Are Federal Student Loans Even “Loans?” From Forbearance to Forgiveness to Taxpayer Expense. Fairer: Allow Bankruptcy

The educational-industrial complex is laughing all the way to the bank.

By Wolf Richter for WOLF STREET.

One person’s loan is another person’s asset. If the loan is canceled, the asset is destroyed. That’s how it is.

No one is making payments on government-backed student loans anymore, after two years of forever-forbearance, countless campaign promises of forgiveness, various targeted forgiveness programs already in effect, and now the biggie, the general forgiveness program being hashed out.

Total student loans outstanding, assuming they’re even still “loans,” remained at $1.59 trillion in Q2 compared to Q1, according to the New York Fed’s Household Debt and Credit Report. They have been relatively stable since the Q1 2020, as new loans were being added, while practically no one made payments, and as the numerous forgiveness programs are whittling down the tally from the other side.

Federal student loans.

Federal student loans account for about $1.3 trillion of this $1.59 trillion in total student loans, according to a separate report from the New York Fed. The remainder are Family Federal Education Loans (FFEL) owned by commercial banks, and private loans.

It’s the $1.3 trillion in federal loans that were all moved into forever-forbearance in the spring of 2020, and that are now up for forgiveness.

The median balance of federal student loans is $18,773 – meaning half of the federal student loans balances are lower than $18,773, and half are higher.

The outliers everyone is talking about, the $150,000 and $200,000 loan balances, were accrued by a small percentage of borrowers going to law school, medical school, etc., most of whom are now in high-paying careers and don’t need loan-forgiveness at all.

Forever-forbearance “solved” delinquencies.

The amount of student loans that were 30 days or more delinquent plunged from the official 9.4% of total balances before the pandemic to just 1%.

For federal student loans, the delinquency rate is 0%. All of them were automatically enrolled in forbearance programs in the spring of 2020, which have been renewed over and over again and are still in effect. When a loan is moved into forbearance, it is reclassified as “current,” not “delinquent,” regardless of payment status.

FEEL and private student loans, which were not enrolled in forbearance programs, accounted for all the delinquent loans.

Student-loan forgiveness and cancellation.

In addition to the list of existing student loan forgiveness programs – Public Service Loan Forgiveness, Teacher Loan Forgiveness, Closed School Discharge, and others – there is now the forgiveness when students feel that the educational-industrial complex screwed them.

So just on Thursday, a federal judge granted preliminary approval of a settlement that would cancel $6 billion in student loans of over 200,000 students who claimed they were defrauded at 153 mostly for-profit colleges.

Few of those schools have been held to account. So it’s the taxpayers that will pay the $6 billion, not the educational-industrial complex that got the $6 billion over the years, laughing all the way to the bank.

And the biggie, a general forgiveness program is currently being hashed out by the administration. The proposal started out with $10,000 in forgiveness per borrower. But this stinginess of the taxpayers is leaving a lot of voters deeply frustrated, and the anger is boiling over, putting politicians under pressure to buy more votes, or re-buy the same votes, by raising the forgiveness amount to $50,000, maybe with income caps.

Next, auto-loan forgiveness… Just kidding, kind of.

The average transaction price of new vehicles is nearly $46,000, and the average advertised price of used vehicles is $28,000.

By comparison the median government-backed student loan is $18,773. Just another consumer loan. It’s not the end of the world having to make a $200 payment every month for 10 years – and wage increases and inflation over 10 years will reduce that burden.

And if people cannot even make a $200-payment, they cannot make a $400-payment or $800-payment on an auto loan either. So when are we going to buy votes with promises of auto-loan forgiveness?

It’s unfair that people who bought a car because they need to drive to work would be forced to pay off those loans. We need to have general auto-loan forgiveness. The government could just buy up all the auto loans outstanding and then forgive them, up to $50,000 each, maybe with some income caps, such as $250,000 per individual and $500,000 per married couple filing jointly.

Think of it this way: It would be a huge boost for the economy because, instead of making car payments, those folks could then blow their money on other stuff.

It’s not fair, but fairness has nothing to do with it.

The government (taxpayers) funded these student loans by borrowing in the Treasury bond market. It then handed this borrowed money to the educational-industrial complex via the students, expecting to get paid back most of the money, plus interest, by the borrowers after they start working. Their payments would have helped the government service the debts that it incurred to fund the student loans. But that’s over. Going forward, the taxpayer pays off the loan of the borrower.

In other words, the waiter that would have liked to go to college but couldn’t afford to now has to pay off the student loans of software engineers that did go to college. It’s not fair, but fairness has nothing to do with it. This is about vote buying. And they’re hoping the waiter cannot figure this out.

Allow bankruptcy courts to decide what gets discharged and how much borrowers have to pay every month.

Borrowers currently cannot get their student loans discharged in the bankruptcy court system. But they found something much more appealing in order to get rid of their debts: Politicians eager to buy votes with other people’s money, namely with taxpayer money.

But that doesn’t need to be that way. These same politicians could change the law to allow student loans to be discharged in bankruptcy courts.

So it would be a judge that decides how much that coder with a degree from Stanford can pay every month for the next 10 years, and how much that teacher with a degree from OSU can pay every month. And the judge can then discharge the rest that cannot be paid. Personal bankruptcy has worked that way since the Bankruptcy Reform Act of 2005. In personal bankruptcy filings, people cannot just walk away from all their debts.

Student-loan borrowers would then think about whether to tough it out and make the payments; or file for bankruptcy, get the blemish on the credit report, get part of the student loans forgiven, if any, and make payments under a court order for many years.

This system is already in place for personal bankruptcies. It’s not perfect, but it’s functional. And it would provide relief to borrowers who really cannot pay. And it would be a lot fairer to everyone around, including the waiter that couldn’t afford to go to college and doesn’t really want to pay off the student loans that other people had incurred getting their degrees.

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  271 comments for “Are Federal Student Loans Even “Loans?” From Forbearance to Forgiveness to Taxpayer Expense. Fairer: Allow Bankruptcy

  1. SpencerG says:

    I agree that Wolf’s waymakes a lot more sense… but the same politicians who authorized this student loan debacle in the first place don’t want to force student borrowers to take responsibility in Bankruptcy court.

    It didn’t have to be this way. Twelve years ago the Obama Administration promised that taxpayers would SAVE $68 billion over the next decade by having the government hand out student loans rather than having banks and other third-party lenders do it. “Cut out the middle man” and the government could pocket the interest (and savings) and thus borrowing would be cheaper. Cynics warned at the time that the government is GREAT at handing out money… not so great at collecting it when the bill comes due.

    Now the nation is being gaslighted into paying the piper. This isn’t the average taxpayer’s fault… it is the fault of politicians who knew EXACTLY what kind of monster they were creating.

    • drifterprof says:

      I doubt that blanket forgiving of student loans was even in the imagination of the most nanny-state politicians 12 years ago.

      I agree with Wolf – the blanket forgiving of student loads is bare-faced buying of votes by shameless politicians. This is done by all major parties. The nanny-staters are all wheeeee, what a great opportunity!

      Any blanket forgiving over median loan, like other gross disgusting vote-buying issues, loses my vote for all non-objecting candidates in the party responsible, probably for many years.

      • Winston says:

        “the blanket forgiving of student loads is bare-faced buying of votes by shameless politicians”

        So what’s new?

        “The main thing that every political campaign in the United States demonstrates is that the politicians of all parties, despite their superficial enmities, are really members of one great brotherhood. Their principal, and indeed their sole, object is to collar public office, with all the privileges and profits that go therewith. They achieve this collaring by buying votes with other people’s money. No professional politician is ever actually in favor of public economy. It is his implacable enemy, and he knows it.” – H. L. Mencken

        So, whenever pols graciously promise to cut your taxes or provide you with more “free” services or provide “relief” handouts, they’re effectively buying your vote with your own money or with new debt effectively put on YOUR tab.

        • SS says:

          Didn’t Wolf not point out that most mortgages today are backed by government aka tax payers. So when Fed raises rates and house prices correct and people handover their houses in no-recourse states, what choices will fed/government have? See what I did there.

          Mortgage balances are way higher than other loans. Ready for MMT!

        • Wolf Richter says:

          SS,

          HUGE difference.

          Student loans are “unsecured” loans.

          Mortgages are “secured” by collateral, the house. If you default on the loan, you lose the property, even with a non-recourse mortgage.

          The lender with a non-recourse mortgage still gets the collateral (the house) if you default, and gets to sell it in a foreclosure sale, but if the sales proceeds are smaller than the loan value, the lender cannot get a deficiency judgment and go after your other assets and income.

          With a recourse mortgage, the lender gets the house, PLUS they can go after your other assets and income for the deficiency.

          But in both cases do you lose the house.

        • El Katz says:

          SS:

          But the key difference is that there is a physical asset in your example of the mortgage. A house can be sold and some financial recovery made.

          You can’t repossess an education. Well you can, but it’s rather gory.

        • joedidee says:

          TIME TO END ALL STUDENT LOANS

          see solved it
          and for those we’ll forgive – make sure IRS(got 87,000 new employees)
          gives 1099-C cancelled debt = INCOME to receipient

        • Shiloh1 says:

          Going to McDonalds and buying food there with a credit card is non-recourse and non-collateralized too, unless Jamie Dimon wants to pump out my septic tank the next day.

        • SS says:

          In the scenario where house prices correct or even go sideways, the house ceases to be an asset. Will you really like a zero liquidity collateral that requires you to pay utilities bill, trim grass, repair roof, monitor and fix plumbing, provide security……

          If house was really an asset, why did govt need to bailout so many lenders in 2008.

        • gametv says:

          I would be willing to bet money that alot of these people who cannot afford to repay their student loans have very nice $1000 iphones that they buy every 2-3 years.

          Government largesse that distorts market dynamics is the largest problem in the United States. Housing prices too high for first time buyers? Blame the government. The government has put the taxpayer at risk for default on home loans and driven interest rates to lows that would have never existed if banks retained the exposure for home loans. Home prices would be a fraction of what they are today if not for the governemnt. Cost of college too high? Blame the government. Piles of free money has allowed colleges to raise prices massively with absolutely no pushback from the population. And this has created a higher education system that is affordable only for the rich and the poor (via need-based scholarship). It has also bred a whole industry of for-profit education that provides little value to the students. Healthcare costs out of whack? The government has refused to crack down on a healthcare industry that is basically a complete fraud. Hospital bills are a cruel joke, driving many people into bankruptcy. And then there is the military-industrial complex, where the revolving door of top military brass into the private sector after retiring is a gravy train that perpetuates a lack of accountablity in pricing for military systems. Financiers that combine companies until there is no competition and ship jobs oversees, while rewarding CEOs at a rate that is absurd, compared to the average salary of an employee. Zero government enforcement of insider trading, anti-trust laws, etc. A legal system that is designed to generate fees for lawyers, not justice or efficiency for the people.

          Our private companies are NOT the problem. We have many of the best companies in the world. But our lack of effective government is rotting away the core of this free enterprise, competitive system that has produced great companies.

          Our government has become a massive leech. When do people realize that the core of this problem comes down to BOTH the republican and democratic parties?

          If you are a died-in-the-wool advocate of either party, you are delusional and YOU ARE THE PROBLEM. Both parties are dominated by special interest parties and are virtually indistiguishable in terms of the money the accept from these special interests.

        • LK says:

          Now do Katie Porter.

        • El Katz says:

          SS:

          The house is still an asset… even if underwater. Even if it’s a smoking hole in the ground, the land still has some value.

          IMHO, the student loans should be repaid via payroll deduction. Once the ex student debtor attains a certain level of income, it comes off the top. Hard stop.

          That’s the purpose of pursuing an education – to improve your lot in life and improve your chances of earning a higher than average income. Why should they be able to dump the loans for the education that worked to their advantage on others?

      • historicus says:

        The very first thing Obama went after when first elected was federalizing student loans.

        • Wolf Richter says:

          It did save a lot in fees. If he hadn’t, the discussion would now be how to forgive the student loans while bailing out those private investors that are holding those student loans and got rich off fees and interest.

        • phillip jeffreys says:

          hmmmm….no matter how one cuts it – it all reads like burden shifting to me. As someone who actually paid for his kid’s college education – the insult only intensifies the anger. This, in the end, is no different from all the federal enticements used to snare illegal aliens.

        • gametv says:

          Wolf makes a good point here. The only thing worse than an inefficient government bureaucracy is when governments try to fund private enterprise and completely distort the normal economics of truly free markets. That leads to massive profits for a small group of people. Businesses know that the most profitable customers is the US government.

          Government’s primary role in private enterprise, and our economy, should be to establish laws and enforce them. Anti-monopoly laws, tax policies that reward production of value, rule of law, enforcement of contracts, etc.

          Government should do alot less, but do it well.

        • LK says:

          I probably benefitted by those student loan changes, and the first thing I did was pay off my loans.

          If people make different decisions, thry should be held to them. That isn’t to day an absolute judgment should be made given systemic factors and personal circumstances, but I’m not a fan of doing forgiveness and the unintended or unknown consequences of doing so.

      • George says:

        “the blanket forgiving of student loads is bare-faced buying of votes by shameless politicians. This is done by all major parties.”

        What Republican is advocating the forgiveness of student loans?

        • Gattopardo says:

          None I know of, but you missed the point. The Repubs have their own set of votes they buy.

    • james says:

      Finally, finally, finally! Someone admits that this fiasco was created in 2005 when Bush removed student loans from the bankruptcy code. Student loans exist in an illegal credit market – a sort of debtor’s prison – that benefits banks, higher education, and all economic functions in between.

      That being said, the government will never allow these loans back into the bankruptcy code, nor will they be forgiven. A massive college town bubble is reliant on this forced, and unending slavery of the youth. Think about the towns, cities, regions and people that benefit from student loans – professors, shop owners, apparel manufacturers, construction companies….it goes on and on. All on the back of America’s “future.”

      • Tom S. says:

        Rising rates will cool it all down. Not sure what the lenders expected charging 6% rates to people while a 5 year bond was at <2%. How many recent grads want to make minimum payments and see the balance due creep up because of that usury?

        I was one of those people who got my mechanical engineering degree and got out of college in 2013 to a competitive labor market. Eventually got a job and saved up to pay off my loans before buying a car. Would be nice if I got a thank you check from the Federal govt for being responsible if they go ahead and forgive $10,000 for everybody. Would go a long way towards a downpayment on one of these overpriced houses around here.

      • JimmyCricket says:

        Bush?

        The Senator that proposed these changes is now President.

        Trying to rewrite history to favour your political party?

    • Citizen says:

      I think there is a much better solution to all this – cut the interest rate to ZERO!

      This way we don’t have to bail them out but they do get a break from the government. It’s really a crime anyway that corporate borrowing is at a quarter percent and mortgages were 3 and yet student loans that the government makes money from are 6-8% (I’ve heard,not sure exactly).

      I don’t see why student loans should be something the government makes money in, why aren’t they just set st the fed funds rate?!

  2. Joe in LA says:

    Americans were hell-bent on preventing borrowers from declaring bankruptcy to discharge their student loans. Biden even wrote that change to bankruptcy law.

    This crushed ordinary people who’d run into real misfortune, like loss of employment for health reasons. It was a dumb and cruel policy.

    “Personal responsibility” bro.

    Now nobody is paying anything and Americans are on the hook for ALL of the loans, including the ones that were otherwise good.

    This is a nation of people too pissed off to even think straight.

    • El Katz says:

      IMHO, the change to the bankruptcy law was using the same paint brush on all borrowers. IIRC, the reason was that high income earners (doctors, lawyers, etc.) that had extreme loan balances would BK, get them discharged, and then go about their business earning their high income.

      Sadly, the student who got a degree in education got splattered in the process.

      • joedidee says:

        but the history and psyc majors all got jobs as baristas

      • Flea says:

        Construction company in my area filed bankruptcy 3 times needless to say ,he’s well off .Biggest scam in the world

        • Wolf Richter says:

          That wasn’t a personal bankruptcy. His COMPANY filed for bankruptcy. The bankruptcies discussed here are personal bankruptcies.

        • gametv says:

          Actually, the ability to file for bankruptcy is an important part of our system. It allows people to recover from mistakes. If you have no bankruptcies, you will create a risk-adverse business climate and lock productive people into a business or job where their skills are not well utilized.

          The ability to take chances and then try again at something else is very important. Anyone who loans money out understands the risks and it is part of the equation in lending institutions. If people are still lending to this guy, that is their problem.

        • Apple says:

          Perhaps the answer is for students to incorporate and then the student loans made to the new corporation.

        • LK says:

          Creditors would rather get something than nothing, particularly if a firm is otherwise solvent but is overburdened with debt. You can’t be reductionist with bankruptcy or treat it as a purely moral issue.

      • Tom Jones says:

        The loans (especially for those whose education did not result in appropriate employment) should be paid in part by the lucrative institutions from where the students graduated. Many universities/colleges sit on properties worth hundreds of millions, and have endowments in billions, yet pay no taxes, and offer degrees in non employable areas of study. The other culprit is employers who require educational levels far in excess of job needs, just because they can. Lastly, “on-going education” requirements in many occupations is yet another education racket.

        • Petunia says:

          Women are the biggest victims of licensing and excessive education requirements. In Louisiana you need 1500 hours of instruction to braid hair. This particular regulation hurts black women there the most. They could make a good living if the govt just left them alone.

        • Petunia says:

          Also, I was an applied math major. I would gladly have volunteered to teach kids the math skills they badly need in American schools. To do this, I need the equivalent to an MA in education. This is just nuts.

        • Lily Von Schtupp says:

          NYS now requires BSN in 10. Can barely afford to live here as an RN, but yeah cool make em pay for 3 1/2 more years of school (an ADN really takes about 3 years worth of classes including summers contrary to popular belief) while working a stressful job many women take for the shift work around childcare.

          Many employers cover a fraction of the tuition, but others don’t, science credits ‘expire’ and schools get conveniently selective what credits transfer. Empire wanted me to take 3 semesters worth of crap gen eds despite having over 115 credits under my belt due to selective transfer credit acceptance. No.

          The job market is crap if you don’t pay through the nose to stockpile letters after your name that you then have to keep paying in license fees, mandatory courses and CEUs to maintain credentials. Plenty of other professions out there with less cost and liability. And good luck getting your loans forgiven, so many employers are for profit and the ones that aren’t are in higher stress/liability environments. I checked out Biden’s revised PSLF program, over 15 years in healthcare and I might have 2 years that count toward PSLF. Gee whiz. Its all a joke. I’m still deciding on my next career but until ‘they’ straighten out the obscene cost and piss poor value of education, I am done paying for more college.

        • Alicia says:

          The student loan program was destined to fail from the start. Loan amounts and subsidized vs unsubsidized are usually based on the parent’s income despite the fact the student is obligated to pay these back. Subsidized vs unsubsidized makes a huge difference in the loan balance upon graduation and the parent’s income threshold for determination isn’t all that high. Also, the risks assumed by the lender(s) is erroneous at best, there is NO bank or financial entity that would ever lend this kind of money to an 18 yr old with NO credit, NO income, NO collateral and therefore NO guaranteed repayment! Furthermore, there’s no guarantee the student will finish college or be able to secure employment with an income to support repayment. The entire program is a debt scam and the anger should be directed at those responsible for implementing such a disastrous program, not towards the borrower, most of whom were 18 yrs old at the time of borrowing and likely had a very limited understanding of the commitment. Perhaps a class educating students on exactly how the program works should be required before loans are issued considering the extreme risks for the lender (tax payer) with this type of borrower. Ideally, they should put an end to the program!

        • Citizen says:

          Yes! Aside from cutting the rate to zero or the fed funds rate I do think it would be great if the institutions were somehow on the hook a little bit. Their salaries and endowments are absurd just like the tuition.

          Truly I wish the government would make very good state schools with only good, functional classrooms, that’s it! Then they can pay great teachers good salaries and the private ones can compete w that!

      • RepubAnon says:

        It was the myth of freshly-minted doctors declaring bankruptcy to escape their loans that pro-lender politicians used to sell the idea of making student loans non-dischargeable in bankruptcy.

        Not all people who graduate from law school / med school, etc. get high-paying jobs. Many law school graduates in particular find that the dream of a high-paying job runs into the rocks of the current job market.

        Suggestion: more public funding for public junior colleges, colleges and universities. This way, tuition stays low, college administrators would no longer get multi-million dollar salaries – and students won’t need to take out excessive loans to learn the skills needed in today’s workplaces.

        If they want to pay. for a high-tuition school, they can – but they’re no longer forced to do so from a lack of under-supported public schools.

        • phillip jeffreys says:

          Higher taxes is your answer?

          More gov’t control over an already corrupt public education system that is responsible for declining metrics in many key categories?

        • El Katz says:

          Abolish college sports beyond tiddly-winks competition. No stadium that is more than some wood bleachers and a lawn. When you have college coaches making a million bucks, something is perverted.

          Just drive through Texas just once. There’s high school stadiums that rival some colleges. It’s just stupid. “I can’t add nor read, but I can chase a ball…. if only I could remember what kind it is.”

    • Gomp says:

      For every loan I’ve ever received, I’ve had to demonstrate the ability to pay it back. That provision doesn’t exist in Student Loans.

  3. Gary Kuhn says:

    “Loans” move money from one account to another, like from your mother’s purse to your wallet.

    “Credits” create money in an account without removing any money from another account. Creating such money is an advantage of fiat currency.

    Under “fractional reserve”, some fraction of the value of a credit has to be assigned or “committed” from the creditor’s assets. This requirement puts an asset-based limit on how much crediting a creditor can do.

    If only 5% of a credit is backed by creditor assets (typical for a non-systemic bank), and a nominal interest rate of 3% is charged:
    — 95% of the capital paid by the creditee is a gift to the
    creditor, 5% releases the committment on the creditor’s
    asset; and
    — 20 times 5% i.e. 100% of the committed amount is the
    true interest rate.

    Federal-backed student “loans” are credits. As the article suggests, the system is a gift from poor students to people who have assets.

    • Wolf Richter says:

      Nonsense. A loan requires that the principal — the amount owed — is paid back, not just the interest that is supposed to compensate the lender for risk and inflation.

  4. Common Man says:

    At the beginning of the pandemic, I had a small sudent loan balance of $2,500. I decided to keep on paying $100 a month towards it, even though it was in forebearance, and now it is paid off.

    I know a coworker of mine who has a student loan, and she stopped making payments on it during the pandemic because that would be stupid, since Uncle Sam would probably just forgive it anyway. Even though she could not “afford” paying her student loan, she could still afford taking airline trips down to Florida to go to Universal Studios and Disney World. No worries–just send the bill to the taxpayers, I suppose.

  5. Evan says:

    Wolf, stuff like this is what leads me to believe you’ve really lost the script.
    Next you’re going to be asking “is federal debt really debt?”

    There’s obviously a difference between a private loan (like a car) and a public “loan” (like the Covid PPP) and there always has been. It’s not like the government needed any revenue to go about printing the money in the first place, and they only need the taxes to make the currency scarce. In the case of federally backed loans, they might as well have been a grant with a perpetual tax penalty attached to them. You can even look back through the history of these things to realize the people negotiating these legislative programs were always moralizing about how poor kids from poor families might not deserve to go to an expensive school, and that there needs to be program of debt peonage to discipline them, lest it all goes running amok. So then naturally, as the only way America knows how, they outsourced everything to privatized companies, with little accountability, to skim off the top of every student trying to pay what was owed to the state.

    It doesn’t take an intellectual to check how other countries handle this stuff. Clearly many of the other first world countries have figured out how to treat this stuff like a public service and infrastructure project. Even in Germany where upper education is already heavily subsidized, and they have a federal credit program for students, with the stipulation that half the loan can be expunged upon completion of the degree.

    In a world where the economy either runs on debt or taxes, Americans choose debt every time.

    • Wolf Richter says:

      The is a lot of financial aid for students in the US that is based on “grants” (among other financial aid, such as tuition and housing programs). Grants don’t have to be paid back. And the amounts are huge. Grants come from various sources, including federal. Why do people always confuse grants and loans?

  6. VegLuv says:

    I normally love your analysis, but I think you are missing the bigger picture. Which is about the interest rates being charged. Those Federal loan interest rates are typically 6%. Forgiveness or no forgiveness, I hope those politicians buy votes by reducing the interest rates lower, as it IS in ‘Murica’s interest to educate its population.

    Why aren’t those loans interest rates tied to the CPI?

    No financial leech should profit on an inherently government function.

    • Wolf Richter says:

      “Why aren’t those loans interest rates tied to the CPI?”

      CPI = 9.1% now. Let’s sock it to them just when they can least afford it because inflation is already eating their lunch?

      6% is pretty good for an unsecured loan, such as as student loan. And student loans have the worst default rates of all loans, and interest should reflect the risk at least to some extent.

      • Steve Letro says:

        HEAL loans for medical school 1982 to 1986 were 18%.

      • LK says:

        I got away with 3% – 4% on my loans, but that was during preak ZIRP.

        • Tankster says:

          In ‘78-81 I borrowed $18k to go to law school. Wachovia serviced the loan. I paid off every cent @ I dunno 6% and Uncle Sam has made a fortune in taxes. I reckon I’m a dinosaur.

  7. Rando says:

    While this article makes excellent points about student loan debt and who’s actually paying for them, it ignores the larger problem of, why is secondary education in the US so expensive? We went from a public funded state and federal secondary school program where you could literally pay for school while going to it off of a part time job to requiring kids who know very little about themselves to intelligently mortgage their future so they can go learn a skill or trade? The corruption in these schools directly feeds athletics, a multi billion dollar a year industry is supported by students who are supported by government debt which is paid for by taxpayers. There’s your problem, not the kids being given a decision between working crap jobs or mortgaging their future to hopefully make a better life.

    • Ed H says:

      College athletics are the de facto minor leagues for professional sports, especially football and basketball. College administration has grown and grown with no end in site. Colleges can charge what ever the market will bear (and more) because they have no skin in the loan game. Many colleges will let a warm body attend if it has an approved loan. No longer is a good SAT score needed, just 98.6.

    • Mnjoe says:

      I agree. Cost is ridiculous. 600 kids in an Econ 101 class each paying 2800 for 4 credit hours is 1.68 million dollars. Having paid my student loans and saved and invested to put 2 kids through college, I will be making my position on this heard by my politicians. I love the bankruptcy idea. Is it even legal for the federal government to forgive these loans?

      • Apple says:

        To attend Univ of Chicago Law School, you will need to pay $108,063 for the 22-23 school year.

    • JohnnySacks says:

      Good point, we all hear about student loan forgiveness, but if you’re doing it to right some sort of wrong (and coincidentally buy votes), then you had better have a plan to prevent the same problem from recurring. I see no solutions proposed as loudly as forgiveness. Can’t even make a dent in the usurious interest rates. And even if rates could be lowered, the schools would just raise their tuitions accordingly. It’s so typical American grift.

      • 2banana says:

        Solution.

        No more government backed student loans.

        Universities can now make those loans. Maybe out of their billions in endowments.

        And they can be discharged in bankruptcy.

        And, almost overnight, affordable universities…

        Government isn’t the solution. It’s the problem.

        • perpetual perp says:

          Typical libertarian BS, blaming any problem on the government. The reality is Congress can outspend any industry, any private economy, anytime it wants. That’s why when libertarian ideologies crater the economy Congress has to bail the miscreants out. I think it’s time to stop bailing them out. Let the ‘free market’ fund itself for a while. For a change.

        • Apple says:

          Harvard is a nonprofit and pays no taxes. Harvard’s endowment is $53 billion.

          Harvard has become a hedge fund that pretends to be a school.

    • 2banana says:

      Hint.

      Government backed student loans.

      These were rare when college was affordable.

      And COULD be written off in bankruptcy.

    • Wolf Richter says:

      “it ignores the larger problem of, why is secondary education in the US so expensive?”

      No, the article calls it out very specifically: “educational-industrial complex.”

      Free college should come with drab classrooms and lab buildings, no “campuses” but just big buildings in an urban area, no fancy student housing, etc. They do that in Europe. Universities are not fancy there. Here, university campuses are enormous and constantly growing industrial enterprises with huge sports stadiums and arenas and pools, pumping up entire industries, such as the construction industry, the sports industry (including media), electronics suppliers, such as Apple, textbook suppliers (don’t even get me started about THAT scam), etc.

      There is a way to make public college free – but first you have to dismantle the gigantic educational-industrial complex that got rich and fat off these student loans.

      No way in hell should the taxpayer pay for students to live in luxury housing, go to fancy campuses with gorgeous buildings, huge stadiums, and huge park-like areas in the middle of expensive cities. If you talk about low-cost education, follow the European model of what a university looks like.

      • El Katz says:

        Or paying a politician that teaches part time $400K+…… and then that very same politician rails on about “affordability”.

      • Old Ghost says:

        Someone should also call out the private sector. Why would anyone need an MBA to run a carwash or taco stand?

        I once worked for a bookstore chain, that had 4-16 employees (very season). Guess what. The company wanted the store manager to have an MBA. Insane.

      • DawnsEarlyLight says:

        Many universities are including the costs of required texts into the costs of the course, preventing students from purchasing texts elsewhere. What a scam!

      • elbowwilham says:

        Sounds like the community college I went to in Chicago. Nothing fancy, just a big building next to the red line. It wasn’t free, but I could afford it working temp jobs.

      • TheAltonRoute says:

        I remember walking past some college or university in Naples, Italy. The place was a dump. Made me think about the American colleges with Olympic-size swimming pools, huge gyms, etc.

        • LK says:

          My campus had free massage chairs you could book for half an hour at a time. Those were nice.

      • Darwwin says:

        Don’t forget the luxurious student housing being built with 5 star amenities for junior and little missy. Architects and Builders are making hand over fist along with as the investors in the public private partnerships that fund many of these projects. Didn’t you show some chart a while ago which correlated the increase in education costs with a neatly tracked chart in the construction industry?

      • CrazyDoc says:

        Can convert all those empty corporate office buildings to colleges and dormitories

        • Wolf Richter says:

          CrazyDoc,

          “Can convert all those empty corporate office buildings to colleges…”

          Yes, that would work, if they wanted to, and it would save a huge amount of money, and they could sell their huge fancy campuses. And cut tuition down to near-nothing.

          In addition, they could hold many classes remotely, with hundreds of thousands of students listening to the same lecture globally, and that should be free. But they don’t want to do that either.

          Lots of things could be done, but the educational-industrial complex would wither, and that’s not allowed to happen.

    • BenW says:

      One of the reasons it’s so expensive is because of all the support from lotteries. It’s built it money, creating secondary education inflation.

      I’m fine with allowing a portion of college debt to be discharged through bankruptcy, but I don’t think it should be 100%. This indefinite suspension is for the birds and is adding to inflation.

      I don’t think it should be more than 50%.

    • Happy1 says:

      Hello, college in the US inexpensive BECAUSE the Federal government pays the loans no questions asked with no inquiry credit worthiness, ability repay, or the quality or earning potential of the educational program. It’s nuts.

  8. Magnesium Sulfate says:

    If I were a legislator I’d dig my heels in to reform public schools as part of this. You ought to be able to “work your way through school” attending a public uni, as prior generations did, with little/no debt. But unis have become real estate tycoons, building plush dorms with lazy rivers and rock climbing walls in their rec centers. They’ve hired fifteen tiers of management. I’m not averse to some debt cancellation, unlike Wolf, and despite having paid off my $70k+ (including grad school). But we can’t keep subsidizing bad behavior from these schools. Then the problem will just never go away.

    I hear on the radio that enrollments are down at all but the top-tier “elite” schools. Maybe market forces will help, but the market is 18 year olds who have (largely, I know I didn’t in HS) never taken a personal finance course. They don’t know any better. They’re basically just easy marks for the “education-industrial complex.”

  9. Another Scott says:

    The education industrial complex is the base of the Democratic Party. Has anyone else noticed that they no longer talk about high costs of education only the price to consumers? Any sense of cost control, especially in the bloated administration and construction has gone completely out the window.

    • drifterprof says:

      How is the Federal government implement “cost control” at private universities or state run college or university systems?

      Republicans, in general, would scream bloody murder at any attempt to regulate for profit private systems. Regulation might have put a large dent in the lucrative profits of all the Trump style universities that have been out there.

      The only way to implement “cost control” is to signal people they are responsible for their decisions in getting educational loans. Then demand for crap education will decrease, which would lower costs. Looks like that is not going to happen. The opposite will probably happen.

      • Jesse says:

        You implement cost control by cutting schools with low student loan payback metrics out of the federal student loan program.

      • Happy1 says:

        For profit schools are a miniscule part of the problem and you are pointing your finger at the wrong political party. Higher Ed is a massive Democratic constituency and the problems are problems of government removing market control and incentives. Loans should be drastically curtailed and not provided for programs that fail to meet graduate financial metrics.

  10. Digger Dave says:

    I got my student loans starting in the 90s from the feds, and paid it back to them. Only in the aughts did the servicer change from federal to third party, and then the stupidity started. Payments were frequently misapplied or not applied at all to my balances. Can you believe that the feds, with no profit motives, actually processed these loans better?

    It was Bush’ bankruptcy reform in 2005 that made student loans non-dischargeable in bankruptcy courts. That’s the part that made no sense. Debt is debt. This has partially led to the ridiculous situation today, by not allowing legitimate cases of usury and fraud to be discharged.

    Wolf’s point that it was the lender for most of these loans should not go unnoticed. If they had reasonable limits and standards for loans the educational administrative cartel would be held in check. Instead there were just blank checks for whatever marginally passed for education at inflationary rates for the past two decades that were not tied to real GDP or any other reasonable metric. Higher ED was allowed to expand on the debt fueled mania with much administrative and construction bloat.

    I was able to work “part-time” (30 hrs/wk) and get my degree from the closest public college in five years with all of my portion of the costs covered by my earnings and with less than $20k in federal loans, which I paid off in about 10 years without feeling burdened by those $200 or so monthly payments. When I entered school that seemed reasonable. It should have stayed that way.

    • Dan Romig says:

      Digger Dave,

      The 2005 BAPCPA was signed into law by President Bush II. But guess who’s fingerprints are all over the Act?

      A Democratic Senator, on the Judiciary Committee, from Delaware was pushing for this Bill, and he voted against three amendments in it to ease bankruptcy requirements for some citizens. One was to help seniors keep their homes. One was to help military service members and widows of service members killed in action. And another was to help women whose financial trouble stemmed from “deadbeat husbands’ failure to pay child support or alimony.”

      Plus, another detail the Delaware Senator voted against in this Bill would have allowed debtors to continue to pay their union dues during bankruptcy proceedings.

      D D, the Act was predominately a Republican supported piece of legislation that catered to the banking and credit card industry, but it had bipartisan support as well, and the biggest supporter from the Left side of the aisle on Capital Hill now has a new address: The White House.

      By the way, Delaware is the preferred domestic address, because of State tax laws, for corporations such as large banks and credit card companies. As their Senator, our now-President worked hard to take care of them.

      Chapter 7 or Chapter 13?

      • VintageVNvet says:

        Good points Dan, and glad to see some other folks seeing what made me SOOOO glad to have gotten OUT of that entire racquet by paying off my ”student” loans long ago.
        And the guy I paid off the last $3,000.00 with a paper check, promptly pulled out a $3,000.00 bottle of some antique booze that he and I drank ALL of while, for the first time for me at least, he told me of his WW2.
        He was drafted into USAMC the day he completed medical school, sent directly to front line MASH, but only until PTB realized he had spent his jr HS year as exchange student in Germany and was ”completely fluent.”
        So, OSS with two ”drops” into Germany, barely getting out each time,,, and then, ”Public Health Officer” for that country.
        GREAT guy,,, miss him a ton…
        And, to be shore,,, WE, in this case the USA WE, WILL have folks like him again…
        As Nimitz of one of his equals said, ” NO, it is NOT ”extraordinary people,” IT IS ”regular people” RISING to extraordinary heights to respond to extraordinary events.
        WE the PEONs can only hope this continues to be true, not just for America, but for all peons everywhere…

  11. Michael Engel says:

    1) Student loans reached puberty.
    2) Student loans can be divided into several tranches.
    3) Most student loans are between 1K and 10K. They cannot and should not compete with the rich in the upper tranches
    4) Very few loans above 150K – for lawyers, dentist, doctors, high tech – distort the median balance. The skew up the total balance, in a fake positively biased.
    5) The upper two tranches are the symptoms of the vertical rise since 2003.
    6)
    7) The cause : in 2003 the gov sent teenagers to the dorms instead of rioting in the streets.

    • Cobalt Programmer says:

      If you have student loans above $50,000 pay only up to that limit of 50K because a loan forgiveness program is expected.
      Also mostly, women goes to college and take up majority of the student loans (61% women and 51% men accept student loans for the college bachelor degrees). Colleges encourage student loans because, student loans give more tuition and fees to the colleges. Rob peter to pay paul. My two dollars…
      1. Ask colleges to reduce tuition. Why they need to build a new stadium and fancy buildings for the students?
      2. Vague college degrees such as “gender studies” are often not necessary. They should be get away with. Humanities should not have high enrollment.
      3. Colleges are sitting on billion dollar endowments. They are hungry for more and even more while the students have to borrow money from taxpayers.
      4. Forgive student loans for students entering government sector and working there for five years or more.
      5. If allowed to bankrupt, a doctor will bankrupt and start a practice. How to milk him?

      • Apple says:

        Fancy new stadiums and buildings are for the alumni. They put their name on the outside.

    • Bubba says:

      A large portion of the lower valued loan balances are ex-students who didn’t even graduate. This pushes the median down. While the median balance may only be $18k and change, there are many students who went to private colleges and earned degrees in art history with balances from $50k-$100k. They are the ones in the worst spot working at Starbucks, but will continue to reliably vote Democrat hoping that will change their situations.

  12. Ben Sargent says:

    I love the cause sent teenagers to dorms! Wolf statement that the waiter and other service industry hourly employee will end up paying for the loan forgiveness won’t be discussed in any election debate . I just wonder if anyone listens to elections anymore. Rolling on the ground about the proposal for auto loan forgiveness.
    Any way to calculate the shadow money creation from the rent, eviction and mtg payment delays that were instituted in 2020?

    • Michael Engel says:

      1) The majority of the lower trenches are young black and Latino voters.
      2) They are drifting away from the ruling party.
      3) Since BK is not an option, writing off the lower tranche might be politically rewarded.
      4) US treasury will dump those loan in a secret vault.
      5) The reconstruction plan will give Zoomers and millennial an economic booster in 2024.
      6) So, vote for the ruling party, because the other side will not give it to u.
      7) But wait, they clicked cash, PPP loans, grants, EIDL loans, when US economy was comatose.

    • doug says:

      Yes, the auto loan forgiveness was howl worthy. Now, lets watch someone somewhere pick it up as a real suggestion?

  13. meadows says:

    Wolf mentions OSU. My daughter in law went to grad school there and is a dentist for several years now working on a native american nation health center. She has huge loans to pay back. I think bankruptcy could be her way out. It was Biden as a senator who made these loans so tough to get out from under.

    • Shiloh1 says:

      The government always here to help!

      Thesis > Reaction > Antithesis

      – Georg Wilhelm Freidrich Hegel

      Taught in second year high school ~ 1974

  14. TK says:

    Ugh. We just paid for 4 years undergrad and now 1st semester of grad, for our Daughter. We scrimped, saved and planned. I don’t feel so good.

    • Mark Stoneweapon says:

      I worked 7 days a week to help my daughters graduate and stay out of debt. If it weren’t for the people making sacrifices to be accountable, this Banana Republic Express would have derailed into Weimar by now. The crazy thing is the median student loan is about $17K. At the very most…..why not forgive the interest and term the loan out for 25 years @ $56/month? There is no good reason to forgive the principle other than to loot the responsible folks to buy votes. We have no choice, we have to vote with our feet now!

      • historicus says:

        Hey …my neighbor has three kids with student loans..
        and my neighbor just put 100K into his kitchen and is off to Greece for a month.
        He votes a certain party in hopes of forgiveness. If forgiven, he just got a free new kitchen and a nice vacation. Those who paid their children’s tuition, who went without, lose. Fair?
        DeToqueville noted in his “Democracy in America” that democracies don’t last, because eventually people will vote for those who pull from the Treasury and disperse the money for political power.
        To wit.

        • Mark Stoneweapon says:

          I guess we will see soon enough if the Fed will save the dollar republic with higher interest rates. “Democracy in America” has become what your country can do for you and the “most reckless Fed” has exacerbated this behavior with super low interest rates for the past 20 years especially. The M1 money supply chart looks like a sting operation…..flood the world with cocaine and then increase the price on the Street 5X and then see what happens with capitalism Vs socialism? The hunger games are on!

        • perpetual perp says:

          A lot, if not most, of the inequities cited here are there because the wealthy benefit the most from them. They are the creditor class. The ones who own munis and Treasuries and corporate debt. as well as stocks and various derivatives beyond counting, much less auditing i.e., the financial system as a whole. The ones who own minerals and land and forests and all the rest of what initially belonged to the public. The Oligarchs, in other words. The same Oligarchs who exist in every nation in every corner of the world. Democracy, fascist, communist, name your poison. Income inequality is the engine that fuels this class. Everyone else is just too ignorant, or hopelessly compromised, to reform the structure down. Bitch all you want about Biden but raising taxes and giving Medicare negotiating power, are two levers that are required for reform.

  15. Publius says:

    So what is the policy moving forward? Take out up to $10,000 (or whatever payoff is decided) in loans even if you don’t really need to, because taxpayers will cover it? No way it’s a one-time deal, have to buy off future voters, I mean college students.

    • Marcus1 says:

      Exactly, Publius! I have plenty of problems with this plan on it’s own, but the bigger issue is, “what now?”. Is college free? What about the new class entering college this year? Do they go hog wild on loans because their parents realize that it’s free money (eventually) and better than shelling out their own money? This plan is catastrophically disruptive because it breaks the relationship between debt and accountability. The ultimate moral hazard.

      What about the people who skipped college to enter the family business and took out loans to bolster their operation? Restaurants, landscapers, construction, etc. Why not loan forgiveness for them? Oh right. Because it’s not federal debt. What a total mess it is to create two classes of people based solely on who their lender is.

      • perpetual perp says:

        Marcus 1. Debt is the ‘ultimate moral’ hazard. But not in the way you believe. Debt is the way the rich became rich, in case you haven’t noticed. Debt centric financial systems are created for the rich, by the rich. So Help me God.

    • Shiloh1 says:

      It’s more buying off the votes of The Higher Ed Industrial Complex. The students/parents are merely a vehicle in the process.

  16. The Big Show says:

    Typical lol.

    This article has the tone of attacking the debtors, with no responsibility shouldered to the entity underwriting these predatory loans.

    There was a lot of misleading advice and misinformation propagated from every institution under the sun about the usefulness of a college degree.

    This propaganda conned both parents and their unsuspecting children, putting pressure on everybody involved that these worthless pieces of paper were the only way to a good career and middle class life.

    Furthermore, the author paints a black and white picture. Not every student went to a Ivy League school. Some went to lower tiered colleges in good faith that their hard work would payoff, only for society to break its social contract.

    Students were responsible for the debt, but there was no career and middle class life.

    And I don’t want to hear about how “well maybe they should have gotten a STEM degree”.

    STEM degrees don’t guarantee you anything in a globalized job market. Experience and network is all that matters.

    Furthermore, I am an avid reader.

    There are so many financial articles I’ve read, and a number of authors, who are working in the big boy institutions, will sometimes divulge that they received a degree in English or some other liberal art, but are working in finance.

    Degrees mean nothing in the large majority of cases. Competent people are competent. I am a tradesman, and know journey workers that will run circles around people with engineering degrees.

    I’m a tax payer, and I support write downs.

    Student loans are sinister, and debtors need relief.

    • drifterprof says:

      “Degrees mean nothing in the large majority of cases.”

      That was not my experience in applying for jobs at various points in 50 years of working.

      • OutsideTheBox says:

        d

        You are talking about the past.

        TBS is talking about the present.

        • OutWest says:

          Without a four year degree, many doors that lead to a better life never open. I witness that on a daily basis. An advanced degree isn’t for everyone but I always encourage young people to consider it.

      • The Big Show says:

        Well, my experience was different. My economics degree did not give me any leg up in the job market whatsoever. None.

        All I was told is that I lacked experience the majority of the time. Jobs were extremely difficult to come by without the experience or right network.

        And even the white collar jobs I held I competed with others in the same role that had no degree at all.

        I was under the assumption that meritocracy existed, which was part of a false consciousness I was forced to break out of.

        I realized that these white collar jobs were saturated, and I had no place in that arena, so I moved on to blue collar work, which was a blessing in disguise, since I make way more now than I would have ever in a meaningless cubicle Job begging for promotions.

        50 years in the work force? You sound like a boomer, which means you really don’t understand the current dynamics of the job market for younger peoples trying to make their way.

      • Apple says:

        Even receptionist jobs require college degrees now.

      • Trucker Guy says:

        Lol. Yeah no, with the ease of financing school and the big scam sold that college is an absolute necessity, everyone and their dog has a college degree now. It’s the new high school. I knew a lot of kids when I went to college that were forced there by their parents and they had no business even graduating high school.

        College degrees are the absolute bare minimum now. From what I’m seeing, if you’re under 30, a high school degree gets you a life in a miserable job or a life in and out of jail. A college degree gets you a job stocking shelves at Walmart with all the other worker bees.

        I don’t have a college degree, I went into the “lucrative” world of trucking. I work 14 hour days, driving all night, burning up 50-60 hour work weeks to barely cut my teeth on 60k/yr. In a medium cost of living area. And I am absolute killing it compared to all the other people I know from my age group. There is one guy who got a GED and works in the pipe fitters union who makes slightly more than me but works out of town 70hrs a week. One girl got an MBA and makes 65k in a high cost of living area. The rest are just warm bodies in retail or service industry milling about like zombies for 14.50/hr struggling to makes ends meet and taking anti depressants.

        Also, piss on this bullshit idea of loan forgiveness. At 18 you’re legally an adult. You aren’t mentally but hey, that’s how the law has been for decades. If you sign up for a student loan that’s on you. The middle class is and has been getting destroyed for a long time. There isn’t some quick easy ticket into it. I knew when I was a teenager that the terms for student loans were financial suicide and that college wouldn’t be the golden ticket magic carpet ride to success like everyone passes it off as. People used their pen to sign on the dotted line, they shouldn’t get a free pass carte blanche. Where’s my free ride? I bet you they wouldn’t retroactively reimburse my CDL school that would have costed 5k if I would have needed to attend it. Like others have said, what if I say I want out of trucking and a life of manual labor, is college free now? (aka nearly worthless) Can I get a degree in computer science on the deferred dime of the tax payers and pay nothing but the opportunity cost of lost wages while I’m in school?

        What an absolute mess. I don’t know how likely the “forgiveness” is to actually happen but seems like Pandora’s box to me.

        • Aida says:

          The middle class has not been destroyed, just equalized around the world through globalization. Globalization has been reversed in the past, and can be reversed again. So was class inequality. There’s hope, but takes a lot of pain to get there.

    • Jon says:

      I have a friend.
      He lost his job 2 years back.
      The govt paid for his rent and living expenses for 2 years roughly $4k in total per month or so.
      He went on vacation to Europe for 3 weeks spent thousands.
      He has 70k in student debt.
      He looks forward getting it forgiven.

      I am a taxpayer and am angry at this .

    • DF says:

      A few things get overlooked with the “Shoulda gotten a STEM degree”:

      1. Most of the STEM opportunities are concentrated in computers and healthcare. After that, it’s other engineering disciplines.

      2. Engineering programs aggressively weed out people, which means that many of the non-STEM majors are really ex-STEM majors.

      3. ISTR that the major with the highest underemployment rate is actually business.

    • Gattopardo says:

      Big Show, not one thing you wrote justifies taxpayers picking up the bill for that debt relief.

      Find someone else to pick up the tab for that forgiveness. We are not here to indemnify everyone against everything.

  17. Implicit says:

    The bottom line is that people want what is best for their bottom line, like the banks and other oligarchies 14 years ago when student loans were still being paid.
    Unless your rich, you probably hope for loan forgiveness. Generally, It is not about morality.
    It is easy to say what is right and wrong from a position of wealth. However, most people would steal to stay alive. The politicians and government figured out what they “needed” to get away with then, and they know what they can get away with now.
    More poor people probably still believe that bank forgiveness was a good idea versus the number of wealthy people that think student loan forgiveness is a good idea. The two sides of forgiveness.

    • Happy1 says:

      No. The working class will not take this well. There will be hell to pay with the blue collar electorate and with all of us who paid our loans and children’s tuition. This is both bad policy and bad politics. Terrible policy actually.

      • Implicit says:

        I agree, but these are the cards that are dealt. It is difficult to not play the hand using the cards that are dealt to you unless you go off the grid

  18. Kent says:

    “But that doesn’t need to be that way. These same politicians could change the law to allow student loans to be discharged in bankruptcy courts.”

    Or, act like the civilized world and just have the government directly fund college educations, or at least provide it with extreme subsidies.

    The purpose of college loans is to teach people that one gets ahead by taking on debt, not by looking to the government for any kind of help. It is an instrument of moral instruction.

    • The Big Show says:

      Absolutely. Education is a public utility, and should be heavily subsidized. Right along with healthcare.

      These costs should be kept low, so labor has more purchasing power within the productive economy.

      Unfortunately, we live in a world where rentiers, privatizers, and other parasites rule and are protected by their union, the federal government.

    • Dan Romig says:

      Kent,

      Going to college or University is no longer affordable in the USA to the vast majority of students. That is not a good system IMO.

      I was born in a day when that was not the way it was. I paid my way through a Bachelor’s degree at the U of MN. But full year tuition for my first year, 1980/1981, was a grand total of $1,150.50 for the three trimesters ($383.50 per trimester — now on a semester schedule).

      It’s a tad bit more these days.

      • Implicit says:

        Yep, my college tuition is now about 25000 times more than it was in the early70’s.
        Inflation nation started early with college tuitions. Makes RE inflation look somewhat tame.

    • Wolf Richter says:

      The US system is set up to hugely benefit the “educational-industrial complex” — so called in the article.

      There is a way to make public college free – but first you have to dismantle the gigantic educational-industrial complex that got rich and fat off these student loans.

      Free public college should come with drab classrooms and lab buildings, no “campuses” but just big buildings in an urban area, no fancy student housing, etc. They do that in Europe. Universities are not fancy there. Here, university campuses are enormous and constantly growing industrial enterprises with huge sports stadiums and arenas and pools, pumping up entire industries, such as the construction industry, the sports industry (including media), electronics suppliers, such as Apple, textbook suppliers (don’t even get me started about THAT scam), etc.

      No way in hell should the taxpayer pay for students to live in luxury housing, go to fancy campuses with gorgeous buildings, huge stadiums, and huge park-like areas in the middle of expensive cities. If you talk about low-cost education, follow the European model of what a university looks like.

      • stan65 says:

        Here in UK, colleges and universities are happily getting on with the latest educational-industrial hype craze. In my small market town on the outskirts of London, they just built a brand new spanking university (with all the modcons gabbins and leisure facilities you Yanks seem to get everywhere), the cost of which is about 10x per sqm what it would cost to build a multistorey office block or resi block. There is a private villas village built in Bahamas off this one for sure. The courses they offer are the ones that are guaranteed not to be needed in two years, let alone in twenty. Given the profiles of the “students”, I’d rather not name the courses lest I be branded as ***phoby this and ***phoby that.

        So, the business plan of corruption and parasitising off the tax-payer host is happily spreading from west atlantic to east atlantic and so on.

        The old adage of: just get more customers and the plan will grow, here holds firm.

      • TheAltonRoute says:

        As I understand it, the complex was born after WWII with the GI bill and then the war on poverty programs in the 60s?

  19. Freedomnowandhow says:

    Thanks Wolf for moderating my comments.

  20. Magpie says:

    When a class of loan fails or falters in any way the first action is to halt new issuance. Is anyone suggesting that? No. Why not? It’s a sacred cow.

  21. historicus says:

    I suggest something that involves the following in some form..
    Colleges with a certain size endowment must …..
    cosign the student loan, or….
    be lender themselves for the entire tuition or a lion’s share
    and why not?
    We have an arrangement now where the federal govt provides the credit for the purchase of a service from a “business”. (schools are big business, don’t kid yourself)
    This in itself pushes tuition costs up.
    If a person wants to buy a Ford, he deals with Ford credit. Not the federal car loan dept. What would the price of Fords be if federal credit was involved?
    If you want to go ABC University, deal with ABC University Credit Dept.
    If these steps, in some form, were implemented, two things would happen…
    Tuition costs would cease their dramatic rise
    Worthless degrees would disappear
    Both, because the school would suddenly have an interest in repayment of loan.

  22. Freedomnowandhow says:

    Free school education, what a great idea! Years ago only those who had enough or submitted to the whims of the elected had the opportunity. Now, the youth doesn’t have to vote or pay allegance to any politician.

    • Wolf Richter says:

      Free public education should be in drab buildings without campus, stadiums, pools, fancy student housing, etc. Europe does it that way, and it’s not free either.

  23. RockHard says:

    One question on the numbers – is $18k the total balance, or the principal balance? i.e. excluding interest and late fees

  24. SC says:

    Seems to me if the government wants to “help” the people, maybe they should consider paying off health care debts. This actually might help people in need.

  25. rick m says:

    It burns that the ethical are boned and the moochers are rewarded. After Katrina, SBA loans were forgiven and forgotten. Your taxes covered it. The unscrupulous made hay in the Deepwater Horizon spill, I was in Venice LA at the time and saw.
    It wasn’t all BP’s money.Student loans will be the next gimme. “Car mortgage” forgiveness not far off. Gotta have somewhere to sleep. All this makes those who pay their taxes and subsidize the unproductive feel like gullible fools. And those who can do so undetected will not pay all their taxes going forward. Salarymen are trapped but lots of us aren’t. When the only interest government took in individual’s lives was getting their share of the money that those people earned, it was much more intimidating to get a we’re-hungry-pay-us notice from the irs. Today they have involved themselves in so much that many are noticing the cracks and fissures in the structure as they exceed their competency at governing like it’s nursing care. Highways and armies, leave all else to the states. There’s less wealth to steal now from those that the government can easily scare into compliance, and more and more that they cannot find and confiscate cost-effectively. Black markets in labor flourished in northern Europe and Scandinavia with East Europeans working under the table. The Soviet Union existed for longer than a straight collective should have, and it’s extensive black markets in materials and commodities was part of the reason. In the sixties, US people started little businesses to lose money which could be offset against gains to lower their tax burden. As tax cheating becomes a practical necessity again, the feds will crank up enforcement. They cannot win all the time. The mouse runs for his life, the cat runs for dinner. If a thousand mice decide that they’re tired of running and bow up on the cat instead, he’s gonna be contemplating a change of venue. There’s hundreds of thousands of houses in this country that a irs agent would be ill-advised to walk up to. They’re government proles regulating you at your expense, not righteous workers. And they know that if they don’t do anything they can’t do anything wrong, and want to keep their pensions. Government always becomes top heavy, and falls on the governed.

    • Old school says:

      Already $7500 credit to buy the right car. If enough don’t buy, I bet it goes higher. People going to drive their old beaters to 300k.

      • Wolf Richter says:

        The way I understand with superficial reading: the law limits where EVs and components (battery) have to be manufactured, almost no EV today qualifies for it, and it will be years before automakers can set up US production for this stuff to get their EVs to qualify. Ford and GM have lambasted the limits.

  26. Gyalogtank says:

    Free higher education would be a fairer and more straightforward system. If taxpayers will pay the bill eventually.

    • historicus says:

      Ask the tough question…
      WHY is education so expensive?
      Did Plato charge this much?
      So many static courses…..math, language, history, art, physics, accounting…
      A few lectures a week that could be videoed and “canned” for repeat use…and teaching assistants (TAs) that get tuition breaks for their teaching the smaller classes. Where is the great expense?
      The cost is other than the actual delivery of education.

      The trajectory of college tuition has been in lockstep with the trajectory of the budget of the Dept of Education.
      From zero in 1979 to $63 Billion a year!!!
      For the simplicity of math, lets assume that each State received $1 Billion a year to spend on education in their State as they see fit. This would leave $13 Billion for a trimmed down dept in Washington.
      This suggestion strips bare how the federal leviathan operates…they take and then give back after taking their cut. Maybe the money never should have left the State in the first place?

      Only 38% of Pell Grant recipients complete degrees in eight years, which is as long as federal data track. That means some two-thirds of Mr. Biden’s $229 billion could go down the drain. WSJ 3/30/2022

    • andy says:

      Why should taxpayer pay if it’s free education? Who will be chosen to be educated?

    • historicus says:

      Free higher education sounds great.
      Will the teachers work for free? Is that the idea?
      Because if it worked the other way …
      who sets the pay scale?
      what of grad students?
      what of more than four yrs for a BS?
      what of those who just paid in full….refund?
      what about trade schools?
      debt forgiven for two home families with the boat and european vacations, country clubs? (upper bracket famalies are huge percentage of those owing college debt)

  27. David Hall says:

    Unlimited free university courses, room and board would be a waste of taxpayers’ money. There are so many complaints about people going to college and not getting good jobs, they may cancel the student loan program, or only extend it to the brightest applicants. Some of these diploma mills do not provide adequate training, only easy A’s to keep the cash flowing.

    I had a college loan that was difficult to pay back. I got the bank to restructure it to make the payments smaller. I paid it off and have no long term debt.

  28. HowNow says:

    There is a lot of distortion in the comments, so far, in this post. One of the biggest problems in the student debt issue is the for-profit colleges. They actively recruit students – every way imaginable, e.g. recruiting homeless people living under bridges – to get their education using student loans with no money down. And their recruiting is directed primarily at poor students, promising a great job and easy, quick coursework. The attempts by Democrats to stop this fleecing was shut down by the GOP who were beholden to the contributions from the for-profit lobbyists, as recently as the Obama Admin.

    The GOP and the Dems are protecting other industries, too, as we all know: pharma, big oil, etc. So this shouldn’t be characterized as something that the Democrats are guilty of. That’s BS. “Another Scot”, you might want to reckon with some truth and recognize the widespread corruption within the GOP.

    Bernie Sanders and others have advocated free college education, for one and all, like a few countries in Northern Europe. Here are two serious issues with that thinking: 1) if students do not have any “skin in the game” – paying or in some way sacrificing to get a program completed, so they can quit at any time, drag-out their instruction for years, play around with different majors, etc., they’ll be pissing away taxpayer supported higher ed. Not so if students are paying for it. The community college system pays good salaries to teachers with very, very modest workloads who are teaching 6th grade skills: arithmetic, remedial reading and writing, ESL. Look at any Comm. Coll. schedule of classes: tons of remediation. The audience is mostly students who didn’t give a sh*t while in middle and high school. They’re “catching up”. So, aside from student loans, there needs to be more stringency about what constitutes K – 12 competence. Throwing money at the idea that people have a “right” to higher education is just inflating the time it takes to learn the three R’s.

    Yes, Dems are bleeding hearts and want to give a leg-up on the massive number of people in the lower echelons of our country. But free higher ed is stupidisimo.

    Students know what loans are about, even at the age of 17 or 18. And they typically have parents who are aware of the obligations. Pretending that they “didn’t know the gun was loaded” is nonsense. These loans should not be “written off”. It’s the same moral hazard of the FED rescuing banks who caused the ’08 financial crisis. We ALL know that. The same applies to student loans.

    And the idea of “buying votes” is crap. Americans forget political actions a day after they learn about it, so, thinking they’ll feel some loyalty to Biden for erasing their debt is science fiction.

    • CrazyDoc says:

      I am fine with a free education system for degrees that are actually needed for job openings (those that are not needed should cost as they would be considered for personal development).

      Shorten degrees to two years or less and make them more specialized (lots of subjects in a degree are useless filler and not needed for an individuals job afterwards) and pair the student to an internship for a year straight after at a company that is willing to help out with cost-sharing the education. in that way it may resemble a trade. The government gets to fill jobs that are actually needed in the economy, companies get workers with the skills they need and students get a useful degree that doesn’t bleed them.

      Then move the colleges and dormitories to all the vacant office buildings, starve the bloated universities of their waste and maybe there will be lots more prime land for residential housing.

    • Bananas says:

      Free education in European countries is not free, there’s limited availability and you have to qualify to get it. It’s nuts to talk about ‘free’ education. Those countries also control what and how many spots are needed, they won’t pay for your art history major.

  29. David G LA says:

    Life long democrats will become republicans if student loans are forgiven. Well, for sure at least one I know will.

  30. DanS86 says:

    Sure just add another $2T on debt stack. Print away!!!

    • Wolf Richter says:

      Actually no. It’s already added to the pile. That $1.6 trillion in student loan debt was cash that the government handed to students, and it borrowed that cash as it went as part of its Treasury issuance. So that $1.6 trillion is already included in the government’s debt. What’s different is that after forgiveness, the taxpayers has to pay it off instead of the former students with student loans.

      • Flea says:

        Money has turned in to confetti,these political hacks of my generation have stolen the future of America.Hope they make it through judgement day

  31. breamrod says:

    with the gov. involved in everything it’s no wonder everything from health care to education is so expensive. Saw a chart showing productivity gains and the amount shared by labor and capital. Just what? Capital over the last 30 years or so has outpaced labor by a wide margin. If they had shared the gains average wages in this country would be 3 times what they are and then maybe folks could afford 400k houses and 50k cars. But they still would not be able to afford our ridiculous health care and education.

    • drifterprof says:

      Health care became super expensive-o-rama without government involvement.

      • When was “health care” without Government involvement?

        I put that in quotes because of the confused conflation between actual health care and so-called health insurance. When I was a kid, we went to a family doctor and paid in cash. The doctor was not required to fill out federal forms for the diagnosis/treatment. Every state has a bureaucracy for regulating insurance. They agree on costs of treatments/medication. The federal government, obviously, has a huge bureaucracy for regulating “health care.” None of the explosion in costs to the individual occurred without government assistance/encouragement. We probably pay over a million dollars in salaries to ensure that someone does not cheat and deduct the cost of unnecessary cosmetic surgery that would reduce their adjusted gross income by no more than $100k. (Mind you that is their AGI , not their taxes.)
        I contend that more government is not the answer.

      • El Katz says:

        According to my ex-doctor, the rise in his operating costs (he is a single practitioner in a concierge practice) was the result of government reporting requirements. He had to increase his staff 100% from 3 – a nurse, a receptionist, and billing / office manager (aka his wife) to 6 to comply with the red tape. In order to make a living, he would have had to resort to “assembly line medicine” (in his words) and he said that wasn’t the reason he went to med school. His choice was to go concierge or join some corporate practice as a drone.

        If you look at the costs in a medical practice, I’m fairly sure that the bulk of the “growth” in employment is administration – not the people that provide care.

        • Implicit says:

          The cartels/oligarchies exist by oppressing competition thru their ‘ lobbying efforts and price fixing. They disdain competition. It makes one feel safe to work there.
          Monopolies everywhere now. What was once considered a monopoly, aint any more.
          If you want to have a business, you better have lawyers and accountants on the pay roll if your in the one of the Cartel/Oligarchy/Monopoly industries:
          Banks/Finance, Military, Health, Telecommunications/Media, Defense/Offense, Education etc… just the ones I think of right away.
          It could be “lichened” to the largest organism in the world-a myceliated fungus with huge connected reach and power feeding off of each other, and on the masses.
          haha funguy It will not change in my lifetime.
          .

      • andy says:

        A history professor? So this whole system of employer-based health insurance happened without .gov involvement?

        • Old Ghost says:

          Health insurance in the USA is employer based (for lucky working people) because that is the way the private insurance companies wanted it to be.

        • Apple says:

          Companies also want this.

        • andy says:

          We got two more history professors today. Winning.

  32. eg says:

    Does anyone know why this weird “no bankruptcy possible for student loans” regime came into existence in the first place? Why and more importantly, cui bono?

    • El Katz says:

      eg: Doctors, lawyers, and other high income potential ex students filing bankruptcy to get out of paying the exorbitant loans they signed up for.

    • andy says:

      Universities bono. And their endowments bono. And their prizes (like new stadiums) bono.

  33. Shiloh1 says:

    Advice for college admissions –
    Have the kid apply to as many ‘dream schools!’ as desired, per high school admissions office terminology. When the acceptance letters come in buy picture frames from Hobby Lobby. Display on wall for friends and family! Have kid go to trade school or community college.

    Advice for ‘financial aid’ when the kid just starts high school – 1) watch any Peter Schiff or Bill Holter video or pirate movie; 2) proceed to the garden tool section of your friendly local hardware store.

  34. Steve Letro says:

    Perhaps cut thru all the options and just give every American citizen 50k . Let the universe sort it all out.

    • drifterprof says:

      How about taxing every American with assets over 5000K to give every American making under 50K and extra 50K.

      • El Katz says:

        Yes. Let’s punish the successful. Envy is one of the 7 deadly sins.

        Of course, so is greed.

        • drifterprof says:

          Successful meaning the kleptocrat paper hustlers.

        • Shiloh1 says:

          Just for fun I’d like to see one of those ‘heat map’ data depictions of where the big borrowers lived and where their colleges are located.

          I bet Muncie Indiana doesn’t show up in either case.

          No offense intended to any geographical region where it is customary to pay $60,000 for prep school, as advertised on LinkedIn pages for those east of Pittsburgh.

        • El Katz says:

          @drifterprof:

          Not everyone with assets over $500K was a paper hustler or kleptocrat.

          My sister/BIL had an automotive body shop…. he did mechanical work and breathed bondo dust for several years, putting in 60+ hour weeks. They ended up with far more than $500K without having to resort to kleptocracy.

          Again: Envy. Hate the successful because they must have done something illegal/immoral to get there because no one can ever admit that they couldn’t cut it.

          What is a professor if not a paper shuffling kleptocrat? Produces nothing tangible. Part of the Education Industrial Complex. Taking advantage of the unenlightened.

      • TXRancher says:

        Yep why we are dreaming why not make it $500k?

        • Implicit says:

          …then they got rich and fell in a ditch. Shatner happens to everyone. The more you own, the more you’re owned.

  35. unamused says:

    My kids went to college in Europe, where the average cost of bachelor’s programs is $7,390 per year, although it’s basically free in some countries.

    In the US college is a racketeering operation. American colleges, so called, are pro sports franchises that offer degree programs on the side. ‘Education’ just isn’t a priority, and besides, you have Fox News to make sure Americans stay stupid.

    • Gomp says:

      Do you watch FOX News to enable you to make this statement? If you don’t, then you likewise wouldn’t know this to be true. Aah! A conundrum.

      • Apple says:

        Other networks cover their idiocy and the billion dollar lawsuits by Dominion and Smartmatic.

      • unamused says:

        Fox News sponsors surveys to ensure their viewers are less well-informed than any other consumer of news, and even less well-informed than people who don’t bother with news at all.

        Not everything is about you, Gomp. Only some things.

    • Tolkapiam says:

      True! US college education is a racket.
      My daughter studied 3 years MS ( masters) in physics in a reputed free college in Germany.( eligibility bar high for foreigners) Tution fees per semester is a token 315 euro that includes subsidised canteen,free bus/ tram/ non express train rides with in the state. To get German education study visa you have to upfront open a blocked bank account in Deutche Bank for living cost. 9000 euro deposit before grant of visa. Her average expense was around 750 euro per month ( including boarding lodging, tution, student medical insurance) .Now after 3 years she got a dept assist job in the same uni with 2200 euro stipend per month while pursuing PHD. Now financially independent.

  36. unamused says:

    The Education Industrial Complex, like the Medical Industrial Complex, the Military Industrial Complex, and the Petroleum Industrial Complex, is a subsidiary of the Financial Industrial Complex. Those who have power in the world want it to be this way.

  37. drifterprof says:

    I worked for several years at a 2-year college in a flyover Colorado region. The farm boys could qualify for loans from auto dealers, to purchase their manly-man pickup trucks, if they were getting student loan money.

    So those education loans fertilized a lot more debt than just paying for education. This included people just getting some extra cash to cover rent and food.

    • El Katz says:

      Nothing new. Student loans were used for spring break vacations and “international studies” back in the dark ages when I went to university.

      Which is exactly why they should not be forgiven.

      If you can’t afford to provide for your kids, don’t have them. My parents planned for our educations as did we for our kids. My wife got stuck with student loans….

      • OutsideTheBox says:

        EK

        Good thing your parents didn’t die before you got done using them to fund your education.

        • El Katz says:

          OTB:

          Good point, but it didn’t happen and, if it had, there were assets available to fund our educations. They made sure of it.

  38. breamrod says:

    so true! Fiat money( money by gov. decree)Is the root problem. Oh and sociopaths in power!

  39. drifterprof says:

    People with sociopath or psychopath characteristics tend to be power-tripping leaders regardless of the type of monetary or political system.

    When gold or silver was basic money, the same or worse people dominated.

  40. THEWILLMAN says:

    It’s worth taking a step back and considering the extent to which these loans are predatory:

    They are sold to 17 year olds. Before someone can buy a pack of cigarettes/vote/drink – they can take out 100k in loans. And the people selling them are people who they’re supposed to trust (teachers, advisors, etc.)

    They are (mostly) backed by the government + stay with the lender through bankruptcy – so lenders have zero risk – the entire burden is on the borrower.

    They are for a product that doesn’t justify the cost. A Stanford Computer Science grad makes the same as a high school drop out coder who went to a coding bootcamp and got more real world experience. Let alone the number of degrees you can finance that don’t even open up career opportunities (people get masters and Ph.D’s in philosophy, sociology, social work, etc.)

    …so what do we do? We continue to allow colleges to charge massive tuitions. We continue to allow 17 year olds to sign up for a lifetime of debt servitude. But we have a lottery where you get some of your money back eventually but don’t know how much.

    Why? So the crooks who set up this whole ponzi scheme can get paid. It’d be easier to just nationalize educational costs like most other countries – but that kind of change would mean all of the leaches who profit off the current system are kicked to the curb and no one has the guts to do that.

    So here we are.

  41. Michael Engel says:

    Forgive student loans if they go to the Marine, or become navy seals.
    A 30K (whatever) signing bonus for college recruits, for better troops.

    • El Katz says:

      ME: That’s been done. Plus there’s the GI bill on the back side. There’s many ways to get student loans eradicated – the first being not getting entrapped to begin with.

      Another problem is that many young adults aren’t in the physical condition necessary to make it through boot camp. That’s why the military is allegedly running “fat camps”.

      • Anthony A. says:

        After my tour in combat, I got $222/month (G.I. Bill) to fund my college. I had two part time jobs to pay for the rest.

        Oh, my two daughters got out of college with no loans. They worked part time and applied for grants, of which they got and were enough.

    • andy says:

      Recruites can already get 4-year college degree paid by the military. They can get it while serving or later. Better stick with predicting the future, ME.

  42. Anne says:

    Hi Wolf,
    Your content is amazing and I am an avid fan. It’s very good that you are focusing on this issue. There is one item that I would like to respectfully correct – the “outlier” loans of 100-200 thousand and above are not just for law school, medical school, etc. loans, my neighbor has a loan of over 300k for her child who went to 4 years of undergrad college in New England, much of interest that has accrued even though she is up to date on the payments.

    • Wolf Richter says:

      “neighbor has a loan of over 300k for her child who went to 4 years of undergrad college in New England,”

      Either this is false (lie by your neighbor?), or someone (your neighbor) needs to get their head examined! That is just ridiculous. If it’s true, what did they spend $300K on in 4 years? Luxury student housing??

      Sure, we read stories about idiots/fraudsters that incurred $1 million in student loans. So it’s possible to do this, but a responsible parent’s job is to prevent this.

      • Shiloh1 says:

        Wolf, don’t you know anyone who went to NESCAC or Patriot League schools?

        What’s that? Exactly.

        Big money neighbors, including the corner office exec crowd, where I used to live in Chicago burbs running up big debt. They always know how to game the system and wait it out for the inevitable government bailouts.

      • Mark Stoneweapon says:

        My daughter did 5 years at Cornell in ORIE for a lot more than $300K.

        I’m sure a good portion of the high end student loans for the $300K is with the commercial banks and that will not be forgiven and usually involves a cosigner.

        • andy says:

          Must be nice to have brain surgery rocket scientist in the family.

        • Mark Stoneweapon says:

          BTW
          My daughter was the only Anglo in the masters program at Cornell……$100k/year is just pocket change for the Chinese

        • Shiloh1 says:

          Even Dave Collum, a chemistry professor at Cornell who does podcasts, says that for the tuition Cornell charges it would be idiotic to go there for most majors in terms of ROI.

        • Mark Stoneweapon says:

          Shiloh1

          Absolutely! If it weren’t for the scholarships she would have been going to UOFT.

      • Anne says:

        because the Obama Administration/the federal government decided to get into the business of college loans and said EVERYBODY should be able to go to college (after the mortgage fiasco blew up – remember, everybody should be able to own a home, and by the way, the student loans are being traded as derivatives now, so wall street and others are making money bundling and trading the student debt) and the us government now guaranteed the loans, the colleges decided to get it on the deal and jacked up their tuition and room and board rates – there are charts available that show how the cost of college exploded versus rates of inflation of other things like food/clothing; this is a true story. my friend is a single mother and is willing to keep making the payments because she believes the education for her child was an investment in the child’s future – even though the cost was way too high and will impact her retirement options. the cost was about 61k per year, (total, tuition, room and board) and the housing was student dormitories on campus. the rest is interest….I really wish you would look into this more – it is a scam being run by the govt

        • Wolf Richter says:

          “it is a scam being run by the govt”

          You got part of this this wrong. Yes, it’s a scam, but the scam is run by the educational-industrial complex for its own huge benefit, including landlords that provide student housing, tech companies that sell consumer electronics, the real estate empires of universities, textbook suppliers, top-aid administrators, and on and on. Government is just enabling it with all this money.

      • David Hall says:

        Harvard U. in Cambridge, MA charges about $75,000 a year for tuition, room and board, books, lab fees, etc.

        I read about a man who started a company while attending Harvard who later became the CEO of a publicly traded company that eventually made the Fortune 500 list.

        I have a relative who was a Vietnam War veteran sent to Harvard for an MBA by the Air Force after a successful combat tour. He retired as a colonel, then became a vice president managing defense contracting companies.

        • Wolf Richter says:

          David Hall,

          Harvard has the best financial aid program, if you’re American. If you’re admitted on academic grounds, they will make sure you can attend, no matter how poor you are. And it’s not through student loans. Do some checking on this.

          Back in the day, I got admitted to Harvard on academic grounds for graduate school. But since I was still a foreigner, I didn’t qualify for this financial aid package, and I would have had to pay these types of huge and impossible amounts in terms of my income at the time as a security guard at night while in college. And I would have had to have the amounts up front for one year, to get my student visa extended. And so I didn’t go to Harvard. But had I been American, I would have gone to Harvard grad school because they would have paid for it, and who knows what might have happened.

          I ended up going to the University of Tulsa, which gave me a TA-ship, which covered tuition and paid a small stipend that paid for my roach and mice-infested apartment and for some groceries.

      • Happy1 says:

        Neighbor may be an idiot, but undergraduate tuition at Tufts is 61K, with housing, it would easy to hit 300K in costs for 4 of private New England college expenses. Of course you could pay 1/3 of that for most in state institutions, which is what we did. People who pay that kind of money for a non Ivy undergraduate education are part the problem.

  43. ru82 says:

    My Daughter took out $60k of student loans for grad school.

    I don’t know the whole story but before covid, she consolidated them with one company and lowered the interest rate so she would only have to make one monthly payment instead of 3.

    They do not qualify for the student loan forbearance. I will have to ask her why. Anyway since she did so she has been making payments and never stopped during COVID.

    I am wondering if the true amount of student debt is much higher as the chart is mostly Federal Backed student loans.

    There are also all the Parent Student loans. They student can only take out a specific amount of Fed funded student loans. The university asks the parents to cover the rest in a non fed funded student loan.

    Does that

    • Wolf Richter says:

      As I said in the article, $1.3 trillion are federal loans. About $300 billion are FEEL and private loans, such as your daughter’s. FEEL and private loans were not part of the automatic forbearance, and as I said, that’s where the remaining delinquencies are.

    • Shiloh1 says:

      I think once one consolidates the loans then all bets are off.

  44. ru82 says:

    I have another daughter going to school right now. FASFA said she can only get a Fed loan will only cover half of the cost of tuition and room and board. The university say the parents have to get a loan to cover the rest.

    So I wonder what category those loans fall under. The call then parent loans or something like that.

  45. elysianfield says:

    The issue is a simple one to correct, painless and politically viable.

    Government provides loans to students.

    Students immediately have 6-10% of any current or future pay deducted along with Social Security, Unemployment Insurance, etc. until (and if) the loan is ever satisfied over the life of the former student. No work, no pay.

    No moral hazard issue here. No political issue here. No drama.

    D

  46. Ed C says:

    Forgot who said it, but this is the Achilles’ heel of democracy. Politicians buying votes. Just put it on the tab (national debt). What’s a few trillion more? It’s all for a good cause (???)

    • historicus says:

      DeToqueville noted the flaw in democracies as did Madiso, Jefferson, Socrates et al. The fact we are a democracy locally and a reprentative republic nationally was supposed to short circuit the frailties of a pure democracy.
      As Thatcher noted govts who give away money to gain /maintain power eventually run out of “other people’s money”. She never imagined a Federal Reserve balance sheet or MMT.

  47. Not Sure says:

    “But this stinginess of the taxpayers is leaving a lot of voters deeply frustrated”

    Looking at this logically, it seems like horrible political strategy for one party to champion student loan forgiveness.

    Loose napkin math: Let’s say a third of the population has a bachelor’s. And let’s say half of them owe money, we’re already down to 1/6th of the population. And some portion of that group won’t vote at all, or they won’t vote for the forgiveness party even after forgiveness. Some large portion would have voted for the forgiveness party anyway, so they’ll be thrilled to get loans erased, but they can’t be counted as an added vote. So what does the forgiveness party gain? Maybe 3-5% actual increase in votes at best?

    However, many voters have paid off their loans and will be sour over freebies for those who didn’t. Worse yet, a lot of voters may have wanted college, but avoided it because they didn’t want the debt. So many Americans are going to be immeasurably pissed off by this injustice. The non-degreed voter working a tough job has to cover degrees for folks making more? So what’s the point of buying a small gain in votes, but losing a huge number of votes in the process? Oh, and let’s not forget the tagline, “this will disproportionately negatively effect marginalized communities,” which have largely been reliable Dem voters… Maybe not for long.

    I have been an independant mixed ticket voter for a long time, looking at individual candidates and issues. But I spread a lowly State University degree over many years so I could afford it out of pocket… Took over twice as long, but I came out debt free. Responsibility was hard, and if I am effectively punished for my responsibility while other’s debts are “cancelled,” I will probably register (R) and never vote (D) again.

  48. JeffD says:

    The student loan racket pays my bloated University of California pension. Thanks taxpayers, for making sure I live like a king until the day I die.

    • Implicit says:

      HaHa precious!

    • historicus says:

      Name withheld
      Employer: UIC (University of Illinois Chicago)
      Annual Pension: $564,298
      Pension Collected to Date: $578,460
      Employee Contributions: $768,611
      Highest Annual Earnings: $783,862
      Estimated Lifetime Pension Payout: $22.33 million
      Percent Contributed to Estimated Lifetime Payout: 3.4%
      Years Retired: 4
      Age at Retirement: 55
      Years of Employment: 29

      source: taxpayersunitedofamerica.org

      and why is education so expensive?

    • Shiloh1 says:

      I remember wasting many a Saturday afternoon listening to Bob Brinker on the radio about 25 years ago raving about how great it was to invest in Sally Maes.

  49. otishertz says:

    How to make college $250 per class:

    Use remote learning, replay the lessons, pay the professor a royalty on testing fees, maybe charge for tutoring, and let the instructors compete for views like on yucktube.

    Done.

    • Implicit says:

      Totally agree, especially if the jobs require an exam, test, certification, bar exam etc…
      The student person will want and know their goal. It makes motivational issues less of a variable for the all parties: student and coach/tutor/ teacher. It could be done all online.

    • unamused says:

      That’s not an education. That’s drone indoctrination. The kind of non-solution typically proposed by drones who didn’t get an education.

      • otishertz says:

        You attack others like a high and mighty dunning kruger ineffectual pseudo intellectual.

        Why don’t you tell me why it wouldn’t work? Did we not just spend two years trying remote learning. An education ultimately is up to the individual. Sure some people need their hand held and safe places for their tutelage but others get on just fine on their own.

        There is no reason to pay academics to repeat themselves year after year. Let the best ones record their lectures and monetize their content in perpetuity. We don’t need more half wit pedagogues who never stray from textbooks they didn’t write.

        • unamused says:

          “Why don’t you tell me why it wouldn’t work?”

          Because you’ve already made up your mind and even the most convincing argument wouldn’t persuade you to admit that you were wrong.

          “We don’t need more half wit pedagogues who never stray from textbooks they didn’t write.”

          Did you tell them that before or after they rejected your application?

        • otishertz says:

          I was suggestion a solution. Your reply is weak and sad. Go to bed.

        • Alicia says:

          This works! I have taken online classes taught by top tier academics that were much better than my in person grad classes at a UC. Most in person education is a waste of time and money.

    • HowNow says:

      Done, is the right word for your idea, Otishertz. It’s nonsense. What do you think “education” is, TED talks with quizzes? Maybe that’s what your education amounted to. If professors had to compete with youtube for views, Soupy Sales would have been the Chancellor of your university.

      • otishertz says:

        Straw man again. And more visceral reaction. I’m really surprised by the vitriol pointed at me for suggesting competition among academics for views and royalties based on test fees for their lectures. Someone feels threatened.

        It was just an idea. Put down the gun.

        Try harder to address the subject in context without personal attacks if you want to appear serious to people who think without walls around their thoughts.

  50. JeffD says:

    Anyone without health problems can pay an $18,000 loan off in ten years. Anyone without health issues who says they can’t is a liar. And while the terms on these loans are typically 10 years, they can be modified for up to 30 years. I promise you that most of these people have an expensive phone and phone plan and go to starbucks or the equivalent luxury many times a week.

    • unamused says:

      “Anyone without health problems can pay an $18,000 loan off in ten years.”

      Unless they live where the cost of living is sky high, which in the US is basically everywhere there isn’t a college.

      Then they can’t.

      • unamused says:

        Correction: Unless they live where the cost of living is sky high, which in the US is basically everywhere EXCEPT where there isn’t a college.

  51. otishertz says:

    Having teachers repeating the same lesson year in and year out in different colleges all over the place is an anachronism. The technology exists to completely obsolete these campuses and the loans required to go there.

    Truth is college has become a right of passage and an “experience” for young adults who these days are essentially children growing up way too slowly. Owned by their phones.

    What a trick it was to get them to pay for their own day care.

    • otishertz says:

      Why are you so lit up and trying so hard to get one over on me? Does this type of baiting usually work for you? If you can’t tolerate another opinion and defend your position without insults you reveal yourself as an unthinking jerk. Go Twitter if you want to feel justified like that.

      I suggested a solution. I don’t know everything but I also don’t see you honestly addressing the idea of online classes with teachers competing for views and collecting royalties based of test fees. You have such a visceral reaction that it is quite the tell.

      You only have snarky insults and it’s a bad look. Funny how you don’t have anything constructive to offer and are too delicate for my opinions. Just curl up and go to bed. Pull up the covers and sleep with no dreams. You sad sad person.

      Get a dog. It might soften your demeanor. If you have a dog, well, I’m sorry Fluffy.

    • HowNow says:

      otishertz, more blather on education. Can you explain why students compete so intensely to get into a college, especially foreign students, when they can NOW get degrees online? Why aren’t the enrollments for online college coursework soaring? They may be going up but it isn’t touching the demand for enrollment at top colleges.

      Student debt forgiveness, imo, is wrong. The reality is that young people and their parent or parents want the product: a college education. If you don’t like vegan restaurants, or rap music, or titty-bars, or shopping at Walmart, or… any number of things, then don’t buy into it. No gun at the head of these students or their parents.
      In all honesty, if you had or have 15 – 17 year old kids, would you advise them to avoid student loans and take their instruction online or just skip a college degree? (not likely, unless you want to save face on this blogsite)

      • otishertz says:

        You missed my point entirely.

        “(not likely, unless you want to save face on this blogsite)”

        You are also projecting.

  52. SigmundFraud says:

    VintageVNVet,
    Thank you for your exemplary story, your service, and your ongoing commentary about how people need to man up, gear up, and get to work.

  53. PonderingPA says:

    It would be a lot more fair if the states still supported and subsidized their state universities as in decades past. When my parents went to the U of California system, the state was funding about 1/3 of the UCs’ budget, but now state general funds are just 8% of the UC system’s budget — and there are parallel declines across the country.

    When states subsidized college, that kept up-front costs lower for students, and it required universities to be a lot more trim than in this current ridiculous loan system where it often seems nobody is actually really working within any budget but just assuming the students are getting loans for everything.

    Unfortunately, in our current era — especially if there is a lot of loan forgiveness — then the government is STILL subsidizing higher ed, but just in a much more backwards and unfair way, since the high sticker prices are bound to turn a lot of first-gen/minority/lower-class students off college entirely and to antagonize those taxpayers who didn’t go to college.

    • RockHard says:

      TX of all places seems to still support higher ed. I just checked at the 2nd tier state school I went to, they’re saying $600/semester in state tuition. Still tuition, fees, and room & board on top of that, but even the overall bill still is not awful.

  54. Sporkfed says:

    The same politicians pushing for loan forgiveness benefitted from the scam of for profit colleges.

  55. BuySome says:

    As a member of the “I don’t give a f*ck anymore Industrial Complex” (IDGAFAIC for the alphabet soup crowd), I must point out that you all are wrongly calling them the Most Reckless Feds ever. In truth, these are the Most Feckless Reds ever. Upon my return from that cold war service, winding my home via any open military transports, twenty fours hours of on-and-off observation from a seat in the airport bar in St. Louis was enough to convince me that I was already on an alien planet. And they hadn’t even filmed “They Live” yet!

  56. SRF says:

    Long time reader, first time poster. Thought I’d chime in as one of the outliers. I’ve got about 350k in federal debt and about 70k left in private, with about 7 more payments until PSLF kicks in for federal. My wife has almost 200k with about 2 1/2 years left till her PSLF kicks in. I’ve been an active duty doc since medical school, and thankfully my son got my GI bill. Hopefully he’ll never have to touch a student loan in his life.

    I think it’s rather hard for people to fathom how you get that high, even if you try to do what’s right. In ’06 I got into USC with a half tuition scholarship. At the time, estimated cost of attendance was about 35k, it’s now 80k a year. Undergraduate stafford loans were capped, so privates made up the difference. Family life wasn’t great so on my own. Add more loans for covering the “expected family contribution.” Then more loans for Summer school so you don’t end up homeless for 3 months. Rent on campus went up to 1000 a month by graduation for a room. Even if you got a full ride, living expenses would hit 20k plus a year. Working 2 jobs just covered basic expenses at $8 an hour. Made it out with about 60k.
    Did UCLA for medical school. Started at 18k for tuition, doubled by graduation. Minimal aid available by the state, so almost all loans. Not enough housing available, so kicked to the market. Add 4 years of living expenses. By graduation around 200k federal, 80k private. Fast forward 3 more years for residency making 40k a year. During this whole time loans on forbearance, repeatedly capitalizing. Start IBR payments in military. Despite paying continuously 10 years later, doesn’t even make a dent. Interest grows total to 350k federal. Walla! And this is coming from a poor family with financial aid and academic scholarship. I can’t imagine how raked over you’d get as middle class with minimal financial aid.

    The whole system is just a broken mess. I would absolutely have loved to have barebones cheap school to just go and live in a room. I don’t think there is a single 4 year university, let alone grad school, you could come close to working a regular job at to pay your way and get out debt free. Both of my schools are over 80k a year now total cost of attendance. That’s 640k to go from high school to medical doctor. Add to that the pressure to go to a “good” (expensive) school so that you can match to the next level. There aren’t enough residency programs for doctors graduating, and there is the possibility of graduating medical school, not matching to a residency, and literally having a half million dollar worthless piece of paper.

    Along the way, it’s nothing but corrupt rent seeking. Fee’s out the wazoo for everything. Costs of test prep courses. Books are $100-300 a pop. Licensing, exams, equipment run in the thousands each. Thousands spent on applying for schools and residency. Bush mandated 6.8% interested while I was in school, and then add the interest and capitalization of 11 years before you get a real chance to start paying. The intent is not a woe is me response. I’m almost free after serving for 10 years. The point is that it’s going to get way way worse.

    Would love to see educational reform: cost controls to get loans, 0% interest loans, bankruptcy protection, affordable textbooks, state funding rejuvenated, etc. A bare bones STEM school with affordable living expenses… Most of my friends did law and finance/consulting. You’d still have to contend with many firms not giving you a look if you didn’t graduate from top 10 whatever.

    • implicit says:

      Enjoyed your story,
      These are the cards you were dealt, the payoff will come. Keep playing.
      …”Jacks, Kings and Aces, their faces in wine, do Lord deliver our kind.” Robert Hunter
      Food is medicine and medicine is food

    • Jpjpjp says:

      Very interesting read.

      One question on salary, could you not go work in the private sector and make 200k+? After tax, at around 150k, you could pay that debt down in lets say 5 years while still making above average income.

  57. Nancy K. Humphreys says:

    I totally disagree. I worked night shift in a diode factory to get through my undergraduate college. I had no help from my family. I amassed student loans I couldn’t pay back. For graduate school, I accumulated debt I couldn’t pay until I got a University Librarian position. There were no jobs in South Carolina during the 1970s Stagnation recession. 50 percent of my student loans were forgiven. I think the government should open up 50% forgiveness loans for blue collar workers. Incentive them instead of employers to learn their trades. Pay from the Intrafrastructure Bill

  58. SigmundFraud says:

    to Old Ghost and everyone else: The third party medical insurance system was created at the behest of the American Medical Association and the American Hospital Association in the first decade of the 20th century in order to prevent large industries like steel and railroads from establishing their own proprietary health care systems. See “The Social Transformation of American Medicine,” by Paul Starr.

  59. unamused says:

    Financialization ruins everything. There are many examples.

    It doesn’t matter what it is. When profit maximization is the goal everything else loses importance until those things are largely excluded except to maintain the appearance that you’re actually getting something for your money.

    The FIC doesn’t care about education. It cares about profit.
    The FIC doesn’t care about housing. It cares about profit.
    The FIC doesn’t care about sports. It cares about profit.
    When all you care about is profit, everything looks like a profit center.

    Don’t think of yourself as a person. Think of yourself as a disaggregated market segment. That’s what the FIC does.

    The word ‘philarguria’ is from 1 Timothy 6:10, meaning ‘the love of money’, as in ‘the love of money is the root of all evil’. Probably most of the branches too.

    Very fashionable these days.

    Suckers.

  60. M says:

    I will say there is a huge flaw in student loan lending that always is left out of the convo and I’m not sure why. Part of why I at least want some of my loans forgiven is that I should have been eligible for a pell grant. See in order to be determined an “independent” student which means you don’t have to use your parents income to report what your family can afford for college, you have to be married, have kids, be 24, emancipated minor, homeless, in the military or grad school. Otherwise you are “dependent” even if you file your own taxes, live in a different state, or your parents don’t help you financially, all of which was my case. So even though I was working multiple jobs and paying for everything myself—rent, school, transportation, utilities, food, etc— starting at like 18, I had to use my parents income which was more than double mine to get financial help for school. So I was making like 25k working multiple jobs and freelancing on the side, my dad is making like 70k and then the government is like you don’t qualify for pell grants, even though based on my income, yeah I would’ve. For every year I was in school, so 4, I would’ve been eligible for a pell grant which is about 25k total now. Personally I’m not sure why I was required to report my parents income. I think the idea that parents can help their kids financially and college is a family decision is probably true for a lot of students but for some of us, no. My parents aren’t bad people, but they don’t have money. Not to keep themselves afloat and help me. On top of that, my moms income taxes were messed up for years due to her owning her own company, which she fixed now but for years it showed her income as way higher than it was because of her businesses success. To me, I feel like I was owed that assistance— call it entitled but I’m not sure how you can read what I wrote and be like yeah you shouldn’t have qualified for a pell grant when I was literally living pay check to pay check and doing what I was told was right, working and going to school, paying my bills and trying to figure out how to be able to increase my income. I should’ve been able to use my income to be awarded assistance because my income was all I was depending on. I just always like to throw this into the discussion ring because again, no one talks about this when discussing forgiveness.

  61. Michael Engel says:

    1) Everything is a trade, everything is a gamble in the labor market casino. When your house reached $2M, NYU might squeeze u for $95K/y. If only $400K, state colleges are decent alternative. Results: the same, low paying job.
    2) How can u say no to a kid, when u never did it before. The man of the house is at the bottom of the Pyramid, if he exist. In most cases he
    is missing in action.
    3) STEM is good/ STEM is greed. High end STEM enjoy traveling HR shows, that might send u to the FANG. Kids with vitamin P first in. If they lack talent. first out.
    4) If the music stop, the shows season is over.
    5) Those who who will be recruited after college might shave their student loans, otherwise, their fate : waitress, gardening or homemaker.
    6) Parents with GI bills/ kids in trade school, benefit from high Risk/Reward.
    7) Boys & girls age 15 work AH and summer times in a modern mfg facility might stay, because making $60-$100K/y with zero student loans is more attractive. Vitamin P help. Parents work with their kids.

  62. Augustus Frost says:

    Student loan program should not exist. Institutions should provide loans for their services at their own risk. Existence of this program is the only reason higher”education” is so expensive, as no private industry can perpetually charge above their customers ability to pay.

    Too many students are getting loans who have no business being there at all, not being academically qualified except under basement level admission standards. Too many mediocre institutions of “higher learning” which shouldn’t even exist issuing decreasingly marketable or worthless diplomas.

    • HowNow says:

      AF, for some reason I like your stoicism, but on this matter, you’re wrong:
      “as no private industry can perpetually charge above their customers’ ability to pay.” Medicine is just one example. Lots of high-priced assets, cars, houses, create indentured servitude.
      And, if you cut out those people who are in the “basement level” of standards, you’re willing to condemn lots of people, early in their lives, to live very, very meager lives. Is that the best we can do as a society? I’d rather we have space for mediocrity than a caste system with untouchables.

  63. SOL says:

    Colleges have great campuses, and landscaping. State of the art stadiums and auditoriums. How could they pay for that without govt promised loans?

    On a side note, every time I see “affordable” housing pop up I laugh. I (the taxpayer) fund the project, but I make too much money to live there.

  64. lincoln says:

    If cancelling student debt creates a larger bailout than what was needed for the Great Financial Crisis, then someone will have to investigate precisely how we got into this situation, and how we can prevent it from ever happening again.

    This includes investigating the conduct of universities and banks, which are the primary beneficiaries of student loan interest and proceeds.

  65. Coffee says:

    One idea is to make all future/current/past student loans for US citizens interest free. The students would still pay the principal. Think of it as a cost to invest in our next generation.

    People who worked to pay off their loans early won’t be sour as the monthly payers will be paying the same amounts (no freebees). People who are buried under interest payments will now be able to service their loans. It would be more palatable to everyone instead of just forgiving loans outright.

    • Jpjpjp says:

      Tie it to 10 yr treasury rate, would be a fair solution. Not even the government gets to borrow at 0

  66. phoenix says:

    I used to be in favor of blanket student loan forgiveness but now I support any policy that accelerates the collapse. So I think payments should start up again asap and the government should peg interest to inflation. everybody should be paying at least 9% interest on those bad boys.

  67. CreditGB says:

    “The educational-industrial complex is laughing all the way to the bank.”

    That is the bottom line. No other industry has been able to create a massive “Cabbage Patch Doll” as the “degree or die” foisted on the population by the EIC.

    Degreed workers are sitting home as Gov’t supported deadbeats or working minimum wage jobs because the high life promised by the EIC simply is not there waiting for them when they emerge from academia into the real world. That fancy looking box they bought for a hundred grand is empty but the debt is still there.

    So it is repeated here, say it again this time with gusto! :
    “The educational-industrial complex is laughing all the way to the bank.”

  68. ft says:

    As a veteran and college student in the mid 70’s, I was able to live modestly off the GI Bill and weekender National Guard pay – totaling less than $300 per month. It was not necessary to go into debt. Looks like times have changed, and not for the better.

  69. DR DOOM says:

    Student Debt cancellation is political. Not much pressure to make the deadbeats pay because that’s mean. So print the shit and throw it at it. Government uses inflation and de-basement as a taxing tool because it does not expose the political class and the electorate does not know or even give a shit about de-basement. De-basement is a dark place under a house that smells musty. De-basing the fiat currency is how congress taxes. Ron-Co says “Print it and fer’git it”. A trillion is chump change. We have already shit in our mess kit. Let’s party some more,it’s fun.

  70. CredtiGB says:

    My buddies were party animals as in “Animal House”.

    What a great idea, free “education”, literally a way to party for years on the tax payer’s backs, and only have to spend on booze and drugs.

    Of course requiring graduation or any kind of grade performance is totally racist so don’t even bring it up.

  71. Lone Coyote says:

    I picked great timing refinancing my $100k+ of student loans to private in 2019. At least I locked in a sub-4% interest rate :)

    Also thankful I got a useful grad degree out of it so I can afford to make the payments, but there’s definitely a part of my brain that would have liked to have had another thousand bucks a month for the last few years.

  72. Nate says:

    I like the solution presented, seems more clean unless we tackle to root problem, but not a fan of how he got there.

    The waiter argument, that lower class people are getting screwed by doctor/lawyer forgiveness, is class baiting. The waiter hardly pays taxes – median income is 30k, standard deduction 12k, before other deductions and tax breaks. Instead, this is more a conflict between older generations who paid less for college, vs. younger who paid inflated prices. But no one cares about the arguments – I did it in the snow so you should too! vs. fuck you, boomer, so each side tries to pull in other groups.

    Honestly, when we look at how most countries at our level do it, we should be both making the first four years free and writing off the nondischargeable debt. Society as a whole has an interest in everyone getting training to match their aptitude and reducing artificial scarcity in the workforce because of class barriers. It’s why the gi bill was a huge success and why states subsidize their universities. Instead, we make kids take on nondischargeable debt and let those debt levels increase beyond the rate of inflation.

    Finally, about lawyers and doctors–it is obvious bullshit that we make those professions do four years of a semi related degree and then more years where they kinda learn their job, before a massive test. If you can’t see the guilds limiting their competition so they can charge a fuckton more, you are not paying attention.

    • Wolf Richter says:

      You’re generation baiting.

      And don’t be silly: “waiter” is an example for any person who is working without having gone to college, and is now making less money than they would be making otherwise.

  73. The federal student loan programs are an abhorrent mess.

    Unless a person can pay off a “student loan” in a lump sum or over a 10-year period, the borrower is likely going to be held to pay on these loans until death. The cancellation programs do not work. Any other financial organization offering such financial products to the public would be prosecuted for financial fraud. Uncle Sam has sovereign immunity.

    However, borrowers are now aware of the rampant financial abuse. Many borrowers have paid over the amounts that they borrowed yet still “owe”. Ron Lieber wrote a good column on this, as well as WSJ’s Josh Mitchell´s book, The Debt Trap.

    The blog post did not consider at all the predatory terms of the loans. No bankruptcy discharge yes. But also daily assessment of simple interest, payment rules that send payments to accrued interest first, then fees, then principal (if any of the payment remains). Obscene interest rates, without any opportunity to refinance.

    Accrued interest can be added to principal. Oh, the government and loan servicers did not keep track of payment progress and lost records. Thus, only few received cancellation. “Borrowers” should not be help to pay for such manifest policy failure/abuse of power.

    Congress is stalling on reforms because so many donors profit from the immiseration of so-called borrowers. Jack Remondi, Navient CEO, in Biden’s Delaware, draws almost $8 million in compensation (check Navient’s proxy). However, constituent pressure prevents typical politician double-talk.

  74. AustraliaMan says:

    You people need to adopt a system like we have in Australia:

    Simple.

  75. Jpjpjp says:

    More interested in discussing what this does on a go forward basis…

    Obviously the price of schooling does not align with benefit of future earnings if the student cannot pay their debt. ROI isn’t there at the current prices for university. Having gone to school during the late 2000’s, I can attest to the fact that most students were going to college because that is what they were told to do. They weren’t there because of any desire to expand their knowledge, just to party and delay adulthood a bit longer. And to be honest, who can blame them, it was a good deal, free money for housing and education; and the promise of high pay when they graduated. Alas, in life people make mistakes, and I fully believe they should be responsible for those mistakes. Wolf alluded to low wage workers now having to pay this bill, but in reality, no tax increases are part of this bill. Its all going on the credit card and that is why no one is making a fuss about writing this off. If people knew that their federal taxes were increasing to pay for this, there isn’t a chance in hell it would pass.

    Fair solution is to cap the interest rate at something like the 10yr treasury rate and garnish wages after a certain income level is achieved. This level should account for things like state lived in, household income and children.

    Back to my initial question. Will the federal government continue to back these loans in the future after making the tax payers responsible? Will any private money come in and offer students loans on non dischargeable debt?Will students increase their borrowing in hopes that another forgiveness occurs in the future?

  76. DV says:

    Just wondering, if you forgive your ‘asset’ (writing off the loan), your net debt should rise the same amount, right?

  77. Franz Beckenbauer says:

    Let the Fed ” fight inflation” with as much broohaha as they want.

    Thr gubment says “party on !”.

    What a shitshow.

  78. 🙄 says:

    Taxpayers are not gonna pay nothing. No government debt is ever paid back but by borrowing more money to pay off existing debt. It’s by definition a ponzi scheme.🙄

  79. Finster says:

    It’s essential that students pay for the education they buy. They are the only stakeholders with a clear interest in making sure they get their money’s worth. If those costs are broadly socialized, it’s a short circuit to wasted capital, capital that could have been used to feed the hungry, house the homeless, heal the sick…

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