently increased the cost of ‘useless arts degrees’ to encourage people to choose more ‘useful’ STEM degrees. Ironically all the politicians in power have arts degrees. This kind of annoyed me because as someone who never went to uni and currently work as a senior marketing professional, I do plan to do an art degree for fun when I retire early!
    Most of the universities make their money from international students who don’t have access to this system and are charged a fortune.

  20. As noted in the first comment, making student loans dischargeable in bankruptcy would make a lot of lenders look long and hard at whether it make sense to lend that hundred grand to the intersectional studies major. Perhaps making that retroactive might be fair retribution for the institutions that knowingly made predatory loans.
    Another thought I had was to make all loans originate from the college or university being attended. So University of Podunk couldn’t just send their students to YouOweForever Bank; they’d have to take out the loan themselves (or pay out of their endowment).

  21. Private university tuition fees should be capped. Public colleges should be tuition-free. There is no question that an educated population yields greater benefits than an under-educated one, so education should be treated as a public good, not a private luxury.

    I find the idea of punishing colleges for « useless » degrees extremely dangerous. Take a journalist with a degree in political science and history. That person may be making a tremendous difference in the world by keeping the powerful accountable and the people informed, and yet be wholly unable to pay back a huge student loan. But is that the college’s fault? Do we want colleges to scrap their humanities departments entirely to avoid penalties? Are we ready to live in a world without journalists, lawyers, high school teachers, historians, writers, diplomats?

    I have 3 degrees: 1 BA from a private Canadian university (total cost: CAD 10K), 1 BA from a public French university (EUR 600), and 1 MA from a public French university (EUR 800). All those figures include health insurance. I graduated debt-free and at age 25 got a high-paying job with excellent benefits. My education was mostly funded by taxpayers, and given where it got me and how much I can now contribute (in tax dollars and investment in the economy and in my future children’s education), I would say it was well worth the sacrifice.

    But the US is intent on keeping its idiotic system, whereby sports coaches make millions while students pay through the nose to attend courses taught by burnt-out adjuncts making starvation wages.

    Good luck keeping future generations educated enough to not invade the Capitol on rumors that Democrats are eating babies or whatever.

    1. Agree! University was originally not supposed to even be about professions (says the engineering prof writing on engineering graduates’ blog); the technical schools were affiliated with the university but not really part of it. I do really think that we need people with diverse skills in the economy even if they’re not immediately useful as job training.

      Having said that, we shouldn’t be saying that everyone should be going to university either. The previous post about someone going to trade school was good. More people should go to trade schools. Even kids of the elite.

  22. I could not agree more that the American post-sec industry is beyond messed up, but this analysis overlooks a vital component of this proposal, which is that the people who would benefit most are people with lower incomes, less education, and often of colour.

    Think about it. If you went to Princeton or Oberlin or whereever and have $160k in loans, $10k means practically nothing. A huge number of marginalized people have been hoodwinked into predatory, for-profit, only sometimes accredited colleges, and often have only been able to complete a term or two before the finances force them to quit. (Yes, personal responsiblity blah blah, but if you’re the first in your family to attend post sec, or your family is new to the US, you may not know which questions need to be asked before you sign on the line). The vast majority of these loans total less than $10k. Any analysis of a policy like this should be considering equity.

    Also, a reminder to Wanderer and the other commenters that there is a lot of value from “useless” degrees. Someone in the comment mentioned ethics classes for business students (and I totally agree!) but you know who teaches those? People with Philosphy degrees (usually more than one)!

  23. Loan forgiveness — No no.
    Education should not be so costly.
    Students may enroll in local university, stay at home (instead of staying in university resistance) and work part-time instead of partying.

  24. I’m from the Netherlands and I think we have it sorted there pretty well (I can also compare to UK as I have a MSc from a UK uni), even though studying has become more expensive.

    Around 90% of degrees cost around €2000-2500 per year for a student. If you find out that the degree isn’t for you after a few months and quit, you can claim back more than half of that. People therefore sometimes “try” a few degrees but in general find something they are passionate about. The degree is actually about 10K per month but the government subsidises the rest.

    Of course there are also useless degrees. But I do believe that having lots of different types of degrees creates a very diverse and tolerant more inclusive society. We’t tend to value a lawyer or accountant more than a creative therapist (or most people anyway).

    We also study for max 20-30hrs a week, and its in our culture to have a parttime student job. I estimate 80% of students work (I never met any student that didnt but there must be some) and this earns them enough to pay their rent (or more).

    Because students are so used to working next to studying, and internships are an important part of our degrees, most students start earning money quickly after graduating.

    Student still borrow money, and jf your parents earn very little they can get extra allowances. I got 350 euros a month allowance which covered my rent and made about 800 per month from parttime jobs. Also all travel is pais for when youre a student. I still borrowed around £10K because I did 2 internships abroad in countries where I wasn’t allowed to work so it was just to pay rent there.

    I think it’s a cultural thing of creating an environment where jts ok to make mistakes (be able to switch degrees) and in general students supporting each other to work side jobs that create a positive study environment, happier people and therefore more employable people who have less debt to pay so will pay it off over on average 10-15 years, around 30-200 euro per month.

  25. I agree schools should have some skin in the game. And the cost of having a football team should not be included in every student’s tuition. If “College” football teams were a separate organization, that would bring tuition down. And any government loan forgiveness should also be available to people who refinanced to private loans.

  26. I like your viewpoints/solutions Wanderer.

    I got the “useless” fine arts degree along with one in hard sciences. Went to a school on full scholarship so I wasn’t paying…doing things the “right” way (with living expenses paid by me- it was HARD working + doing 20-25 credits a semester so I’d finish when my 4 years of scholarship were up). Couldn’t find a job in hard sciences after school, went back to school for the fine arts master degree, which ironically paid me (I couldn’t find a school to offer me a scholarship in the sciences). Made my living throughout my 20s as a full-time musician debt free, until the last recession when I lost most of my income, including a (music) admin PT day job at a university. Applied for hundreds of jobs, nothing.

    I decided to go back to school for a medical degree. 6 figures debt was unavoidable (there are basically NO scholarships for my field- for sure I hustled and got the ONE that I was eligible for). They told us (and available research “confirmed”) we would make ~6 figures easily upon graduation but the current reality is I know less than 5% of my classmates doing so. My field isn’t one that’s eligible for PSLF, there are very few opportunities in that setting. The majority of us are self-employed and not full-time. W2 type jobs rarely exist for us. I do hustle still as a musician (not much during the pandemic), delivery person, other misc stuff. For me I’m doing better than ever, but my impression of a lot of people here would be they’d laugh at my $50k/yr current income.

    I’m still grateful that I am in this field since I am working, even if lower income, while my performing arts friends are really struggling during the pandemic- and of course having a direct effect on people’s health right now. It still doesn’t feel like my fault though that these institutions can charge so much money for these degrees. I think there is too much accusations going on that people who can’t pay back their degrees are lazy or stupid for picking the wrong major- quite often they may be misinformed, but VERY often are misled. For this reason IDGAF if I ever pay the loans back. Render unto Caesar’s what is Caesar’s; but not one penny more

  27. I think another aspect that doesn’t like to be discussed is: Not everyone should go to college. I’d even say the majority of people shouldn’t go to a traditional college. For millennials, especially, it’s been crammed down our throats “find your passion, and get a degree in it” from every direction – school, family, friends, the lady at the supermarket, everywhere/everyone. Well, guess what….trade schools with very affordable tuition and/or internships are a great fit for most. But, they have this stigma that they’re not real a college, so if you go to one you’re a failure.

    On the other hand, someone that is truly talented in the arts or history or whatever, and have the degree to back it up, will make strong contributions to society, and can be successful. However their degrees have been “dumbed down” by this unnecessary influx of extra students who can’t pass the hard sciences, so they pick an artsy degree. I don’t think art degrees are useless in society….they are just useless to the vast majority of people paying out the wazoo to get them.

    It’s also a supply and demand situation. Every child has been told to go to college or you’re a failure, so now every child is applying. Prices go up because there are limited spots – limited teaching staff, limited classrooms, limited supplies. Kids keep paying the increases, so they continue to rise. I do like the idea that the loans be tied back to the school after a certain amount of time – it forces the schools to help find high paying jobs to get those paid off sooner. I also like that it must be a percentage of your income – so people are forced to pay it down (can’t just let them lag on forever), but also doesn’t consume ALL of your income. And, I also like the idea of allowing them to be dischargeable in bankruptcy….like the first commenter: if you can’t get a $500 credit card limit, why the HELL are they handing out 200k in student loans? If you’re that smart or talented in that particular field, scholarships will cover you. If your ultra-wealthy, then pay away. For those in the middle, there needs to be someone watching out – and it should be those handing out the loans.

  28. education, housing and healthcare are three things that have such a huge impact on society if there is limit in it’s accessibility that the cost of these things need to be regulated. All of these categories should be available for a reasonable and affordable cost.

    You’re right addressing the debt is doing nothing to the core of the issue which is the cost. Also there is a lot of abuse, my ex amassed $100k in student loans for her Bachelor’s degree while living it up in a Ritzy part of town, going for expensive dinners and even a foreign exchange program (codeword for vacation) in Italy all classified under “living expenses” which can be financed through student loans.

    So, by forgiving part of the student loans, the public is actually subsidizing my ex’s vacation to Italy. Just FYI!!!

  29. What’s the big deal with forgiveness really? The US spends trillions on useless wars when they should be trying to improve the lives of their own citizens. Imagine cleaning the slate so these kids can focus on getting ahead, buying a house (!), purchasing goods and services instead of lining the pockets of the banks so the CEOs can walk away with million dollar bonuses? The education system should be designed based on meeting qualifications (not daddy golfing with the Dean or paying off the President of the university), and at a nominal cost. This will create an educated, thriving society of critical thinkers. So I guess the only people who study art, music and philosophy are the ultra wealthy in your books. Leads to a society without depth of knowledge. Look at well functioning societies like Denmark. How are they successful and the US is a complete failure regarding student loans and medical loans. Perhaps some real out of the box thinking is needed similar to Roosevelt and the New Deal. Wouldn’t we want to improve society instead of holding to an existing system because it isn’t “fair” to those who paid. With that line of thinking, the US should get rid of social security, medicare, school breakfast programs, etc. That clearly isn’t fair since some people work hard for their money. It’s a dog eat dog world.
    Having said all this, I subscribed to the work hard, barely take a loan, get a degree (geography! how useless!!) and bust my ass to work, pay my debt and save. I could pull the FIRE trigger anytime but I wouldn’t be pissed off if debt forgiveness happened. It would be the right thing to do for society as a whole. I am Canadian by the way, but I think the US system is very broken.

  30. Kids born into generational wealth typically don’t pay tuition- their parents pay the bill (and get a tax break while they’re at it if they do it right).

    In contrast, student loans are the only realistic option for kids born into families without generational wealth.

    The government should forgive past student loans (primarily benefiting people who don’t have generational wealth). Going forward, we should use income-based government funded college education so we don’t get into the same mess ten years down the road.

    Its in society’s mutual best-interest to let kids study what they’re interested in. We need musicians just as much as we need engineers.

  31. I don’t think the student loan crisis will ever get fixed. The problem lies with our education system, it’s so awful. Why are we freely giving 18 year olds the option to be crippled with $30,000 – $60,000 worth of debt? That’s insane. College shouldn’t even cost that much.

    Anyone can actually walk into a classroom and follow a college education plan if they actually really want to without the tests, quizzes, and homeworks to learn the material. All of the information is free anyway. We need to educate people sooner, and ESPECIALLY parents.

    We take tremendous weight on our parents words that “you need to go to college”. No. Not everyone needs to go to college!

  32. IMO (useful) degree courses should be a continuation of the free education that exists in most countries, but should be reserved for the brightest students, as was the case here in UK before tuition fees raised their head. “********* studies” were the start of the devaluation of uni. education.

    However, governments like to have maleable populations for ease of governing and there is no better way of forcing people into submission than drowning them in debt. Student loans catch them young and loose consumer credit, car loans and property mortgages seal the package.

    Our UK government boasts that a degree will boost a person’s income by US $ 138,000 over a career. Think about it! $75,000 of debt to gain that (taxable) over a working lifetime. The ministers should be selling used cars!

  33. Pfft, tax dollars. Ha, Biden and the Fed will just print more money. That’s their solution to everything.

  34. One thing to bear in mind is that some of this would actually fuel existing inequality problems. Lots of very expensive universities in the US (Stanford, Yale, Harvard, etc) are as much about networking as they are about education. A proposed structure like this means that students of lesser means have even less access to those networks than they do today. From personal experience, I work for folks who are quite wealthy in a large part because of who they studied with in university. Those sorts of connections wouldn’t have been open to me personally.

  35. My thoughts are like many others….

    I could afford more than community college and state school for my kids but that is what they are getting. My oldest is finishing up his 2 yrs at CC. He switched majors which is typical of kids. He isn’t missing anything and will transfer to a state school 40 minutes away and will commute. For state schools 1/2 the cost is room and board. He will graduate in 2 years debt free. Moral of the story is “if” you are going to get a degree do it as cheap as possible (yes there are exceptions). My youngest is in high school but taking all his classes at the CC for dual credit. He will graduate with his associates before getting his high school diploma. That cuts off a year from the engineering degree he wants to pursue.

    A couple other points…

    1. The government shouldn’t be importing as many foreign workers as they are. US citizens should be given first dibs on jobs. Because if they had a job they could pay their loan.
    2. Ironic the indoctrination camps get the kids in debt so they come out screaming to the govt. about their loans but they never say anything about the schools that enslaved them in the first place….

  36. 1) I am opposed to college loan forgiveness. No one put a gun to their head and said you have to take out this loan. They did it of their own free will.
    2) there are plenty of ways to make college cheaper – including community college, state colleges and living at home
    3) the liberal colleges are also at fault for charging so much money – they can forgive the loans if they want

  37. At first I was ashamed that I became a medical technician. But looking back my total tuition just 10 years ago was $1,200 and time into the system was only 12 months. I began earning six-figure salaries shortly after. I feel like I dodged a bullet.

  38. I’m glad to see discussions on ways to address the root cause of the high cost of college education. Without addressing the root cause, student loan forgiveness, however well intentioned, is bad policy. It’s literally politicians buying votes and not solving the real problem.

    Whether it’s $10k, $50k, or total loan forgiveness, forgiving student loans will add a new tier to our system. Those who had their loans forgiven, and everybody afterwards who did not.

    (Also skipping over the whole moral hazard of creating an expectation of future student loan forgiveness)

  39. I’m from one of the “bankrupt socialist failed states” in Europe (Denmark) where education is free – all the way from primary school to university. Where housing, utilities, and other means of basic living is affordable and where medical help is free for all. Here student loans are not used to pay for the degree, but as an ekstra “income” in years of studying, so that the students have a choice of whether they want to work extra jobs to pay for living or they want to concentrate on studying. The interest on these loans follow the national discount rate – which as of 2012/13 has been 0% and then they add 1%. So, I finished my degree in 2011 and I’ve been paying my student loan of at a 1% interest rate and have now finished paying it off within 10 years with only minimum repayments -(could have payed it of in 3 years easily).

    Yeah, I truly live in a failed bankrupt socialist state…

  40. I couldn’t disagree more as regards the idea that 18-year-olds shouldn’t be held accountable for their financial commitments. If you’re old enough to vote then you’re old enough to sign a contract and you’re old enough to be squeezed until you crap out a six figure sum. Period.

    When I was 17 I dropped out of high school. When I was 18 I got my GED and joined the Army. When I was 19 I was in the Iraqi desert getting shot at. When I was 25 I got my bachelor’s degree in engineering. I never took out a student loan; I got my education through a combination of military education benefits and academic scholarships. Now I’m 36 and my net worth is about $3.2M. I made some good decisions and some bad ones too. But all of them are mine and I bear responsibility for them regardless.

    I have asymptotically zero sympathy for anyone claiming to be a “victim” of predatory lending practices; last I checked, lenders aren’t holding a gun to your head and compelling you to sign on the line which is dotted. But I am willing to compromise. As soon as Matt Maupin walks across the stage and receives his engineering degree, I will open my heart to the millions of slack-asses who expected to cruise through a liberal studies degree to a six-figure income.

    To quote Jack Nicholson in The Departed: “No one gives it to you; you have to *take* it.”

  41. Great proposal. The colleges should also be held accountable for loan repayments. The loan repayments should start ONLY after the student gets a paying job. This will put the onus on colleges to make sure that students can and will get a job..via say an internship. The will initiate purposeful collaboration between companies and educational institutions. Thus colleges will be forced to eliminate meaningless, useless courses and neither will students choose stupid courses. As far as repayment goes, a reasonable percentage of the former student’s paycheck should be deducted to make each re-payment, and the deduction should be pre-tax. After leaving college, if the student with a loan does not have any income, he/she should prove that they have tried applying for jobs every 6 months. They should not get an easy ride either. Thus the college, the student, and the Govt are all held accountable to address the mess. Blockchain anybody ??

  42. Federally-backed student loans can’t be discharged through bankruptcy but private loans can. Unfortunately, over 88% of student loans are backed by the US government and those loans create billions in interest. I don’t agree with forgiving the loans. College should not be this expensive in the first place. I like the idea of making the colleges pay some of the loan amount or at least the interest. I’d bet tuition will decrease significantly.
    US college tuition is similar to drug costs. Astronomical compared to other countries. The fleecing of Americans.

  43. Many great points. But there’s one key component that hasn’t been discussed: what about employers?

    Remember, employers are the ones requiring degrees. And students do want jobs after college.

    Why don’t we force employers to repay 50% of tuition for any job which “requires” a degree? As is common already for MBA hires?

    1. It’s a creative idea, but why would we require employers to pay that? It’s a free market system. Employers compete in the salary and benefits packages they offer.

      Here’s an idea, let’s have adults be responsible for the choices they make and their consequences. That’s real freedom. Master of your own fate. America and similar developed nations have well established paths to success, folks. Kristy’s book, for example, outlines a good one.

  44. Why would we forgive loans for people who, as a consequence of their educational attainment, are in an advantaged position in society? This is the suffering class that needs the most government help? Not to mention they chose to borrow the money and study their elected discipline.

    What about the students that worked through school, and parents that saved and paid for tuition? Will they receive a payment also? Why not when they walked the same path and simply made better, although more difficult choices along the way?

    I think you see politicians talking about forgiving student debt because it’s popular with young people that have made mistakes borrowing too much for degrees with low or no ROI.

    I have a lot of friends in their 20’s and these students that borrow these huge sums aren’t just using the money for tuition and books. They are paying for apartments, groceries, and even vacations. It’s ridiculous that I should have to pay these loans back as a tax payer writing that writes a huge check to the government each year.

    I advocate for more trade schools, more counseling about the debt covenants, the implications, POT ratios, and an overall tightening of the footloose and fancy free money supply chasing expensive degrees and making college tuition unaffordable for young people.

  45. Call me old fashioned but it’s pretty immoral for someone to make the ROI based decision to go to school to try and earn more income and because they make a poor investment and don’t get that ROI the tax payer has to cover the bill. I’m an independent politically and find it wrong especially in the modern day where everyone and their mother is talking about trade school with social media. You made a decision to try and make more money by going to school and like every investor you need to live with that decision. I don’t want bailouts for anyone business or student. If government wants to stop the student debt crisis stop federal financial aid so people have to make a more risk concious decision if they want to borrow and cut off the unlimited supply of $ to schools.

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