Reply to Canceling $10k of student loan debt is stupid.

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Canceling any debt is stupid. You borrowed, you pay. [/quote]

I agree, we should eliminate bankruptcy and bring back debtors prisons. Maybe airline executives would do a better job with that incentive. Or are you only talking about 18 year old kids being forced to make life altering decisions? [/quote]

Any means any[/quote]

The problem is that the current system requires poor people to pay back all their debt while wealthy people and corporations (who carry WAY more debt) are often able to escape debt via lawyers and other legal mechanisms designed to help them discharge debt for less than they owe.

Student debt is unique in that it can't be discharged in bankruptcy. It's also unsecured debt -- it's not like you can sell the underlying education to pay off your loans the way you can with a house. We need a policy solution to the problem of ballooning student debt because it impacts the economy very negatively. It keeps people from buying homes (or even moving out of their parents homes into rentals), it is impacting the birth rate, it limits the ability of people to open businesses or invest. We need a longterm solution to student debt, and that probably includes some amount of debt forgiveness for people who are already buried in debt, followed by rule changes to prevent people from ever getting this deep in debt to begin with.

-- Signed, someone who paid off 80k in student loans myself and does not oppose debt forgiveness for others because it's a smart policy decision and is not actually about personal fairness to me[/quote]

Except it’s not a smart policy decision, it disproportionate benefits the wealthiest 30 percent of the population, doesn’t solve the underlying issues, and is a stimulus/inflationary.

I agree these loans should be restructured/have interest rate lowered.  Time for supporters to stop waiting for the hand out and elect legislators who can get it done.[/quote]

PP here. I agree that the 10k cancellation across the board is weak and would also prefer to have loans restructured and interest rates lowered. I think one happy middle that would target the neediest borrowers would be to cap the total amount of interest people can pay on loans. I think the people who get deep in trouble are the ones who wind up paying small amounts for a long time and barely touch their principal. The companies that service student loans often push these long repayment plans with graduated payments (meaning your early payments are quite small and interest only) because it makes them a lot more money. And students often enter into these plans when they are right out of school and maybe still job hunting or making an entry level salary, so the idea of starting with a lower payment is really appealing.

If we capped the amount of total interest borrowers could be asked to pay on loans, then many people who are still in repayment would move to principal-only payments now, which would help them get out of debt faster while still repaying the money they borrowed. And it would also disincentivize lenders from pushing these long, graduated repayment plans. If they are going to get the same amount of interest either way, why not encourage borrowers to pay more up front?

The point is that it doesn't make sense to just focus on the behavior of borrowers, who are kids when they take out this money and often still very young and not very financially savvy when they go into repayment. There is a lot of shady and unhelpful behavior from lenders and loan services that is making this problem, much, much worse, and we need a way to address it. I think people who argue against loan forgiveness altogether don't understand how dysfunctional the student loan industry is.[/quote]

This is spot on. It's great that YOU were able to pay off your loans when you were paying 2-4% interest. It's a totally different ball game when you're paying 6-7% or more and making payments each month while barely touching the principal. Predatory, for-profit lenders are the problem, and reform should be focused on reforming the student loan industry.[/quote]

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