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[quote=Anonymous]There are a lot of issues with student loans, and we have to resist two urges - the first is the knee jerk reaction, “all debts have to be paid! You signed up for this!” And “students are special! Look at farmers, oil, pharma, ppp loans, it’s not fair!”

1. Student debt is the second highest consumer debt held in the U.S. (mortgage is number one. It is not like mortgage or car debt because it is unsecured. No one is going to let you borrow $10 million to buy a house worth $2 million. But you can absolutely borrow $500k to complete a PhD in Nordic basketweaving.

2. Interest rates for student loans are typically higher than 30 year fixed mortgage rates. The government sets student loan rates based on 10 year treasuries, while mortgage rates move around more. You can refinance your mortgage, but if you refinance your student debt, you can lose your right of forbearance and deferral. Also student loan debt is not easily discharged in bankruptcy as is mortgage debt.

3. Mortgage companies do not allow your loan to increase, but student loans can increase because of lower payments and deferrals

4. 20% of student loans holders went to for-profit schools, which are notorious for pushing students to borrow more. Half of those borrowers will default.

5. The student debt burden is hurting the economy in a broad sense. The $1.7 trillion debt prevents borrowers from buying a home, buying a car, starting a family, starting a business etc. That hurts the borrowers, but it also hurts the rest of us as well since they are not able to spend.

6. Many of the borrowers will default anyway, and since most of the debt is held by a single entity, it is easier to forgive. What’s the difference between letting people default vs forgiving debt if the U.S. never gets their money back either way? If debt is forgiven, the borrower can contribute more to the economy by buying a condo, going on vacation, having a kid, etc. And yes, it’s not fair that some people get debts forgiven, but in the big picture, we need more people involved in the economy, and encouraging 10 million borrowers, who are currently delinquent, to enter the economy would be helpful.

Should people pay their debts? Yes. Were students allowed to borrow more than they should have? Yes. Is all the debt hurting the economy? Yes. Will a lot of the debt never be paid back anyway? Yes. So, what to do?

I am ok with forgiving debt as long as the student loan industry is changed. It’s just untenable for students to be encouraged and allowed to borrow unlimited amounts of money when there is no consideration of their future income. Maybe the answer is to give it back to the private sector. Private student loans are predatory and will discourage students from borrowing. Maybe the answer is to cap loans at the in state tuition level. Maybe the answer is to index different majors and areas of study and cap loans by what you will study. Maybe the answer is to make community college and trade school free to all to discourage loans. And don’t get me started on how colleges have seen student loans as permission to send their tuition soaring. It’s a house of cards. [/quote]

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