How much student debt do we want to forgive? Just How Much Student Debt Do We Really Want To Forgive? | Above the Law
Somewhere I saw an article on loan forgiveness for students who attended Colorado Mesa University. Apparently, some people were unaware that they would have to repay their student loans.
Just to play devil's advocate... I've encountered more than a handful of people who didn't know they were getting loans. When I went to the University of Scranton I took a very active role in my financial aid package because my father refused to co-sign loans. I knew I had loans because I read my paperwork. But the "financial aid" folks never uttered the word "loan" once. They talked of grants and scholarships. And they assured me that I, as a qualified candidate, would be allowed to study there. I was assured that they would find a way for me to attend and that tuition wouldn't be a barrier to my attendance. I knew I had loans. I had four of them, in fact. I knew the interest rates, the loan amounts and the final payoff date for each of them. I opted for a 10 year payoff and then I made spreadsheets to keep track of them and to play around with what a few extra bucks, paid against the principal, each month might do for me. Other people at the same school had no idea they were even taking out loans. One former classmate threw a big adult sized temper tantrum when, years after we had both departed Scranton's hallowed halls, her father dropped the bills on her. He had been paying interest during her graduate studies to keep things a bit more manageable (generous, in my opinion). But she was mad that she was entering the working world with this "extra" set of bills that would prevent her from having as nice of an apartment as she would have liked. She had no idea she had a loan. She thought Scranton gave her a free ride with her scholarships and that daddy was making up the difference. It's still ignorant. But it is, at least, a different kind of ignorance that I imagine is probably pretty common on many college campuses.
On the one hand I think we need to allow student loan to be discharged in a bankruptcy. Maybe set some conditions so that people are less likely to go out and get Ivy League medical degrees, declare bankruptcy and laugh their way to the country club. But it should, at least, be possible. But I'm really not buying the "fraud" claims that people are pushing these days. You have state university grads who are underemployed. You have community college grads who are no better off than they were pre-CC. And you have a computer literally sitting in your pocket with which you can compare tuition, view job outlook data, pull up local salary information etc. PF charges what, $1,200 for their Pharmacy Technician program? Compared to $16k for Everest it's a bargain. It may still be wiser just to get hired by a pharmacy as a trainee and not pay anything out of pocket but it takes about 5 minutes of googling to see these facts. The guy selling me a car also swears it is twenty times better than the car someone else sells. Do your homework or sit quietly when you get burned due to your own ignorance.
I agree with you Neuhaus that student loans should be discharged in a bankruptcy. I don't really see the difference between student loan debt and credit card debt other than student loans are guaranteed by the government. Perhaps there should be some milestones during bankruptcy that would allow for people that have huge future earning power to pay back some of it like MD's, etc. I am not sure how you would set something like that up fairly though. I also believe that the lending standards should be beefed up. Too many people take out maximum student loans that are way beyond the amount needed for tuition and books. That makes the whole situation worse in my opinion. My brother went to community college for 2 years and did not graduate. He took out the maximum loan every semester and lived off the money. The amount of money he owes would have made repayment very difficult even if he did get is AS degree. As he did not graduate he has defaulted. The system is not working as it should in these kind of examples.
Well, if I recall correctly that was the stated reason for the loan forgiveness at Colorado Mesa University (fka Mesa College) was that the student(s) didn't know that they had to repay the loan. To which I would say: now how can any adult not know that loans have to be repaid?
Allowing college loans to be discharged in bankruptcy would be a slap in the face to everyone that attended community colleges, took longer to graduate, or used creative means to get a degree (reputable online programs, piecemeal courses while working, etc.) with as little debt as possible. I think if you get your loan discharged, the degree should be rescinded. Why should you get use of something you did not pay for? A lot argue that since you can go nuts with credit cards and buy the big screen TV and gadgets and get that discharged, college loans should be dischargeable too. I say they should clamp down on bankruptcy claims and make everyone have to repay what they borrow whether it be credit cards or whatever else. I'm okay with ditching the interest, deferring payments for a while, but the principal? No way, no how.
How so? Why does someone else's financial condition impact you in any way? I'm not talking about bankruptcy because you weren't able to get a six figure job with your degree in culinary arts. I'm talking about people who have permanent disabilities and mounting medical bills and can barely afford food, let alone student loan payments, who need relief from their debt. You know, the reason we have bankruptcy in the first place. As to why you should get to "use" the degree the simple reason is that because the degree was earned and was paid for by a creditor. It isn't a secured debt like a car note. If you don't make your car payment then they take your car. The lender places a lien on your car at the time of purchase. The debt appears on the title itself. Not so with education and with most other debts. If I buy a doughnut with my American Express and then don't pay my bill AE doesn't insist on getting the doughnut back. They want their money. They may agree to settle the debt for less. But the doughnut is mine to keep. Bankruptcy is a costly and financially damaging proposition for individuals. It isn't something that people do frivolously or just to wipe clean the last few months of credit card debt so that they can get a free iPad. Medical expenses are one of the leading causes of bankruptcy, even for individuals with health insurance, and that credit card debt is often racked up with things like paying copays, utility bills and food. Take a couple. Both professionals and productive members of society. At age 50, half of that couple is diagnosed with cancer. They have health insurance but they have to meet deductibles and pay copays for all treatments. This goes on for a few years. Then things take a turn for the worse and we have to add hospice to the stack of bills. On top of the treatments, the individual who was working likely had to stop and they had to rely on one person's income. So they earned less money and they had to spend more trying to survive. It's not unreasonable to assume that the surviving spouse, let's just say this is in a community property state, is saddled with hundreds of thousands of dollars in debt, their earning potential cut in half by the loss of the spouse's income and now being in his/her mid to late 50s where finding a new, better paying job is less likely (particularly given the attention that this loving space paid to their partner rather than burning the midnight oil at work). The result is a mountain of debt that the surviving spouse will never be able to pay off. Ever. Garnish wages and make them live on Ramen and they still won't be able to pay. This happens a lot. Add to that the financial ruin that longterm care can bring. Bankruptcy, in these situations, is the difference between being able to stay in a home or live on the streets. But, by all means, I await your litany about how unforeseen circumstances are the fault or misfortune of those afflicted and how you would never find yourself in that situation and therefore need no compassion for those who would. But it's a sad state of affairs when the Donald can pull that move with a business venture and walk away from it right back into his penthouse but people call for an end to a lifeline that can save regular families from absolute financial ruin.
"But it's a sad state of affairs when the Donald can pull that move with a business venture and walk away from it right back into his penthouse but people call for an end to a lifeline that can save regular families from absolute financial ruin." Yes, it is a sad state of affairs.
The fact of the matter is we have to do something better with college education. The mountains of debt are not only a drain on our young people, they are a drain on the whole economy. These young people should be living their lives...and spending their money, which is what makes the economy work. Instead, they are paying lots of their income to lenders. We need to shore up our public college and university system so that tuition inflation is slowed (or reversed) and more students can be accommodated. Giving some more access to bankruptcy is OK in the short term, but in my mind it ultimately just adds to the problem. The problem is parallel to the the issue with medical costs, and the solution is the same. Control costs instead of adding more money (forgiving loans is just another way to add money). To me that means more affordable public higher education.
I think we are likely to see a bubble burst before any of those meaningful changes occur. To be fair, I don't know if it will be a proper burst. Perhaps more of a slow deflation. For generations the conventional wisdom was that you had to go to college to get a degree otherwise you would live in poverty. Now people are working jobs which don't require a college education and paying off massive debts. It's becoming trendy (again) to become a truck driver, start a bakery, work as a carpenter etc. The people who suffer the most, the much derided millennials, are having kids. And those kids are going to grow up seeing first hand that a college degree is not a fast track ticket to financial freedom. And honestly? I think it wouldn't be a terrible thing if we thinned out the number of colleges and universities in this country. There will be for-profit schools that can hack it (ACE and Patten strike me as two that have been able to sidestep the current controversies with grace). There will be non-profit schools that won't be able to survive. We might not need 30 different public universities in a smaller state where one or two, with some DL programs, could do the job more effectively.
