Let’s talk student loans
Just a nice, uncontroversial subject for a Friday morning. Also, 7 other things worth knowing today.
In the news this week … The Biden administration is canceling $5.8 billion in loans for students from the for-profit Corinthian Colleges, which filed for bankruptcy in 2015 and then shut down all their schools.
This comes against recurring rumors that Biden might … cancel all student loans … or else, cancel student loans up to an income cap … or else, cancel student loans up to $10,000 … or else, something.
For a Friday comment thread, I’m going to try to spark a civil discussion by sharing my ideas on this whole policy and asking for your thoughts in the comments.
(Some of you already started this in yesterday’s comments, which is great. Thanks!)
It’s an experiment! Quick disclosures:
I had about $55,000 in loans when I graduated from law school (so, about $98,000 in 2022 dollars). In fact, the number one reason why I went to a less-expensive, public law school, UCONN, as opposed to one of the “higher ranked” schools that I got into, was because I was scared of owing even more.
I still owe a bit, in fact, after more than two decades of paying it down! I mention this so I can come clean about my personal experience with student debt, and also to point out that there’s a chance I could possibly benefit personally from Biden forgiving it.
OK, so here are my thoughts. I suspect many will probably disagree, but that’s why we have comments!
Some kind of relief for student loan borrowers who are drowning in debt clearly makes sense.
But, it’s crazy (IMHO) just to wipe out billions of dollars in student loans without additional reforms. I don’t hear anything suggesting that debt cancelation would be accompanied by anything to prevent the next generation of students from falling into the same traps.
It’s also counter-productive to treat student loans as a special class of debt: unfair to people who went without higher education because of financial concerns, and unfair to people drowning in other forms of consumer debt (medical bills being an enormous one).
If I ran the zoo, I’d start by treating student loans as normal unsecured debt for purposes of bankruptcy. Bankruptcy is no fun, but it’s better than having no way out whatsoever. Also, the hope is that most distressed borrowers wouldn’t really have to file; but, the threat of being able to use bankruptcy would give them leverage against lenders to work out more reasonable repayments.
Personally, I wouldn’t quite say that I regret my student loans and the life they led to, even if it probably wasn’t the smartest financial decision in retrospect.
I like my life, and I’m too prone to all kinds of “butterfly effect” thinking to imagine how things might have turned out differently.
Besides, regret won’t get you much. (Although regret and $50 will get you a one-year subscription to Understandably!)
Anyway, I’ve had my say. Now, I’ll get out of the way.
Let us know how you’d solve this whole thing in the comments, and have a fantastic weekend. As always, be excellent to each other.
Oh, here’s how our Twitter poll on the same subject worked out. Anyone can answer this so it’s just a sample. But “Forgive More/All” took first place and my “Bankruptcy” solution above took second.
7 other things worth knowing today
Interesting history on why student loans have been treated differently in bankruptcy than other unsecured debt since 1976. Short version: concern about people running up debt from Day 1 with the plan to file for bankruptcy protection. (Tate, Esq.)
Some Spotify podcasters are making $18,000 a month podcasts that consist of nothing but white noise. Related: How to make your iPhone play white noise in the background. (Bloomberg, The Verge)
Meet the Amazon workers suing Amazon for expenses they incurred while working from home during the pandemic. (Bloomberg)
California is rationing water amid its worst drought in 1,200 years. (CBS News)
Forbes: He missed the playoffs for just the fourth time in 19 seasons, but LeBron James still scores as the first active NBA player to make our list. (Forbes)
BREAKING: CNN has a new guideline, requiring the network's news producers to use the phrase "BREAKING" more judiciously: "It has become such a fixture on every channel and network that its impact has become lost on the audience." (Axios)
High schoolers step in after classmates of a bullied sixth-grader refused to sign his school yearbook. “It just made me feel better as a person. I don’t know how to explain it. It just makes me feel better on the inside,” he said. (KDVR)
Thanks for reading. Photo: Unsplash. Want to see all my mistakes? Click here.
IMO, canceling any amount of student debt is wrong for 4 reasons: 1) it's unfair to those who didn't take on that debt. The government's money is our money, after all, and taxpayers shouldn't have to bear the burden of our neighbor's poor financial decisions. Why not offer to forgive medical debt instead? That's a situation that (in most cases) no one willingly takes on. 2) Paying those loans on the borrower's behalf means that these predatory lenders suffer zero consequences. They still get their money. So there's no incentive for them to change. There has to be some kind of punishment for them and reforms put in place, regardless of loan forgiveness. 3) It also ignores the fact that higher education is ridiculously overpriced. I'm not suggesting price controls necessarily, but we need some measure of making it more affordable, so students don't get themselves into this position in the first place. 4) People need to learn to be accountable for their actions and decisions. So many of these younger generations have been coddled, helicopter-parented and insulated from any/all hardship, and it's creating a society of people who can't cope with adversity. If we keep bailing them out, it'll only get worse.
Why cancel student debt?? It has already gone 2 years with no payments!! I would much rather see $10k go to a Burger King employee whose chances of lifetime income and investment is much lower. WHY give the perks to someone who AGREED to pay it back? Why not give everyone a $10k car? Or every home owner $10k? This is SOCIALISM plain and simple for those of us who WORKED our way thru college and make smart choices. Where does it stop? It is just madness. (I worked full time 40-60 hours a week in college and still contributed to my ROTH IRA
And I had my loans paid off within 2 years And I am no where close to the smartest guy in any room - I just made the hard choices.) I would agree that paying down someone's medical debt make even better sense.
This is just pandering to voters.