Eliminating Student Loan Debt

[DMDarcs]

Give me a reason that eliminating student loan debt, either partially or wholly, does not benefit society as a whole.

Challenge level: You can not use the following arguments -
(1) Others have already paid their loans back, so current debtors shouldn't be exempt.
(2) If you couldn't have afforded to pay back the loan, you shouldn't have gotten it in the first place.
(3) Not all professions require college education - you should have gone to a technical school.

[Phoebe]

Stop having babies you can't afford! Babies are only for the rich! Oh, wrong thread, sorry.

[Kyle]

It addresses a symptom and not a cause. You’re going to put a bandaid on a problem that is fundamentally flawed. Before you forgive student debt, you need to address why schools are (still currently) requiring people to incur six figure debts to get a professional degree. By forgiving student loans before addressing that problem only ensures that we’re going to have to face the same problem again in a few years.

That said, I think our student loan system is crooked. I think there does need to be debt relief. But we also need to fix the problem of why it costs $250,000 to become a doctor.

[Phoebe]

Counterpoint worth considering: Why shouldn't it cost that much, and what is the inherent problem with it costing that much? It's a year's salary for a non-specialist doctor, right?

However, I support at least some form of student loan relief so I'm just giving the counter argument here. One good reason not to forgive all the student loan debt is that we've got well over a trillion in outstanding student debt, so there might be better ways to spend that significant chunk of money, like emergency food and housing and medical assistance during the pandemic. This economic stimulus might have more direct impact on those in greatest need. On the other hand, most of that loan relief expense also would be a direct economic stimulus, so some of it is probably a good thing. The question then is how much. An average student debt is something like $25,000, but the average for those who are defaulting or currently at risk of defaulting is lower. So maybe we don't need the $50,000 people like Warren are talking about, and instead could give up to 10,000 and accomplish most of the goods while still rewarding those who diligently paid off their debt. The other really good way to do it would be to target forgiveness for people who still have loan debt but never finished college, because one of the worst problems is when students start but can't finish for various reasons, and they've already chained themselves financially to the loan and the tuition and all of it.

The other good thing is to do what they're doing in notoriously liberal places like Nebraska, where everyone who makes under the median income can go to the public universities for zero tuition.

[Kyle]

Counterpoint worth considering: Why shouldn't it cost that much, and what is the inherent problem with it costing that much? It's a year's salary for a non-specialist doctor, right?

I don’t think this is true. But what you’re saying is that we should only encourage people to be high paid specialists. Those aren’t the doctors most in need.

[Phoebe]

Granted, we could be more precise about all the amounts - 250k is probably high end both for the education costs and for the general practice salary. But why is it obviously bad that it costs this much, and how does this compel people to prefer specialties to general practice any more than the differences in what the job is like and what the salary is like already do?

Anyway, this isn't something I'm saying I want to see happen, as if seeking evidence that professional school costs are too high, while favoring modest loan forgiveness, entails that more students will be driven into less vital specializations. The students will choose their own paths for different reasons, and most of them will pay off their loans in a timely manner regardless. The most "bang for the buck" in terms of direct economic stimulus to those who need it most would come from loan forgiveness targeting students most at risk of default, who attended for-profit colleges or dropped out and never completed a degree. In those cases, a smaller amount still could have a beneficial impact both on quality of life and the economy in general. Or we could just have full public-option health coverage. We should buy at least one of these nice big economic gifts for ourselves, but here we are treading water in an ocean of people fixated on the damage being wrought by the green new deal, trans girls playing sports, and cancel culture - this unholy trinity of obviously urgent problems facing our society.

[WillyGilligan]

I'm not an economist, but in addition to Kyle's point about not fixing the actual problem, I think there will be knock-on effects that may wipe out the benefits. Everyone's debt is someone else's "investment". By wiping out this debt, you will immediately destroy wealth for a large chunk of the financial industry. This will spook the markets and cause them to retract in horror, which will shrink the economy overall in a time when covid has everyone reeling already.

If you, like me, think that this whole debt-based economy is mostly an immoral shell game, that may not move you. And in the long run, it may benefit society to give up the illusion of infinite growth that all of this debt has given us. But in the meantime, people are going to end up losing jobs and livelihoods over it. Which means they will not be able to pay their bills, which means someone else will not be able to pay theirs, etc.

I'm not sure why they're not pushing to make the debt dischargeable in bankruptcy. Not everyone with these debts is incapable of paying them. Taking away the special protection for student loans targets the assistance to the people with the actual problem (college promised employability that didn't happen) rather than be a handout to the middle class. It also shakes up the money train for the people behind these loans a little less catastrophically. Maybe someone is playing negotiation games and that is the eventual goal, but what do I know?

Either way it goes, we still have to look to the structure of college and debt marketing to teenagers to prevent future problems.

[Kyle]

I'm not an economist, but in addition to Kyle's point about not fixing the actual problem, I think there will be knock-on effects that may wipe out the benefits. Everyone's debt is someone else's "investment". By wiping out this debt, you will immediately destroy wealth for a large chunk of the financial industry. This will spook the markets and cause them to retract in horror, which will shrink the economy overall in a time when covid has everyone reeling already.

My understanding is that the talk of loan forgiveness is only for loans owned by the federal government, not private lenders. The feds own the majority of all student debt.

[FlameBlade]

And that's what I think is lost in conversations here.

[WillyGilligan]

I remember seeing something about private sector involvement making the student loan problem worse, but I'm probably misremembering/understanding. In that case, the issue would be that the federal government doesn't get money owed to them, worsening our budget shortfalls.

I see benefit to loan forgiveness, I don't have student loans, and I'm not emotionally invested in people being kept to the consequences of the dumb decisions they were pressured and marketed to accept. I just think it's good to remember that this is not free money.

[FlameBlade]

What budget shortfall? Nobody's talking about whether we can afford to spend on defense budget or bailing out corporations. But when it's people, bollocks to the sheets.

[Mike]

The previous administration spent 2 trillion dollars to ensure that Amazon and FedEx pay less in taxes than I do. I personally feel that the rich should pay a higher proportion of their wealth/income in taxes than the middle class, but even if they just paid the same as the middle class, it would be a great start to paying for extremely popular and much needed reforms.

We have fair sources of potential income. We just need the political will to utilize them.

[WillyGilligan]

What budget shortfall? Nobody's talking about whether we can afford to spend on defense budget or bailing out corporations. But when it's people, bollocks to the sheets.

Haven't you heard? Dems are in charge again, so the Repubs are on deficits like stink on rice.

The OP asked for an argument that wasn't emotional for why this wouldn't benefit society as a whole. That's what I have. It's a drop in the bucket compared to corporate welfare, or anything else you can mention, but it's still a deficit expense. Pointing out all of the other deficits we're running is a great argument against running those deficits, but not a good argument for why one more doesn't matter. But I think we're already at a place where if the world stopped using us as a reserve currency we would be so trashed that none of these individual items would matter, so why not?

[FlameBlade]

I will shift quickly to a much simpler argument. Loan burdens are disproportionately on people of color population because they do not have inheritance that white people commonly have. Forgiving the loan will give a lot of people of color some considerable newfound improvements to their wellbeing, and therefore will be able to focus on their career, their family's wellbeing.

Also, frequently, people of color have gotten worse terms of loan for whatever reasons, so all the more reason to forgive the loans.

[Kyle]

I also just think it's ridiculous that college costs this much. It's a way of limiting higher education to people who come from families with more money. As Flame points out, this disproportionately affects people of color. But just for my family- my daughter wants to be a doctor and, if she had her way, be a corner. That doesn't pay much. But it will cost a minimum of $250,000 for her to go to public schools to get her Bachelor and then medical degree. That's ridiculous for a job that starts out well below six figures, and even when you're well established isn't much above that.

[Stan]

But it will cost a minimum of $250,000 for her to go to public schools to get her Bachelor and then medical degree. That's ridiculous for a job that starts out well below six figures, and even when you're well established isn't much above that.

And then they have to offer special enticements to get doctors to go to low paying areas. Just try getting a psychiatrist appointment in most rural areas.

I think part of the issue is that there have been several times where the feds have backed off on subsidizing college and the states have not stepped in.

Here's a site with costs adjusted for inflation:
https://educationdata.org/average-cost-of-college/

Most colleges have also become increasingly top heavy. I work at a university and the number of administrative positions is insane. It seems like they announce a new type of dean every year or two - that dean has a six figure salary plus a team of support staff

[Tahlvin]

I actually looked into going to medical school at one point in the early 90's. At the time, one possible way to fund it was to apply to rural communities, who would pay for a student's medical school education in exchange for a commitment to practice in that community for a certain number of years after they complete their education. I had heard more than a few stories about communities that paid for someone's medical school training only for that person to drop out. As a result, I'm not sure whether that's still a common practice or not.

[Phoebe]

I'm somewhat confused about what the real problem is supposed to be. Is it that people have an enormous amount of student loan debt nowadays, which is creating other economic ripple effect problems and risks? If so, then we could choose to forgive some of this loan debt and thereby cause various economic benefits. So I took that to be the issue. After 4 years of the worst Secretary of Education we have ever had in this country - and I feel pretty confident saying that without even knowing in detail who all of them are, though I admit it's possible there's an even worse one tucked away somewhere in the past - we have done little to solve this problem, while supporting precisely the kinds of for-profit institutions that lead to a greater number of students with loan debt and the inability to pay it off. These institutions fund themselves on the backs of students taking out federal loans, but they don't deliver what the students need to move forward in life and pay off the loan. That's a big problem.

But if the issue is that university education is too expensive in general, that affects people whether or not they take out a loan, and the solution would be to reduce costs in some way. so in what way would we propose they are overpriced and what should be reduced? The causes are complicated and differ across institutions. It's not obviously a problem on the level of the student loan problem, is it? Some states have decided that low income people simply should not have to pay. Some have lower tuition so you can become a doctor without paying a quarter of a million dollars. In answer to Tahlvin, yes, they still have programs like that in at least some places, for both medicine and nursing, and for lawyers. I don't know about other professions. They also have some urban programs like that.

Either way, what's the evidence that higher education costs are excessive? Excessive compared to what standard? Why should a year of college not cost the same as a new car, or a C-section, or a week for two in a fancy Mexican villa? My college education cost more than a year of my annual salary and it was worth every penny. My spouse by contrast makes more in a year than it ever cost him to go through all of his many years of schooling, but I wouldn't say those schools were underpriced or overpriced compared to the ones I attended. We definitely got what we paid for and what we were looking for. Or to use Kyle's example, maybe they need to pay coroners more, and that's where the problem lies?

[Kyle]

I think the question should be answered in the reverse. We shouldn't be asking, why should it be cheaper? The right question is, why does it cost this much? Your question looks at what the value and expected return on investment is. My question asks what the costs are to justify a 1/4 million dollars for a degree.

[Tahlvin]

When you compare the cost of a college education today vs. the cost of the same education when I went in the late 80's/early 90's, it has far outstripped the pace of inflation during that same time period. A significant factor in that increase is the ready availability of government-backed loans.

Interestingly enough, there have been other areas where a similar type of thing has occurred. When working as an employee benefits analysis in the 90's, it was becoming common for employers to start looking at covering alternative benefits (acupuncture, massage therapy, etc.). I remember the consultant I worked for talking about how we would see the same thing happen with those services as had happened one to two decades earlier with dental costs when dental insurance became commonplace: prices would skyrocket because people want to use benefits they have available to them, but also because the administrative layer introduced by it being covered by insurance would hide the real cost of the service from the consumer: they only know what copay they have to pay per visit, and beyond that, they don't care because it's paid by the insurance company. So introduce dental insurance, and the inflation rate for dental services increases drastically; introduce insurance coverage for chiropractic care, and the inflation rate for chiro services increases drastically.

Not that student loans are exactly analogous to health insurance, but the idea is the same: a flood of guaranteed money was introduced, so the cost jumps onto a different inflationary track.

I'm sure there are people out there who can describe this much more eloquently than me. I'm just an actuary-turned-software-developer, who really wanted to be a fighter pilot, and briefly considered being a pediatrician.

[Tahlvin]

And for the record, I like the idea of forgiving up to $50,000 of student loan debt, but agree with Kyle that it doesn't address the underlying issue, that being the high cost of a college education.

[Kyle]

To what you’re saying, also captured in this inflation is education. I have a friend who is a chiropractor, as is his wife. They were both licensed about six to seven years ago. Each of them took almost $200,000 in debt for their degrees. They can’t even prescribe medicine. But as the practice became more lucrative, the cost of getting into the game became more expensive. I don’t want to be a cynical shit, but it’s a fixed game. For everyone. The way to become truly wealthy is to be born into it. The system is set up to largely prevent anyone else access.

[Phoebe]

I'm not sure I follow - is the idea that as the chiropractors were able to make more money from their practices, the cost of being educated for that practice also rose, in a manner that did not correspond tightly enough to the increases in the actual cost of educating chiropractors? I guess I would need evidence that it could/should have been done more inexpensively. I don't know much about chiropractor postgrad education - all I know is that there are a few "legit" schools where this training occurs, and I don't know how their costs have risen over the years relative to salaries.

I do know, however, that it costs a half a million for a school to have an IRB board alone. Just to run an IRB board, which is necessary at any medical school and doesn't generate income to pay for itself, by its nature. I also know that it costs over 3 million dollars per year to run a surgical simulation program, which also doesn't generate its own income in the way e.g. an epidemiology program might raise money from tuition and research grants. This type of simulation technology didn't always exist, so maybe people could consider how necessary it is and whether it needs to cost that much, but if you want to have one, you need lots of students paying full tuition to cover that cost each year. This is before we even reach to items that cost the most, like faculty salaries, which at a med school obviously have to compete with other employment opportunities for very well-paid doctors, and have to increase in the budget due to the ever-expanding cost of health insurance even when there is no increase in the take-home pay.

One solution to this problem is to admit more students! Bring in more tuition. Ask the well-paid faculty to contribute more of their own salaries in research grants. However, whether those grants are forthcoming depends on the government and private philanthropy. Whether more students can come in depends a great deal on the profession itself. If doctors wanted to generate more doctors to deal with the shortage of doctors, they could do that, but at the cost of decreasing demand and pay for themselves. So the shortages and high costs are a complex causal web - I don't know how to solve that one myself but it's difficult to pick one factor from among the many and decide that it's the source of the problem: high tuition. As I say above, if we wanted low-income and first generation students to have access to those things, we would simply choose to grant them access. Some schools have massive endowments and choose to do this, like the college I went to that decided to let students with financial need wipe out most of their loan award in favor of direct grants from the school. Others choose not to do it - they gatekeep. Some large public institutions cannot break free enough from their controlling state governments to do this, or are too underfunded to do it. Occasionally you get a situation where a university is so systematically starved of funding that it is forced to fend for itself - and if costs are low enough and private support is high enough, the school can then unilaterally decide to do away with tuition for most everyone who qualifies for grant aid, whether the state legislature and Governor like the idea of helping regular people or not. It takes leadership; it takes freedom from politicians who think universities go hand in hand with journalists as enemies of das volk.

So ultimately I'm saying yes, I agree, the system is rigged in favor of those with the resources, but the usual suspects are the ones doing the rigging and not e.g. the medical school that costs $25k a year including room and board and fees and books, a price tag that actually doesn't seem high to me at all compared to what other things cost in our society.

[Kyle]

I get it and I get why you're defending the institution. I just disagree.

[Phoebe]

If you knew a relatively well-to-do person who still had some remnants of student loan, perhaps it would make sense for that person (not me! mine were paid off decades ago because my depression-era trainers raised me to live as cheaply as humanly possible on cottage cheese, eggs, lettuce, and furnishings fashioned from cardboard boxes!) to hold off on repaying their loans in case forgiveness doesn't come with a means test. They really need to add a means test to this plan.

[bralbovsky]

The economy is so complex, and so broken, that it's become a huge Byzantine house of cards.
Just as with any illness, there are symptoms to deal with, which are killing you. There are also structural issues which have to be changed.
Having a student loan is a little like having early lung cancer. You may not survive, and it will definitely force adjustments, but your parents smoked (had no money, but had desires for you to go to college) and the magnetic pull of advertising was too strong to resist.
Symptomatically, you need surgery, or chemo, or radiation, depending on how bad it is.
Blanket forgiveness of a huge amount would be great. A little will do a little good..... For the most part, it would be a stimulating force. Right now, rafts of millennials are postponing kids, marriage, homeownership, which is having a dampening effect on the economy/culture as a whole. They're mostly postponing these things for financial reasons. My daughter is a third year pediatric resident in California. She owes 1/4 million dollars. She will not make that much per year; she certainly won't clear that much. Even in California. My son and his wife (He's 31) Have cleared their loans, but both of them are budget analysts, so they have knowledge assets well above average. Even with their superior management skills, they found it difficult. He had trouble getting decent work at the beginning. They waited to have their first kid (she's two). They tell me they are way ahead of all of their peers.
Having said that, it's tricky. Any means test builds resentment (a better choice would be t make the forgiveness taxable, so those with low incomes would keep it all, and folks who didn't really need it would give some back) What about all the very useful people who just finished paying? I don't have a creative solution to this.

This doesn't address the waves of advertising to sell cigarettes to vulnerable populations. It doesn't address how expensive cigarettes are. Should a science education cost more than an arts education? Should we evaluate institutions based on how they spend (like charities)? Part of the problem is the "ratings." If you want your school to be higher on Barrons list, one way to do it is to charge more. Ya. And yes, like insurance, availability of money makes things more expensive.
This is too long already, but I'll suggest this: Specifically, there could be more medical students if we used the VA hospitals appropriately. Income inequality, in general, is a cancer. Money flows out of the general system like nutrition to a tumor, and it only pretends to be productive. As it gets worse, I'm seriously considering starting the Eat The Rich party. I think it would get traction.

[Phoebe]

"better choice would be t make the forgiveness taxable"
Yes, done, solved! Please send your plan to Congress.

At some places it does already cost more to get a science education or more to the point, a business or computer science degree, relative to other 4-year degrees. Differential tuition doesn't occur everywhere but it's an idea that spread like wildfire among institutions of a certain class. The sad thing is that majors with a proven track record of graduates performing better in the business environment, not to mention better on the entrance exams for an MBA, are cheaper but completely devalued by actual chamber of commerce businesses when it comes to hiring and job fairs and such. From my perspective, that's a much bigger problem than tuition costs. Spend four years training people to do PowerPoint presentations and not to write or examine anything critically, and you're going to get the product you asked for.

My husband and I are having a major clash of values over this at the moment. His theory, not wrong from his perspective, is that if you want to be a doctor, get thru undergrad as cheaply as you can because it doesn't matter like the med degree will. My theory, equally true from a different set of values, is that we go to college to learn in manner that shapes the whole life, which is what (along with comfort in old age and illness, and Travel) surplus wealth is FOR. It's one of the few reasons not to give away all your money. Neither is right or wrong here so it's not a Fight, but it is a serious value difference that bubbles up rarely.