
U.S. To Forgive at Least $108B in Student Debt in Coming Years - blacktulip
http://www.wsj.com/articles/u-s-to-forgive-at-least-108-billion-in-student-debt-in-coming-years-1480501802
======
JackFr
The most earnest attempts to help are again struck down by the law of
unintended consequences.

From the article, for the 8 million people currently in default the average
outstanding balance is < $10,000. For the people enrolled in the income-based
repayment plan the average outstanding balance is > $67,000. So it seems if
the marginal cost of borrowing more is 0, people are going to borrow more.

I think the real story is that it's difficult to have government subsidies for
students without putting some form of price controls on the schools. What we
see in practice is that the subsidies cost the government (which is fine --
that's what a subsidy is) but the value is being captured by the school, not
the student.

~~~
John23832
I agree.

When the government subsidizes student loans (which I think they should in
order to promote an educated/skilled society) there must be cost controls on
the school (no NE private school art majors costing 100k+) and underwriting on
the part of both the school and the student (the student doesn't successfully
complete a degree, the government gets money back), in combination with
monitoring.

~~~
koolba
> When the government subsidizes student loans (which I think they should in
> order to promote an educated/skilled society) there must be cost controls on
> the school (no NE private school art majors costing 100k+) and underwriting
> on the part of both the school and the student (the student doesn't
> successfully complete a degree, the government gets money back), in
> combination with monitoring.

If the government really wants to get involved in this (which I really wish
they didn't) they should build and operate more schools. Make them either at-
cost, heavily subsidized, or (my preference) entirely free for anyone to
attend. Forget income requirements, residency requirements, or anything else.
Just make it entirely free to anyone that wants to show up and learn.

This would force the private sector to actually compete against something
meaningful and _that_ would lead to lower prices. The current system of the
government handing out loans to anybody for anything is what leads to $100K
4-year tuitions.

We've already got a decent baseline of community colleges throughout the USA.
If they closed off the student loan spigot and poured that same money into
there we'd all be much better off. If someone wants to go to $EXPENSIVE_SCHOOL
then fine, let them figure it out on their own _or_ get the school to use
their $N-billionaire dollar endowment to subsidize it.

~~~
John23832
> If the government really wants to get involved in this (which I really wish
> they didn't) they should build and operate more schools. Make them either
> at-cost, heavily subsidized, or (my preference) entirely free for anyone to
> attend. Forget income requirements, residency requirements, or anything
> else. Just make it entirely free to anyone that wants to show up and learn.

By financing loans, aren't they already trying to do this? Building and
operating more schools just adds more cost.

IMO, when you have a functioning government, this is what makes a single payer
system (like is often seen in healthcare) so great. If schools can't come to a
reasonable price/agreement with the single payer, they don't get paid. And it
also leverages a central tenant of Capitalism... there's always someone out
there willing to work for less.

I know people see this as a bad word, but if we leveraged the best of both
Socialism and Capitalism in situations like these we would be better off.

~~~
koolba
> By financing loans, aren't they already trying to do this? Building and
> operating more schools just adds more cost.

No providing loans increases the demand side of things (more people capable of
paying) without controlling costs or increasing supply.

Building and operating more schools increases supply which would have a
downward pressure on costs as private institutions would then be competing for
students against (more) government run schools.

> IMO, when you have a functioning government, this is what makes a single
> payer system (like is often seen in healthcare) so great. The single if
> schools can't come to a reasonable price/agreement with the single payer,
> they don't get paid. And it leverages a central tenant of Capitalism...
> there's always someone out there willing to work for less.

Ha! This is first time I've heard someone try to explain single-payer
healthcare as an example of capitalism.

~~~
John23832
> Ha! This is first time I've heard someone try to explain single-payer
> healthcare as an example of capitalism.

Well single payer isn't Capitalism, it's Socialism. I wasn't trying to
represent it as Capitalism. In (this form) Capitalism, if one buyer and one
seller can't agree (where the supply and demand meet), then that's ok because
there are (most likely, given a supply/demand graph) other buyers and other
sellers.

In (this form) Socialism, if the sellers cannot agree with the single payer
(or the payer that represents an overwhelming number of the potential buyers)
then they don't get paid for services (or are relegated to the much smaller
market segment).

>> I know people see this as a bad word, but if we leveraged the best of both
Socialism and Capitalism in situations like these we would be better off.

Not to imply that you were being disingenuous/malicious, but leaving out this
part of my post misrepresents what I was trying to say.

~~~
ende
Single payer systems are neither Capitalist or Socialist. It's just a form of
public spending.

~~~
John23832
Under (pure) Capitalism, there isn't public spending for private individuals.
Not to mention government influenced pricing... single payer is pretty far
away from laissez-faire and capitalism.

~~~
ende
Capitalism is simply an economic system based on private ownership of
property. Public spending is completely irrelevant. Single payer systems are
entirely compatible with capitalism, and is a good example of Social
Democratic policy (not to be confused with Socialism, which it is not), which
seeks to work within the structure of Capitalism. A Socialist system would be
one in which private ownership (of health care) is prohibited; perhaps the
closest example among modern democracies being the NHS in the UK.

------
Chuckalucky89
Having a reasonable discussion about student loans with an age group that
attended college 20-30 years ago isn't reasonable. The costs increased
exponentially compared to what it was. The reasonable solution is to educate
high school students on the affordable options of in-state universities and
community college.

~~~
pc86
Who isn't being educated about these options? I was in HS 00-04 and teachers
and guidance counselors constantly extolled cheap state school options (which
even today are in the $6-8k/yr range including room and board) and community
colleges.

Prestige and pride have a lot to do with it. Two degrees from the same school
are worth the same if one person was there for four years and one went to
community college for two first, but ask the 17 year old HS student who just
has to sign a promissory note which one they want to do, and they're going to
pick the first option 9 times out of 10.

~~~
iamatworknow
I grew up relatively poor but was encouraged by my high school teachers to
attend a nearby private undergraduate university, which at the time (2005) was
$40k/year. Even as a 17-year-old I was worried about carrying a lifetime of
debt. My parents weren't involved at all in the situation (neither having gone
to college and not particularly concerned with my choices -- long story), so
these teachers were the trusted adults I turned to for advice. They
universally said, "the degree will pay for itself! Don't worry about the
debt!" I did get some financial aid and scholarships, but now 7 years post
graduation my total debt is still around $50k, with about $44k of that being
federal loans.

Just an anecdote of someone who not only wasn't educated about the options,
but actively encouraged to ignore them.

~~~
mholmes680
I was in a similar boat, but picked the cheaper state school (which now, btw,
is not cheap 15 years later).

I think, realistically, the only benefit I maybe missed out on at a more
expensive school is that I could have (completely anecdotally) met a larger,
richer network. And now, I would be using said contacts in that network to get
me better job(s). For example, I've seen perfectly regular people come out of
Cornell and they just mint money.

On the other hand, investing in a network doesn't stop at college, so it can
be overcome in various ways.

~~~
iamatworknow
Perhaps unsurprisingly I got my current job because the owner of the company
is the brother of one of my professors.

I guess what I find most disappointing in retrospect was that I wasn't
encouraged to research further out from the local area. My original comment
may have been a bit hyperbolized in that clearly I _knew_ about state schools,
but my idea of what constituted a "state college" was influenced by the three
within an hour drive of where I grew up. In my state's college system these
three also happen to rank toward the bottom of most lists in terms of job
placement and campus quality of life. I toured two of them and wasn't exactly
impressed. So belief became that "state college" meant "cheap college", as in
the degree would be worthless. Again, this is the naivete of a rural-raised 17
year old.

In the summer before my final year at my expensive university, I did a
"Research Experience for Undergraduates" internship thing at one of my state's
larger research universities and was blown away by how different (and better)
it was compared to the state schools I was familiar with. I was 21 at this
point and had a better understanding that even though it was about a 7 hour
drive from home, it really wasn't _that_ far away, and if I had known about it
when I was graduating high school it would've been doable.

For curiosity's sake, I just looked up what the tuition plus room and board
for this state school, and in 2016 it's still less than half of what I paid
for my school in 2005.

But that's all in the past. I think I got a decent, though not stellar,
education from professors who genuinely seem to care (even now, as I stay in
contact with a few), in addition to the networking opportunities. In the end I
don't regret it, but I do try to advocate to my younger relatives that they
should shop around and take the decision seriously, and of course ask me for
guidance should they need it.

------
pdog
Why is the federal government the largest single lender to students? This is a
direct transfer from taxpayers to a few public and private institutions. If
colleges and universities were responsible for student debt, they never would
have made these loans that need to be forgiven in the first place.

~~~
pavlov
It's the American way: profits are private but losses are public. (See also
the health insurance system.)

~~~
mstodd
Are there any standard paths to getting in on this scam? I'm tired of always
being picked to fund other people's carelessness.

~~~
pavlov
Harvard Business School, I guess?

------
jbmorgado
In a nutshell, all US citizens end up paying extremely expensive education
(compared to countries with same or better education level) to overpriced
private faculties and in bank loans instead of simply accepting that higher
education should be public (and with that greatly reducing the expenses with
education) and founded by state with a network of public faculties.

All in all, people appreciate the idea of having a middleman in the equation
that greatly increases the costs of the product, just so that then can pretend
they are not financing other people education when they could simply accept
public education, pay much less and get rid of the speculative middleman.

Same goes for healthcare actually. It's a strange part of American mentally:
better pay more for an inferior product and pretend that you aren't actually
financing those that can't afford the product, than pay less and have a part
of what you pay directly helping those that can't afford it by themselves.

~~~
ant6n
It's to perpetuate the myth of 'rugged individualism', one of the founding
legends of the US. Those middle men making all the money have a vested
interest that people follow this belief. It's related to the believe where
everybody views themselves as 'temporarily embarrassed millionaires', which
explains why they are willing to take on so much debt to study, and why they
accept the trickle up.

------
golemotron
The student loan system needs serious reform. It encourages students to take
on debt with the student holding the bag and then ultimately the taxpayer,
based on an individual judgment about whether a particular degree will have
market value.

One reform that has been suggested is to make sure that universities have skin
in the game, that they actually lose money when a loan defaults. I'm not sure
we should go there but there should be a system better than debt servitude for
students coupled with moral hazard for society.

------
dexterdog
This is a horrible message to kids currently thinking about borrowing because
it will make them more likely to borrow which will make tuition skyrocket
above its already criminal level.

~~~
VLM
Its a necessary part of the bubble cycle. Once you're on it, you can't just
wish away the bubble and say "now we're gonna run this economic sector on
financial fundamentals" or whatever.

There doesn't seem much political will to de-bubble economic sectors, real
estate certainly hasn't been fixed and thats a larger problem, ditto medical-
industrial complex.

~~~
dexterdog
And that's what we do - band aid at the cost of everybody so that the industry
can keep its racket going and ultimately cost even more in the future.

------
nfriedly
The current situation is a mess, and I don't really know what to say about how
to handle it. Maybe the government forgiving it is a good idea. But, moving
forward...

Kids: _please don 't go into debt for education!_ Go to a community college or
a state school. Go part time. Go to a trade school. Start a business (no
degree required!) But just try to avoid debt. It's hard to describe exactly
how suffocating debt can feel. All those things you want to do when you grow
up - debt is going to make most of them harder of impossible.

Parents: if you want to save up and pay for your kids education, I guess
that's fine. But if you can't/won't, then it's your responsibility to inform
you children about debt.

~~~
jetti
>debt is going to make most of them harder of impossible.

I experienced this when buying my first house. My wife and I were unable to
get a conventional loan because our debt to income ratio was too high. I had
$90k in student loans from grad school which prevented us from getting a
conventional loan. We were able to get an FHA loan and can re-finance once we
get to 20% equity but it is frustrating to have to put up with FHA regulations
before buying the house.

------
rietta
My wife is a mental health worker - a therapist - who works with people with
severe needs. The jobs in her field are almost always state funded either via
the criminal justice system or counties providing services for adults with
severe and persistent mental illness. Therapists get paid less than a fast
food restaurant manager and many times and have student loan debts that quite
large compared to the expected earnings. In my mind, this sort of work is
exactly why the public service 10 year program was created and is a form of
the Federal government subsidizing the state government efforts to care for
the least and the last.

------
Swizec
Hey that's not fair. How will I make my US friends feel bad about paying so
much for the same or worse education as I got for free in Europe?

My favorite effect of this social difference between [most of?] EU versus
[most of?] US is that in non-england Europe, paying for private schooling
means you're dumb and can't earn good grades without paying for them. In the
US few non-private universities are considered truly legit.

Always a fun pub or thanksgiving dinner conversation.

~~~
hood_syntax
I feel like a good amount of the top tier are public a la UC Berkeley, UPenn.

~~~
Swizec
Don't those charge many dollars in tuition despite being public? UC Berkeley
is $13k/year according to their site.

For comparison, my european public uni was 50eur/year for enrollment fees.

LMU Munich, #1 uni in germany, is 110eur/year in mandatory fees.

~~~
hood_syntax
They certainly are nowhere near as cheap as universities in Europe, but they
are comparatively affordable. UC Berkeley's tuition, for example, I would put
in the middle of public universities, and likely anywhere from 10-30k less
than most private ones

~~~
ant6n
Still unlikely to graduate without debt unless your parents are loaded

------
aikah
[http://archive.is/Hoj9R](http://archive.is/Hoj9R)

~~~
CamelCaseName
This is a mirror of the article, in case anyone didn't want to click blindly,
or is doing a ctrl+F for mirror or source.

------
dangerlibrary
Interestingly, and the article touches on this a bit, a disproportionate
fraction of this forgiven debt goes to those who got terminal professional
degrees, like doctors and lawyers.

> Critics, including academics across the political spectrum, say the income-
> based repayment program isn’t targeting the neediest borrowers and instead
> bestows big benefits on those who attend pricey colleges and graduate
> schools and earn high incomes.

Take a new surgical resident who just graduated from med school with a
slightly above average amount of debt - $300k [0]. They consolidate their
loans and put themselves on an income based repayment plan, and start their
residency at a nonprofit hospital. After 120 payments (at most one per month)
made while working for a 501(c), their remaining loan is forgiven, tax-free.
[1]

At the outset, the income based plan really is the only option. They'll be
earning a modest salary as a resident - 40-60k per year. During this period
their debt will accumulate unpaid interest as their payments are capped at 10%
of their income (above 1.5x the poverty line, so something like max_payment =
0.10*(income-20k); $200-300 a month, at most). After ~7 years of surgical
residency, depending on specialty, the doctors begin earning $300k-$500k/year.
At this point their total loan amount at 7% simple interest (unpaid interest
isn't compounded under these programs) has grown somewhere on the order of
40-50%. Now they are making the maximum payment on their debt assuming a 20-25
year repayment term. Unfortunately, they'll only be making those payments for
3 years before the entire balance of the loan is forgiven - tax free.

The end result is that for doctors whose residency and subsequent career
begins by working at nonprofit hospitals, the government will end up forgiving
the full amount of their medical school tuition, usually plus a little bit of
interest. Med schools, law schools, and other professional schools know this,
and actively promote these programs as a way for students to justify going
into unbelievable levels of debt. [2]

In general, those with less than about $40k in debt will see no change to
their monthly payment by moving to an income based repayment program, so they
have little incentive to go through the hassle of signing up.

[0] [http://grad-schools.usnews.rankingsandreviews.com/best-
gradu...](http://grad-schools.usnews.rankingsandreviews.com/best-graduate-
schools/top-medical-schools/debt-rankings)

[1] [https://studentaid.ed.gov/sa/repay-loans/forgiveness-
cancell...](https://studentaid.ed.gov/sa/repay-loans/forgiveness-
cancellation/public-service)

[2] [https://www.law.gwu.edu/loan-repayment-
plans](https://www.law.gwu.edu/loan-repayment-plans)

~~~
djb_hackernews
> The end result is that for doctors whose residency and subsequent career
> begins by working at nonprofit hospitals, the government will end up
> forgiving the full amount of their medical school tuition, usually plus a
> little bit of interest. Med schools know this, and actively promote these
> programs as a way for students to justify going into unbelievable levels of
> debt.

So we get more doctors that work in hospitals that aren't motivated by profit
and you make it sound like a bad thing.

~~~
dangerlibrary
We also get completely unrestrained tuition growth, which is really the core
problem. And we forgive hundreds of thousands of dollars in debt to
professionals earning 10x the median income.

Also: don't kid yourself. Non-profit hospital chains are enormous businesses.
[0]

[0] [http://www.beckershospitalreview.com/lists/25-top-
grossing-n...](http://www.beckershospitalreview.com/lists/25-top-grossing-non-
profit-hospitals.html)

~~~
djb_hackernews
My SO is a resident at a non-profit in an east coast city. I'm not "kidding
myself".

I made no claim that non-profit hospitals aren't enormous businesses so I'm
not sure what your link is proving. Though to me that link does actually make
the point that we should have more non-profit hospitals, imo.

2 more points:

1) You are grossly over exaggerated the compensation of doctors after
residency in non-profit hospitals. Of course they do make more than the median
income but it is no where near 10x.

2) I think you should consider what the benefit of a) having non-profit
hospitals and b) loan forgiveness programs for doctors at non-profit hospitals
is.

~~~
dangerlibrary
> We also get completely unrestrained tuition growth, which is really the core
> problem.

~~~
djb_hackernews
Right so you have a few options there. 1 being getting rid of the incentive to
work for a non-profit or another being to increase the size and number of
medical schools. I know which one I'd prefer.

~~~
dangerlibrary
My preferred solution is actually to force the original beneficiaries of the
debt origination to carry a "lowest priority" fraction of it for the duration
of the loan - somewhere from 5-20% should be sufficient. Once schools need to
carry responsibility for the full repayment of the student loans, they'll have
an incentive to minimize the size of the loans.

------
throwaway98237
University is the new H.S. You know it. I know it. Everyone knows it. We have
publicly funded high schools. It's time we have publicly funded universities.
If the U.S. wishes to be competitive globally we need a well trained, educated
workforce unencumbered by mountains of debt at the very time their supposed to
be making their first "adult decisions" (buying a home, having kids, choosing
which city to live in). Lump this in with climate change and universal health
care, as far as I'm concerned. This is 2016, not 1850. It's not every person
for themselves on the frontier. Almost everything we consume is touched by
folks far away, requires IP to be built, and public infrastructure to get to
you. This "there are no externalities that we need to worry about", "I can
take care of myself mythology is so blatantly false at this point", it's b.s.
and I just consider someone that starts with that as a set of axioms for their
world view as ignorant or delusional.

~~~
nradov
University is not the new high school. Community college and trade school is
the new high school. Not everyone is suited to a university education, or
wants one.

~~~
throwaway98237
I oversimplified. I would say that all three of those should be an option,
that one should not consider their education complete till they'd gotten
through either university, college, or a trade school. I'm even a huge
advocate of apprenticeships. I suppose those could be rolled up into the trade
school category. But I believe that leaving university out of that group (only
counting college and trade school) ignores a large and important portion of
the economy. Also, the liberal arts portion of schooling is important for a
citizen.

------
nradov
A lot of this problem would go away if student loan lenders and educational
institutions were required to give students / borrowers a list of median
starting incomes for graduates broken down by major, along with examples of
typical repayment schedules.

------
grigjd3
I saw academic bloat run sky-high when I was a post-doc. Today, I think about
saving for my daughter's college, which I am fortunate enough to be able to
do. It's infuriating that the money is going to paying for self-preserving
bureaucracy and campus beautification projects like replacing the flowers
every month. From what I've read, it's even worse today.

~~~
castratikron
The highest paid public employee in my state is a college basketball coach.

~~~
pc86
A.

I think it's less about the amount any one person is paid and more about the
huge number of administrators moving paper from one desk to another.

I went to a private liberal arts college with a few thousand students. We had
a Dean and four assistant Deans, all of whom made multiple six figures a year.
Our president when I was there made $450k/yr and had next to no living
expenses.

B.

Private v. public has nothing to do with academic bloat.

~~~
hash-set
Exactly this! I attended a major southern public university and the
administrative overhead there was immense. Not only that, you had high placed
administrators who "retired" only to immediately return as high dollar
consultants. Whole thing stinks.

------
asdasfdsfsdfwe
Some private firms in the income-based repayment space:

\- Vemo Education (vemo.com)

\- LEIF (joinleif.com)

\- Purdue, Washington U (...)

------
niemyjski
Bullshit.. I paid off student debt like a responsible adult

~~~
CoryG89
Then you are not the target for student loan forgiveness. It is meant for
those who took a loan on the premise that they would be able to get a job that
allowed them to pay back the loan. This is not the case for a large portion of
college graduates. Here on HN this is not going to be common due to the demand
in our job market. But talk to someone who borrowed a bunch of money to major
in something with a less demanding job market and you'll hear a different
story.

~~~
yummyfajitas
Yes, the target for student loan forgiveness is irresponsible people. I think
that's the point.

~~~
erelde
What's irresponsible? Getting a master in Art History?

You seem very close minded. Everyone can't and shouldn't do a CS degree to
"get a job".

~~~
lgieron
A decision to start your adult life with borrowing large amount of money and
spending it on studying an esoteric subject would be considered extremely
irresponsible in most societies ( assuming the person does not have any assets
or marketable skills to fall back on).

~~~
ant6n
By 'most societies' you probably mean undeveloped countries.

This problem doesn't really exist in other first world countries.

------
roymurdock
Hard to discuss an article that is paywalled, and that can't be accessed
through the usual "web" search for title method.

~~~
smitherfield
[https://www.google.com/search?tbm=nws&q=U.S.+To+Forgive+at+L...](https://www.google.com/search?tbm=nws&q=U.S.+To+Forgive+at+Least+%24108B+in+Student+Debt+in+Coming+Years)

~~~
downandout
Looks like the tbm=nws parameter needs to be added to all WSJ web links on
here. I wonder if we can get HN to do it.

------
reader5000
Student debt is not real anymore than indebting newborns for their $30k birth
costs at 6.8% interest rate would be real.

~~~
thatwebdude
Except newborns don't have the choice of being born.

Also, your figure is for the average C-Section; not as common as traditional.

And, there is no "insurance" option (as there is for birthing) for student
debt; which really would reduce it to about 10% of the cost...

------
superninja234
There should be a clause that only helps individuals with useful majors
(Engineers, Education, Math) and not some dingus that went to a $60,000 a year
private school for art therapy.

~~~
DanBC
> for art therapy.

Art therapy is a respected form of psychotherapy. It's available to people on
the English NHS (which focuses on evidence based treatment), and "art
therapist" is a protected title in the UK.

Does "art therapy" mean something else in the US?

~~~
nilved
A title being protected doesn't mean it's scientific. C.f. naturopathic
"doctors."

I don't know enough about art therapy to say that it is or isn't scientific,
though.

~~~
justin66
Art therapists are licensed therapists who focus on treating patients in the
way the title implies. I don't think I'd call it science, although the one
graduate program I'm familiar with has their students treat children and
report on the efficacy of the results.

It's often an MA degree, so there's no pretense of it being a scientific
endeavor.

~~~
nilved
In what way is therapy not science?

~~~
justin66
I don't think most therapists publish much, is the short answer. For a more
meaningful answer you'd want to ask a practitioner, I would think.

~~~
nilved
I'm assuming that art therapy is grounded in a scientific understanding of
psychotherapy. You don't need to be a professional scientific researcher to
practice science.

I realize that my wording was ambiguous so I'm sorry for that.

