
We Must Cancel Everyone’s Student Debt, for the Economy’s Sake - rectang
http://nymag.com/daily/intelligencer/2018/02/lets-cancel-everyones-student-debt-for-the-economys-sake.html
======
gedy
I was a low-information student, first to go to college in family. Once I
decided to go however, the entire equation was what college could I afford and
the living costs. Loans never felt like an option. Because of that, I
basically was forced to choose a state school and live off campus in cheap
housing. Plus side is I came out with no debt, drawback is I didn't have much
fun. I guess that biases my thinking, but student debt forgiveness seems
ridiculous for most all of the people I know who went deep in debt for a non-
economically practical degree.

~~~
klodolph
If that's your perspective, I can understand why it would seem ridiculous. But
consider other perspectives. Think of all the people who weren't the first in
their family to go to college.

Imagine that you're 18, and everyone you know tells you that you need to go to
school to get a good job. People are competing to get into better schools, and
you get admitted to a relatively nice private college with a beautiful campus.
Your parents went to a similar college, graduated, got jobs, started a family,
and are encouraging you to do the same thing.

Except now, college is something like 5x as expensive as it was for your
parents, teachers, and advisors, adjusted for inflation. Your job prospects
after college are worse, too. Maybe you manage to pull in $15/hr and you think
it's pretty good, but meanwhile rent is 50% higher than it was for your
parents and teachers.

You feel like you were lied to, betrayed, and you feel trapped. As a society,
we _created_ this problem. I'm not trying to take away agency from the people
who chose to take out loans and study whatever they felt like, but we did send
an army of teachers and academic advisers after our children telling them that
college is what you need, and loans are how you pay for it.

The idea of a "non-economically practical degree" is a bit of a red herring,
here. It doesn't matter as much which degree you get as an undergraduate.
Sure, there are a few high-paying degrees like geology but in many fields you
can get work with a range of degrees. Based on what I was majoring in, people
would ask me if I was going to go into teaching, as if that were the only
option for someone in my field. Yet here I am, working in industry.

~~~
rayiner
Then the teachers, parents, and professors who lied to you about education
should bear the cost, instead of the future taxpayers currently in utero.

~~~
klodolph
Funny you should mention future taxpayers in utero, because it's the
generation with student loan debt that's not having children because they're
too busy paying off student loans. They're skittish about getting married
because maybe you're in love with someone who's $50k in debt, and you're not
sure if you want to deal with that kind of burden.

Also, the idea of taxing "teachers, parents, and professors who lied to you"
is absurd at face value.

~~~
rayiner
Why is the idea of taxing the people who created the problem absurd? One,
they’re the ones with wealth to tax. Two, their ignorantly optimistic mindset
is responsible for the education bubble. Both generations prior and this
current generation realized the value of working instead of pursuing higher
education. Three, they benefited from it. The vast apparatus of higher
education, professors, administrators, etc., aren’t staffed with millenials.

~~~
klodolph
I'm not sure what you mean by "taxing the people who created the problem". Do
we just tax people based on their age, and assume that anyone over 50 probably
had their hand in this? Or do we test people to see if they ever gave bad
advice to children, and give them fines? Who, exactly, will be paying the tax,
and how do we identify these people?

Maybe I'm missing something, because this seems a bit too obviously absurd.

~~~
rayiner
You wouldn’t literally tax people based in advice they gave; instead it’s a
matter of using different funding mechanisms that are incident
disproportionately on different groups. Funding stuff with debt is a _de
facto_ tax on future generations. Instead, you can e.g. tax 401k withdrawals
above a certain amount, higher property taxes, taxes on pension withdrawals,
etc.

You can say that not everyone who draws on a 401k contributed to the problem,
but that’s besides the point. If you forgive the debt, then _nobody_ who is
going to bear the cost will have had anything to do with creating the bubble.

~~~
klodolph
I think we're having parallel discussions here. It's painfully obvious that
simply forgiving $1.3 trillion in debt without figuring out where the money
should come from is not a good solution. So I guess what I'm saying is I don't
think I hold the viewpoint you're arguing against.

I guess I misinterpreted your argument for taxing the "teachers, parents, and
professors who lied to you".

------
rectang
Skyrocketing student debt like you see in this chart does not arise because
students today are less virtuous or moral than their predecessors:

[https://pixel.nymag.com/imgs/daily/intelligencer/2018/02/09/...](https://pixel.nymag.com/imgs/daily/intelligencer/2018/02/09/09-student-
debt-1.nocrop.w710.h2147483647.2x.png)

It is the result of deliberate policy decisions, such as excluding student
debt from being cleared through personal bankruptcy.

These deliberate policy decisions magnify the advantage that accumulated
wealth has on success. Deserving outsiders are thwarted from fulfilling their
potential in the so-called "meritocracy", so that by and large social mobility
is stilled and American "meritocracy" becomes a first-order approximation of
aristocracy.

When the policy decisions which have led to this crisis are so vast and
immoral, _why not_ consider an action as dramatic as forgiving all student
debt?

~~~
troydavis
> why not consider an action as dramatic as forgiving all student debt?

As someone who would like to see public education be free _for future
students_ , I’ll give you 3 great reasons why rewriting the past is an awful
idea:

1\. It would treat someone who worked throughout college (and possibly learned
less and earned worse grades because of it) in order to borrow less - and
someone who didn’t even attend because they couldn’t service the debt - the
same as someone who borrowed heavily. It rewards a poor decision, one that
others handled better.

2\. It would treat someone who took on $30k/year in debt for a mediocre
private school the same as someone who took on $10k/year to go to an in-state
school (or nothing because they worked), or $30k/year to go to a top private
school. At least 1 of those choices is a low-return decision.

3\. There’s a lender on the other side of every transaction and they may not
have had anything to do with the policy decisions you disagree with.

Finally, the paper covers many possible implementations. If by “forgiveness”
you mean that the government should negotiate a payment to lenders (so
taxpayers are paying off everyone’s loans), here’s why that shouldn’t happen.
There’s a much stronger argument that _future_ education from public
universities should be free. Until that happens, given finite resources, any
money that would go towards debt should go towards future students, not
retroactively rewarding what may well have then been a poor decision. Pay/fund
public colleges, not lenders.

Basically, any retroactive move rewards a lot of people who made what were
then poor choices, and penalizes those who didn’t. Focus on making (public or
otherwise verifiably cost-effective) education cheaper or free for future
students.

Also, here’s a deep link to the paper PDF:
[http://www.levyinstitute.org/pubs/rpr_2_6.pdf](http://www.levyinstitute.org/pubs/rpr_2_6.pdf)

~~~
throwaway2048
the point of this article is that moralizing about who "deserves" it more is a
waste of time that is destroying the economy. Is it really worth it to hold
back everyone else just so you can finger wag at people that wern't
responsible?

~~~
troydavis
> the point of this article is that moralizing about who "deserves" it more is
> a waste of time that is destroying the economy

That was arguably the point of the NY Mag article, but the paper that the
article is based on goes a lot deeper, and doesn't claim that student loan
debt is destroying the economy.

> Is it really worth it to hold back everyone else just so you can finger wag
> at people that wern't responsible?

The last part of my comment addresses that. If you believe that (at least
cost-effective) college education can have a net positive impact on the
nation's economy, as I also believe, then put the money one would put into
eliminating debt into making future public college free (or subsidized in
whatever way maximizes impact for the subsidy).

Since they're both very expensive changes, the chances that both can happen is
unlikely. Moreover, until at least some college is free, future students would
still need to borrow. They'd re-create the same debt problem.

(Less important: it's not "finger-wagging" to not want to change the game
underneath someone. It's trying to create a set of circumstances that reward
good choices. Large swaths of our society exist to try to make incentives
reward good choices.)

------
tptacek
Is this the most effective and most moral way to spend a trillion dollars? The
benefits of such a policy would accrue primarily to households that don't
really need financial assistance, and would do little to help those who really
do.

~~~
maxerickson
I imagine federalizing municipal pension obligations would be a better idea.

It would have to follow some sort of extremely firm commitment to overfund
future pensions though (future residents getting a rebate from previous
taxpayers is way less hazardous than future residents getting taxed for
current services).

~~~
toomuchtodo
Both are financially feasible with reduced military spending.

~~~
tptacek
Can you make that argument with numbers?

~~~
toomuchtodo
On my phone at the moment, so I’ll have to come back with an in depth Excel
spreadsheet later (and I need to do additional research on Illinois pension
debt; numbers available show it somewhere between $130-250 billion).

Cliff notes are military spending is ~$550 billion a year. Halving that gives
us ~$275 billion a year ($2.75T over ten years) to direct towards unfunded
municipal pensions that need bailing out and student loan debt forgiveness
(along with other policies such as reducing the interest on student loans to
zero in the interim to give borrowers relief). I also assume that social
security tax thresholds are removed, preventing the need for general fund
transfers to top up Social Security.

My apologies if I made it sound like we could write a single check and this is
all fixed. It’s more the thought that we have ample resources to resolve both
issues in a controlled, orderly fashion if orchestrated by competent
government representation (a guy can dream).

Edit: we spent $2.4 trillion on Middle East wars

~~~
Turing_Machine
What repercussions do you think a 50% reduction in military spending would
have on national security?

~~~
toomuchtodo
A reduction in readiness and force projection, but not sufficient enough of a
reduction to put American soil in danger.

Other countries spend orders of magnitude less than the US on their military,
and remain conflict free.

Our current path is unsustainable structurally, and we must switch course.

~~~
Turing_Machine
> A reduction in readiness and force projection, but not sufficient enough of
> a reduction to put American soil in danger.

And your qualifications for making that assessment would be?

> Other countries spend orders of magnitude less than the US on their
> military, and remain conflict free.

Those "other countries" are, in almost every case, under the defense umbrella
of a country that _does_ have an adequate military.

~~~
tptacek
Unless you have countervailing qualifications —- in which case you should talk
more about them so we can ask good questions of you —- it’s unhelpful to bring
qualifications into the argument.

~~~
Turing_Machine
Nope, it doesn't work that way.

The military budget is set by those who actually do have expertise in the
area, not me. I don't need to show expertise to accept the judgment of
experts. The OP is disputing those experts, and thus does need to show
expertise.

------
maehwasu
The really gross thing here is the insane moral hazard that universities
represent in this feedback loop.

Universities, particularly through the media, exercise strong influence over
public discourse about education spending. They also benefit massively from
that spending. Canceling student debt without penalizing that feedback loop
likely accomplishes nothing or a negative.

Whether you forgive student debt or not, universities keep their huge gains
that they've pumped into infrastructure, administrators, and influence.

------
username8884547
My solution: Make it dis-chargeable in bankruptcy. Since it's a for profit
loan--albeit at lower rates, especially compared to 20+% a year credit cards--
the lender took the risk. The next time, they'll price this in and think twice
before approving every loan.

The borrower that took the loan--you signed it, right, and you were 18+ years
old ? --makes a calculated decision on whether to file for bankruptcy or not.
It has costs for the filer, _at least_ for 7 years, and possibly for life
(some jobs will ask if you _ever_ filed for bankruptcy).

Other than that, who cares: you are a big bank...sometimes you win, sometimes
you lose. You should treat a bank like it treats you, if you can get away with
it, of course.

~~~
ZeroGravitas
I think there's too much moral hazard there. A young person, with no real
assets (you can't repossess a degree) would probably decide bankruptcy is a
relatively good option, immediately after they graduate. And so the interest
rates spike to cover the risk, which makes bankruptcy an ever better option.

This is one of things, like corporations being able to sue governments, that
sounds horrific but has relatively clear benefits because if the risk is too
high the business deal won't happen. A classic prisoner's dilemma, and the
answer to that is always to change the rules of the game to try to make
cooperation pay for both parties.

Not that both systems couldn't be improved.

~~~
username8884547
Debt is debt, you tried to make a profit and x% of borrowers cannot fully pay
it (they might stop paying after 6 years for example, so not all is lost). The
idea is to curtail this kind of debt.

In bankruptcy court they are protections, you cannot have $2 mil in the bank
or a $250k salary and try to get out of paying $92k in student loans.

------
nabla9
Student dept payments should be tied to income.

After person graduates, they must use x percent of their income to pay student
debt. In this way the student avoids the debt trap in the case of
unemployment, or personal difficulties. Some may be able to pay the debt, some
may not, but it's the government that shares the risk and has stake in seeing
people getting the education they need.

Implementation can happen trough government either guarantees for the loan or
direct loans from the government.

I think Sweden has this kind of system.

~~~
dmitrygr
Wouldn't this just cause rapid multiplication of art history majors? Free four
years of fun sponsored by the taxpayer since x% of 0 is 0

~~~
imtringued
4 years of fun is definitively worth the risk of being homeless for the rest
of your life.

Seriously what the hell is wrong with HN?

Do you really think the vast majority people are this greedy and short sighted
at their own expense?

------
c8d3f7b49897918
We must cancel _everybody 's_ debt for the economy's sake, but we also have to
do it in a fair way. Thankfully, we have Steve Keen, who has already worked
out a solution:

[http://www.ideaeconomics.org/a-modern-
jubilee/](http://www.ideaeconomics.org/a-modern-jubilee/)

------
indescions_2018
Cancelled debt is usually taxed as income. Which would simply create another
liability.

One alternative, is to securitize student obligations. they have avalue which
is non-zero. And allow them to be traded in an exchange. It would provide the
reverse incentive that certain majors or career paths would obtain better
terms.

But an even better option is to simply allow for direct corporate sponsorship
at the undergrad level. If Apple needs 300 extra kernel hackers by 2022. They
should begin recruiting right at the high school level. Offering full tuition,
stipend and guaranteed employment upon successful graduation.

In other words, transfer education "risk" away from students. And provide some
insurance mechanism in case of failure.

~~~
criddell
> simply allow for direct corporate sponsorship at the undergrad level

It's hard for me to express, but I really don't like this idea. It turns
education into training.

------
wonderflpancake
I'm OK with cancelling anyone's student debt, IF they also get their degree
CANCELLED as well. As in, when an employer calls to verify their resume, the
institution will have to say they DO NOT have what they claimed.

Otherwise, what about the many people like me who didn't do something so
stupid? We can't go back in time. They end up with a free degree for being
stupid, we end up with nothing for being responsible?

------
threepipeproblm
This seems dramatic. Why not just cancel the Clinton administration's sinister
provisions Higher Education Amendments of 1998 (the 1998 HEA) which made
student debt non-dischargeable in bankruptcy? They sold out all the students
with that.

~~~
dmitrygr
When people graduate from college, they basically have nothing yet. They
haven't had time to acquire anything. This would make it trivial to get free
education at the taxpayers' expense. Declare bankruptcy on graduation day, and
then move on with your life.

~~~
threepipeproblm
That wasn't a big problem before 1998. There are many disincentives to
bankruptcy which is why people who are not broke or those with prospects to
earn aren't lining up to do it.

If a college actually prepares a student for the job market they would be
insane to do this; if it doesn't they may have no recourse.

Very few forms of debt are excluded from bankruptcy. IMO it's far from humane
to make college, of all things, in that category. Should those who pay huge
$$$ for American degrees and then can't get jobs be forced to pay the bloated
costs despite having to go back to a retail job where they can barely survive?
The original act takes a civil liberty, which most people enjoy, from a
vulnerable group. Young people just starting out who may have made a huge
investment that didn't pan out... being unable to declare bankruptcy prevents
such young people from getting back on sound financial ground for potentially
decades. It's embarrassing that the Clintons haven't taken more heat for this,
arguably nothing but an act of crony capitalism.

~~~
dmitrygr
What sort of the job does a bachelor's degree in art history or classic greek
literature prepare one for?

(A PhD in those fields could make one a professor, but a BA does nothing)

~~~
threepipeproblm
If lenders didn't expect to be repaid unconditionally, they would be less
likely to lend money to college degrees that were likely to be financially
worthless. This is as it should be. Before the modern financial aid situation,
some people still managed to get degrees with more of a classical academic
focus (i.e. without regard to market considerations). There were fewer of
them, but then the odds they had to go work at Denny's afterwards were also
probably lower.

------
stmfreak
I find it difficult to understand how taking money from people who earned it,
even if used to "forgive" loans borrowed with expectation of repayment, is a
means to increase economic activity. How is this different than the broken
window fallacy? The students, loans forgiven, are now going to spend their
former loan payments, sure, but the former recipients of those payments will
not be spending them. Sounds like zero-sum game with a feel good motive.

------
bfuller
I spent most of my 20s paying off my loans, I guess if this happens that would
make me the biggest sucker alive.

------
Eridrus
This article is clearly wishful thinking, but it struck me that they want to
do a big debt forgiveness thing without worrying about why people rack up
these debts and just leave that as something to be figured out after we've
done this big expensive thing.

------
TYPE_FASTER
Addressing the "astronomically rising tuition" issue is equally important.

------
rendall
People always bring morality into these discussions which then makes
discussion difficult, since it becomes about how we all feel about it.

Rather than thinking about how much it's 'right' or 'wrong' to forgive debt,
let's try to keep focus on the effect it would have on society. Positive?
Negative? And, if it truly is deeply immoral to forgive debt, what effect
would this have on society? Would the problems introduced thereby outweigh the
benefits?

------
rehemiau
No, this is just plain stupid. You (wherever student debt is so common) must
prioritize early school education about personal finance and loan
consequences.

------
RickJWag
Yes, and everyone should be given free pizza for life and a new Corvette also.

People need to make responsible decisions, that's all.

