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Billionaire Robert F. Smith pledges to pay Morehouse 2019 grads’ student loans (cnn.com)
144 points by Toyentrepreneur 27 days ago | hide | past | web | favorite | 161 comments

Looks like an opportunity for a longitudinal study. Compare life outcomes of this class vs classes that come before and after.

https://en.wikipedia.org/wiki/Longitudinal_study ' https://www.ssc.wisc.edu/wlsresearch/ - The Wisconsin Longitudinal Study (WLS) is a long-term study of a random sample of 10,317 men and women who graduated from Wisconsin high schools in 1957. The WLS provides an opportunity to study the life course, intergenerational transfers and relationships, family functioning, physical and mental health and well-being, and morbidity and mortality from late adolescence through 2011. WLS data also cover social background, youthful aspirations, schooling, military service, labor market experiences, family characteristics and events, social participation, psychological characteristics and retirement.

While I’m happy for the students and appreciate the “pay it forward” message, I am just shocked that the collective debt for 396 students is $40 million. That’s $100k per student on average, just for a bachelor’s degree. How could this be sustainable?

Agreed -

This is a great gesture, but I wonder if it will just encourage bad/gouging behavior by colleges.

Why the hell does education need to be that expensive? Maybe for a doctor, sure - but for teachers who are going to come out making 30k - it seems that education prices should be tied to future earning potential somehow.

> Maybe for a doctor, sure - but for teachers who are going to come out making 30k - it seems that education prices should be tied to future earning potential somehow.

The real problem is that people are completely price insensitive when it comes to their education. I would prefer us to move to an equity model, personally. One where education is free, but the university takes a small cut of your future earnings. This way everyone's incentives are properly aligned.

And for efficiencies sake we could centralise the collection of that cut. We could call it "taxes" (snark aside, this is why public education works. If you need to have a free market system, then have well regulated collection agencies compete for the attention of universities who's only allowed source of funding will be this cut, with some additional bonus paid out by the state for social mobility. One measure of this could be the increase in salary vs expected salary based on socioeconomic class)

We had this system in Sweden for a long time, my parents were able to study with these terms in the 90s. Basically, you could choose between multiple payment plans, one of them being that the government takes 4% of your income (after taxes) no matter the size. Once you're 65, your debt is written off no matter how much is left.

The system was changed by the more fiscally conservative government of the 00s into the terms I got, which is a payment plan over 25 years. If you can't pay you can apply for an exemption, but the interest rate is still compounding during the exemption. The loan has to be repaid before you're 60.

The reasons given for the change were many, but the most cited are that income earned overseas (very common, this being the EU and all) is very hard to keep track of and that this system incentivizes us into choosing a degree resulting in a high paying job.

(I should ad that we do not pay tuition for universities in Sweden, the student loans are almost exclusively used for living expenses so that you can study full time and some of it is used for textbooks and other supplies)

> The real problem is that people are completely price insensitive when it comes to their education.

While some people are, there are plenty of people who are not insensitive. I went to a public state school and pretty much everyone i knew there chose that school because it was way cheaper than going out of state/private and some of them even got scholarships.

I wonder what an equity system would end up doing to the way compensation works. I would imagine “perk” and other non-salary forms of compensation would increase, and other forms of Hollywood Accounting style tricks would be common. Maybe not though, since the IRS already has legal frameworks in place to ensure income is able to be accounted for.

Surely, just cancelling debt will always increase cost of service (I cannot come up with a historical example where this is not the case, but happy to be corrected).

However, this gesture is not a policy, and just a really nice gift and expression of altruism.

Also... since you mentioned it, I cannot believe how little teachers are making, including their pension guarantees (in US and many other countries) -- for the effort that many of them put in -- this is just a disgrace.

I wish, there would be a way for exchange safety/tenure guarantees for significant pay increase (eg at least double). And let the teachers make that choice.

It’s what happens when you think you need to go to a private college....

They could go to a public 4 year college cheaper.

Perhaps things changed in the 20 years since I graduated, but based on the college aid packages offered to me, it was less expensive for me to go to MIT than it was to go to UMass Amherst.

The upper elite of private schools (including MIT) are different from the vast majority of good-but-not-elite private schools.

As a Umass Amherst alum, I knew a couple of people there who got into MIT, and didn't go due to the cost. There were lots of students at UMass, who were foregoing private schools. Those tuitions seem like a bargin today.

You probably got a good package. That was about 25 years ago, when Tufts was the first college to break to 20k/year barrier.

As they mention, financial aid is the big factor. I suspect that the majority of people turning down these schools would not be eligible for significant financial aid awards.

MIT without financial aid: $67,342

MIT with "average" financial aid: $18,025

UMass in-state: $29,876



4 years at a UC is still 80-100k

This appears to be accurate.


The Cal State system is basically the same:


Note, college loans don't only cover tuition (which is not the sole cost of college). They are also needed for room and board. The above links explicitly call that out.

As another poster said. They are only needed if you don’t work while in college or at least go to a two year college that lets you stay at home and then transfer.

Not true. Working while in college is quite common. People still need to take out loans on top because 1)pay sucks for unskilled young workers 2) if you’re devoting yourself to school you probably aren’t working 40 hours a week so you can’t cover all of room and board. I graduated fifteen years ago, worked at all times in college and every break, lived cheap and still occasionally needed to take out loans for living expenses. I just paid the last one off two years ago.

Hey, I'm just citing the estimates from the financial help sections of Universities. 80k-100k is an accurate description of what UC Berkeley estimates for a 4 year degree.

I can’t understand the idea of spending tens of thousands of dollars on tuition then giving it half effort by working at the same time.

It isn't a zero-sum thing, and different people go to university for different reasons.

For me, minimising the debt at the far end was important, so I took a heavy course load and worked half time on average. Work experience from that period (IT for the university) was actually quite valuable in the jobs (mainly engineering) I've had in the decade since. Maybe one employer has ever even looked at my school paperwork; I really don't understand the idea of doing nothing but university with that time.

I worked twenty hours a week in what ended up being my career. I gained valuable work experience that landed me a job immediately when I graduated. I could have done better in school if I’d had the luxury to devote myself fully, but the work experience was invaluable.

Do you know how many adults go to graduate school, work full time, and have families?

Four years at UC is about $55k.

Room and board?

The tuition for UCLA is 13k/year for in state residents.

What’s the average rent in LA for a room within 10 miles of campus? Average monthly cost for food? Transit?

Now take those numbers, multiply them by 12, and add them to the tuition cost.

Now multiply that by four. Near $80-100k? Definitely.

Are you a boomer? Because you seem to think a decent public college is significantly less than 25k/year.

GA State University is a well regarded public college in GA - $10K a year.


And four year public colleges in GA offer 2+2 programs where you can go to a 2 year college even cheaper and then transfer.

Honestly, most students don’t go to Morehouse because it’s an outstanding college, they go to be a “Morehouse man” and the historical significance as an HBCU - And before I start getting replies about not understanding “the Black Experience”, I am Black, went to a much less prestigious (and cheaper) HBCU, spent a summer on Clark’s campus (part of the Atlanta University Center along with Morehouse) at a summer program, and came out with no student loan debt, and making just as much in 3 years as people coming from more prestigious schools.

How much is rent, utilities, and books on top of 10k/year tuition? Can students work to pay these other costs of living without sacrificing their studies? I have doubts.

Maybe at a public school the debt amounts are some percentage less. But, I argue, not that much less.

I can't speak for Georgia, but my monthly expenses at UMich were less than $1k, and I graduated less than 5 years ago.

Rent and food plan (generally required) is usually between 5-10k per year, maybe more now. Add in books, travel, and so many other expenses, and we are edging up to the 100k mark

Wait, are there any public colleges in the United States that charge anywhere near $25k/year for in-state undergraduate tuition?

The public university my brother is going to in New York costs around $25k for four years of tuition.

College debt doesn’t just come from tuition, if you want to make a valid argument representing students in the last 10 years, you need to take into account cost-of-living factors as well.

When you do, $25k isn’t hard to hit at all a year. Take any UC school (average in-state ~$15k) and add just rent (~$800/month if you’re lucky) and you’ll get there. Now factor in food, travel (over breaks), club fees, etc and you’ll see why debt is so high, on average, despite students working part time jobs.

Sure, but all the UCs offer quite a bit of financial aid too. Taking everything into account (tuition, room, board, and other expenses minus grants and scholarships), the net price of UC Berkeley is around $18k on average and 10k for low income students. Of the 26% of undergraduates who take out loans each year, the average amount was less than $6,000. The other UCs are even less. So the idea that taking out $25k/yr in loans at a UC is in any way typical is not consistent with reality as far as I can tell.

How much of the room and board could be covered by working part time? Could they stay at home for two years and go to a 2 year school and transfer?

Obviously, anecdotes aren't data, but "go to a CC for two years and transfer" is the path that a lot of people I know tried to take, and almost all of them ended up dropping out. A few joined the military, but almost all of the rest are just working standard service jobs, though they originally had much higher aspirations.

I know some of that might be attributed to them just being lazy or not being motivated, but it has been, in my experience, such a common story that I feel that there's a problem with providing kids with a simple life plan of "get two years at the local community college and transfer out".

I went to community college before I went to Uni. At least at my uni everyone that transferred in ended up not getting scholarships (we were told we would get them but constantly got a run around or financial aid would schedule meetings with us after the due date). We all ended up paying a little more than those that went all 4 years (who just maintained their scholarships).

Isn’t that even a better argument for going to a two year college? What if they spent those first two years spending more at a four year college and still had no degree?

But if the students didn’t complete a 2 year degree while staying at home, what are the chances of them completing a four year degree when they would have more autonomy and less oversight?

Part time work pays $10-15/hour. At 20 hours a work (which is nontrivial at difficult programs) you’d still easily accrue $1k/month from leftover rent/food/transit/etc.

Many students don’t have the options to stay home.

I’m a proponent of cc’s, but the discussion is about four year public schools being affordable.

I don’t want to be too pressing, but I’m guessing you’re in your forties or older, solely based on how out of touch are your responses (I.e. just do this, things aren’t so bad!).

I’m in the process of having an upcoming senior in high school - yeah I’m doing my research right now and know what the current costs of colleges are in GA.

Our plan is just what I outlined.

- a two year school that is part of the four year program at a local college where all of the credit transfers.

- staying at home for the first two years and we will pay for her car + car insurance.

- She will work part time just for spending money and incidentals.

- Since we won’t have to pay for room and board, she can get student loans that should cover tuition.

- That gives us four more years to get things together to help pay the student loans after she graduates (step daughter, I had no reason to worry about putting a child through college until 7 years ago).

I have a relative, whose parents just did something similar. He went to my alma mater for two years and with my encouragement, he transferred to a state school in Atlanta for a better curriculum and better networking opportunities.

They were in a position to save for his college, but his parents also put limits on the type of degree that he could get and the amount he could spend.

In-state tuition at University of Maryland is $10,000. You don’t need to take loans for living expenses, you can get a job. (A big part of what has made college “unaffordable” is not tuition increases, but the idea that people must be full-time students. That tacks on an additional $15k or so in living expenses each year, which is more than the tuition at all but the most expensive public colleges. To be fair, part of that is the exploding price of housing in many college towns, the bad job market for high school graduates, and the fact that we have infantilized teenagers so that they don’t go into college with job experience that might make them employable.)

> A big part of what has made college “unaffordable” is not tuition increases, but the idea that people must be full-time students.

Christ, it's like the FLOSS "time-isn't-money" scam got bored and decided to tackle higher education.

Any freshman at a four-year college who can "afford" a part time job along with their studies has the perfect detection system for a low quality education and should make their exit posthaste.

If you read this and think your college days are a counterexample, please allow yourself some time for silent contemplation before responding. (Contemplation-- that endeavor which apparently only gets introduced around graduate school nowadays.)

There are quite a few private colleges that have a tuition of about $2000/semester. It is entirely possible to get a bachelors for under $20k if you shop around.

Or, if you live somewhere like Oregon, if you graduate from an Oregon high school, the state will cover your tuition to a state college.


The one person I know who is getting full state funding for community college in Oregon is waiting to see if the program they're in will be renewed next year. If not, they won't be continuing on to a bachelors degree. Note that this program is only for those that are essentially financially destitute.

Edit: All I can find is the Oregon Promise covering only up to 18k highschool students with a GPA over 2.5. This program does not cover anything beyond Community College. Seems much more limited/shitty than the Seattle Promise (free Community College for all highschoolers)


This is false (of Oregon.) I live here and have a kid graduating with honors from High School this year. Wish it were true.

This is absolutely false.

My Georgia tech tuition was less than 25k/year.

Their estimates total for tuition + books + room & board...etc is 28k/year. With the hope merit scholarship it's <18k year

The average US student loan debt is about $37k.

The estimated cost of in-state tuition and fees for Georgia Tech is $12,418 per year without any aid.

If you meet the qualifications to get in to GA Tech, you most likely also meet the qualifications of the HOPE scholarship.


And it will cover most of your tuition.

The one I went to appears to be charging in-state rates of a bit under $10,000/year.

same here, and I went ~30 years ago. Lower class rates are between $9-$10k/year (was looking at two different schools recently - both in that ballpark, which included some books, expenses, etc). IIRC, my jr/sr years credit hour costs were higher, so I'd probably figure those might be, say, $14k? It seems that between books and some living expenses, many 'in state' schools can be done for < $15k/year. This is still fairly expensive (to my eyes) - figuring 4 years, that might get you to around $50k.

UNC Greensboro:

The following estimated annual costs for 2018-19 are for full-time students living on campus, excluding costs of books, supplies, clothing, travel, and personal expenses:

    Tuition & fees  $7,331
    Room (standard double)  $5,381
    Meals (university meal plan)  $3,657
    Total  $16,369


He seems to be an Xer based on his name. But you can’t blame Xers either, higher education became predatory after Xers have graduated.

Good and obvious guess.

But, looking at the tuition of public colleges in GA - where I am a resident and where Morehouse is - I don’t consider the tuition outrageous.

That number might possibly grossed up to include the gift tax he's got to pay. That being said it's still an astonishing amount of debt.

It says the gift will be "up to" $40m. We don't know the actual amount of collective debt. It could be more or less.

A good estimate based on Dept of Ed statistics is around 400*26k or a little over 10 million. He might be able to pay for 4 classes in fact.

It’s not

Is that because the cost for a useful vocational education should be closer to $30,000?

Or are you saying that people with millions of dollars of productivity ahead of them can't afford $100,000?

Starting life with $100,000 in debt compounding at 4-10% per year is a rough start, even with millions of dollars of productivity ahead.

Sure, I think huge student loans are bad for society, I was just wondering what your reasoning was, and I'm obnoxious enough to prod you to make the case that a $30,000 obligation is materially different.

It’s only a $30,000 obligation if you’re making more than ~$90,000/year, and there’s no interest attached.

A non-trivial number of those students would never make enough to pay off the loans. Ever. That’s not an exaggeration and happens in more than 50% of cases at expensive HBCs.

The real handicap is the lost compounding as many will sacrifice saving for retirement, emergency funds, or otherwise use funds that can be invested for long term security.

This is the natural consequence of unrestrained usury in a market for things everyone needs one of. See also - housing. Only the bankers benefit in the end.

I don't totally understand the idea of forgiving student debt. Isn't it fairly healthy to take out a loan to invest in yourself and then pay it back?

Should we be loaning out $100k at 5% interest to teenagers, without making kids pay it down for 4 years, and not being able to discharge it in bankruptcy?

Would a bank approve an 18 year old high school grad for a $100k mortgage at the same rates? Say, $0 down, 5% interest, no mortgage payments for 4 years?

Why can a high school grad get the first one and not the other? Is an 18 year old even smart enough about personal finance and debt to understand the differences between the two?

I was a kid who took out a huge student loan to attend university. At the time, all I knew was that “college was mandatory” and I was encouraged to “study my passion”. Fortunately for me I’ve been able to monetize my passion... but at the time, I had no concept of how much money I’d be needing, or how interest stacks debt on top of debt, or how it would affect my credit when I wanted to buy a house at the age of 30, because no one told me these things and with a verbal agreement my parents co-signed the loan (I never signed a paper myself) for me and now I have this baggage for probably a few more decades.

It’s almost impossible to expect an 18 year old in today’s American society to fully understand the crippling punishment of six figure debt and its long term effects on your life. When you have 1 year to figure it out, and the choices are “go to college” or “be a failure” then there is only one way forward — isn’t there? I feel so badly for people in my situation that aren’t working at tech industry wages... and there are many.

College presumably increases the borrowers earning potential. Not so, a house.

Average student debt load I believe is much less than $100k.

5% interest accrues very modestly.

The bankruptcy thing is irrelevant to this discussion.

>The bankruptcy thing is irrelevant to this discussion.

Well if we are talking about the American educational financial system then it's absolutely relevant to the discussion.

Cars, houses, credit card debt etc. are all discharged with bankruptcy which keeps the markets in check. Student loan debt is the only debt that cannot be discharged when it becomes impossible for the debtor to repay. As a result we are with in a 1.3 trillion dollar[0] debt bubble. And with the government printing IOUs for the students, the universities/profit education centers take full advantage. If the students were able to discharge the debt then the market would correct itself and education would be affordable and there would be less economic risk.

Right now the government is projected to go to a 30 trillion dollar deficit by 2030 with its government job programs and these education 'loans'. Even if you do not have student loans or work in the education system, you should be aware of the large debt bubble that's forming. And if Saudi Arabia, Iran, etc. decide to trade oil on different currencies... well then things will get interesting...

It will affect everyone just like the mortgage crisis in 2008.

> The bankruptcy thing is irrelevant to this discussion.

Wait, what??

Why do you think costs of education are skyrocketing? It's because lenders can write blank checks to 18 year olds who are going to be the ones footing the bill for the next 20-30 years.

If student loans were bankruptcy-forgiveable, lenders would think very carefully about what loans they give out to who, and why. Schools would be focusing on education instead of building worthless buildings that remain mostly-empty (yes, I saw this happen at UC Santa Cruz) or lining the pockets of the administrators. Lenders would be incentivized to loan people money based on their income potential in the future, which does not currently happen.

Bankruptcy is not only relevant, it's the entire crux of the issue. Make lenders partially responsible for the debt and you solve an entire slew of problems we currently face.

It should be.

The things that fucks this whole calculation up is that student loans in the U.S. can't be gotten out of via personal bankruptcy, so, in reality, a lot of dumb young people rack up way more student loan debt than they really should. And the people lending them that money have no incentive to think about the student's ability to pay the loan back, due to the bankruptcy exemption. Oh, right, and the loans are often guaranteed by the government, so there's yet another thing which screws up the incentives.

The private student loan market is almost non-existent now. The “people lending them that money” is the federal government. And the combination of no credit checks on the front end and non dischargability on the back-end is a deliberate policy to make loans universally available.

> make loans universally available.

That's the part that I think is a bad idea.

The whole point of student loans is to make a university education universally available. It's an attempt to avoid the regime of the old days when only the children of nobles and members of the clergy (also usually children of nobility) could go to university. Whenever I hear people advocating for an end (or a severe curtailment) of student loans, I have to wonder what people ought to be expected to do in order to achieve upward mobility.

I'm not arguing against student loans, in general, I'm arguing against our specific instantiation of the concept. As others in this thread have pointed out, a university education is not actually that expensive (roughly $10k/year for a state university; but even less for people who can't afford that, since they would qualify for grants, financial aid, etc.). That is surely out of reach for some people, so what should we do about it? In my opinion, the option we have chosen is the most insane option you could choose (or nearly so; providing free university education to whoever wants it would be more insane). There are so many perverse incentives. We've given 18 year olds the ability to take on hundreds of thousands of dollars in debt that they have no way of getting out of. This means that the other party in this transaction (the university) has no incentive to make sure that they're providing an education that A) provides real value, and B) is cost effective. And then we've decided that our children and grandchildren should hold the risk when this whole thing explodes.

It's nuts.

Especially given that we already have a way for students to earn a free university education by serving in the military. And if we wanted a sane system of increasing access to student loans, it would probably look something like garnishing up to 10% of a student's wages for up to 10 years, after which the student can file for bankruptcy to clear out any remaining loan balance. And get the government out of securing student loans. Students would still carry a significant burden, but lenders and institutions would also have to pay a lot of attention to the economic benefit of their offering, and it would leave me and my descendants out of this whole thing.

There’s plenty of trade schools that can give careers to those not fortunate to get a sizeable scholarship and who would need to take out unreasonable student loans. For those few I’d recommend getting a career and saving up some money before trying to pay their way through college instead of having their student loan loom over their heads for most of their lives and potentially ruining their credit score with a couple of missed payments.

There are plenty of people who would do well in science or engineering programs that aren't prodigious enough for a full ride scholarship. Telling those people to go to trade school is a huge waste of their economic potential.

At the same time, there are plenty of extremely bright people who take a scholarship to study a subject with approximately zero real world applicability. That often doesn't matter though, because they made it through and are now able to signal their status to employers.

I happen to own a copy of Caplan's The Case Against Education and I don't buy his arguments for trade schools. People go to school to signal status, mostly because humans engage in assortative mating, and trades offer money rather than status.

Besides that, many trades are very physically taxing and tend to cause injuries which result in chronic pain later in life. Who wants that? The epidemic of suicides and drug overdoses in the US is occurring precisely within the populations of older, injured workers who were essentially forced into retirement.

But none of this really addresses my original post.

> Isn't it fairly healthy to take out a loan to invest in yourself and then pay it back?

I am directly responding to this sentence in your post...

Even for people that study well-paying subjects and do well in school and for whom a 100k loan balance is worthwhile, it is still better to leave school with no debt.

Fun anecdote, an ex of mine was admitted to Mayo Clinic Medical School back when we were seniors in college. I don't remember all the details completely well, but they put a huge emphasis on getting students through med school debt-free so they could focus on being the best physicians possible in any area of medicine and for however long it took. My ex ended up with a full-ride with their help and it made it much easier for her to focus on being the best physician possible, less stress/able to buy a small home while in med school/take up additional study opportunities/trips/and again much less general stress (we are still friends 14 years later).

It sucks that us Americans are so boot-strapped oriented, but ah-well it makes them easier to exploit.

That investment shouldn't be made by individuals, it should be made by society as a whole, ie by increasing taxes so tuition is free. The burden of student debt is not shared equally or fairly.

Nice of him, but college should just be free. Charity cannot build a decent society, only a determined society can... one that prevents the creation of billionaires in the first place.

If the dominant ladder to the middle class will place those who take it in indentured servitude, you're not building a great society.

Any idea why college education is so expensive? here's just my cynic view from personal experience but I don't have enough data to back it. 1. some professors in some public state schools can get paid a ridiculous amount of salary 2. The administration is inefficient and bureaucratic.

Price is where supply curve meets demand curve. Demand curve is extremely far to the right due to everyone believing college will land them better, whiter collar prospects than otherwise available to them.

Also, it’s a very conspicuous social status marker and greatly contributes to the network of people that you have for the rest of your life. Not that it’s worth it for most colleges, but people believe, and no one likes to make less than rosy assumptions about themselves or their child.

Couple this extreme demand with an unlimited source of money, e.g. taxpayer funded student loans. Now a college can state whatever price they want, and the buy will be able to pay it! All they have to do is apply for a loan they are guaranteed to be approved for, and many times the parents are on the hook as well due to co-signing in the case of private student loans.

Not a single person does any cash flow modeling during this business of borrowing tens and hundreds of thousands of dollars on an unproven adolescent. Imagine a lender’s requirements for any other scenario where this much money is borrowed. All because it’s all taxpayer guaranteed.

It also allows them to price discriminate against rich parents to get them to pay more, and then they can subsidize kids from less wealthy backgrounds with scholarships. This works pretty well as a progressive system most of the time but there are plenty of stories of kids who have a rich parent or two who won't help their kid out at all and then the kid gets screwed with high tuition costs even though they have to pay for it all.

One theory is that it's mainly the strongly subsidized student loans:


It’s the only correct and obvious answer. Things don’t get expensive unless the purchasers have the money to pay for it. Considering the net worth of most US families, who struggle to get a loan for a house worth a few hundred thousand dollars, the only way they’re getting tens and hundreds of thousands for college is due to taxpayer funded loans.

Absurd level of non curricular services. Stadia, prestige buildings, lazy rivers... When I went to college in the 90's we organized our own sports and the college handled the educating.

Speaking just about the UCs, I remember seeing in a powerpoint that the price of tuition remained roughly the same over the last few decades, but since the tax dollars per student were going down, students were left picking up the difference. I didn't know why tax money was on the decline.

This powerpoint was on one of the public UCLA websites, but I don't remember which one.

list of companies in Vista's portfolio (if anyone is interested)


I though of them as private equity firm, more than an VC. but could be totally wrong...

Scott's tod... Wait sorry, Smith's kids.

And thus we see how the wealthy are able to control our society.

A rich man performs an act of generosity to wipe out the student debt of an entire college class, and you complain. What do you complain about?

Do you complain about how students are being burdened with massive debts before they even begin their careers?

Do you complain that university education is becoming ever more necessary while simultaneously becoming ever more unaffordable?

Do you complain that a skilled chemical engineer gave up his career and turned to moving little green pieces of paper around to make his fortune, because society rewards certain types of paper pushing orders of magnitude more than it rewards inventiveness, skill, and hard work?

Do you complain that the billionaire who made this gift pays a lower tax rate on his income than these students will pay on their part of the gift?

Do you complain that, while a few hundred graduates got an incredible gift, a million other students around the country will graduate this spring with a huge amount of debt and no billionaire to pay it off for them?

No, you complain about the fact that some of these students won't benefit from this gift because they were fortunate enough not to have any debt to pay off. Never mind the systematic problems that led to this situation, never mind that a few hundred people got an incredible gift and the only person who lost anything was a billionaire giving up a negligible fraction of his wealth. The important thing is that some of the peasants are getting more than the others, and they must be destroyed!

This isn't very complicated to solve: redistribute more of the wealth. MMTers say that isn't even necessary, but it is to fix inequality.

Question I've never seen anyone actually answer: Why is inequality inherently a bad thing if the "floor" for everyone is continually being raised?

Because wealth is power. Wealth is influence. If you control the means of production you have a disproportionately large voice not in government but in society. Not everyone has Jeff Bezos' pen that can in one fell swoop dramatically alter the livelihoods of millions or bring cities and counties to their knees grovelling at his feet.

Irrespective of total overall wealth, the distribution of wealth is an indicator of who decides the future of the society in which that wealth exists. Today, 90% of Americans have as much wealth as the 1% at the top, which means 1% of people wield half of the influence of money in society, and money has an obscenely powerful influence on society.

Its why we get tax cuts and deficits. Why we don't have socialized medicine. Why our labor protections are lacking, why workers get so little mandatory paid time off. Its why stress is up, why working hours are up, why debt is up. Why housing is more expensive - the poor don't use housing as an investment the way the rich do, in the absence of floods of capital floating around for the exclusive purposes of making more money there is a much smaller market for domineering real estate markets so much that you buy out the local government to prevent building to drive up your property values.

"Bad" is subjective and binary. Let's talk thresholds.

As extremes, the floor is death from exposure/starvation and the ceiling is owning all the wealth available. Does it make sense to have a range this extreme? Some think so, but I think they are confusing this for meritocracy. I think it's ineffective and too closely mirrors nature, where one small mistake means perpetual agony or death.

Now the other extreme: the floor and the ceiling are the same. Everyone is paid one wage no matter the work they do. Everyone has a decent amount of comfort. Is this effective? Probably not, because if I get paid the same wage as someone who works half as hard as me, wouldn't I just work less? There's no incentive structure here.

So the rest is exploring areas somewhere in between. Does it make sense for someone to have the power and influence that $100B gives? Does that kind of concentration of economic power make sense? What if it was capped at $1B? Would having $1B be incentive enough to strive for success? What about $500M? What about $100M?

At what point do you say "ok, great job, you've managed to divert an insane amount of wealth to yourself, you won't be needing any more after that?" And the lower you set that level, the higher the floor raises. Is this fair? Debatable, obviously. Is it effective? Probably. Nobody is not going to start a megacorporation because "gee, I wanted to make $100B but I can only ever make $1B, so what's the point? I'll just work in a coffee shop instead."

Now imagine the floor: What if we could all own a house, car, have free tuition, and work 30 hours a week with plenty of time for vacations? In other words, what if we could actually live our lives without running on some endless, stressful treadmill for 45 years?

This isn't about "good" or "bad" but rather being mindful of how wealth is distributed and how it could look if it was done differently. Obviously, we're talking about purely-hypothetical scenarios, but that doesn't mean the ideas shouldn't be discussed.

Rough/vague answers I've been given:

- our democracy is not perfect, and allowing someone to become too wealthy affords them too much power, effectively disenfranchinsing the masses.

- Even if the floor is raising, its still too low and it would be better to squeeze those on the high side of the inequality in order to raise the floor even further.

- the social cohesion thing from the other comment.

How high does the floor need to be raised?

Researchs show that inequalities have a very negative impact on group cohesion. I'll look up the relevant researchs if you want.

The people most fixated on redistributing wealth seem to often have only a glancing familiarity with how it is produced.

Great wealth isn't accumulated by stealing from the working class, by and large it is accumulated by making the working class better off.

I'm curious how conservatives would feel about a hefty inheritance tax. The person who worked for the money is dead now so shouldn't care, and the person receiving the money didn't work for it, so it kinda sidesteps the typical argument.

Are you distinguishing an inheritance tax from an estate tax? Arguably the former is more fair than the latter: if a rich man bequeaths his entire estate to one child, both taxes would be the same. But if he gives much smaller amounts to many different people, the inheritance tax would be much smaller.

If your goal is to reduce dynastic wealth, this is arguably a good outcome because there's less "harm" in a bunch of people getting a smaller amount of money than a single person getting a huge amount of money.

However, things are a little less clear if a rich man gives all his money to his 4 children, their 4 spouses, and his 12 grandchildren. It still seems pretty dynastic in that case, even though the estate is being split up between 20 people.

They would be say that an inheritance tax hurts "family farms" and "family businesses", because they are dishonest about the fact that their policies benefit the power and privilege of a only a tiny minority of the population

Sounds familiar - here it's always that changes are going to hurt "small businesses" and the "average, working class citizen" even though that's pretty trivially not the case.

I've gotten to the point where I actually desperately want to find a politician with right wing policies who isn't a dishonest slimeball, it's almost my white whale.

> Do you complain that a skilled chemical engineer gave up his career and turned to moving little green pieces of paper around to make his fortune, because society rewards certain types of paper pushing orders of magnitude more than it rewards inventiveness, skill, and hard work?

The 'moving little green pieces of paper around' is called allocating capital, and it's as important a driver of productivity in the economy as chemical engineering. He was highly rewarded because he used capital effectively.

If it’s “as important” then why does it carry orders of magnitude more rewards?

I don’t think people are complaining so much as I think they are pointing out why charity is not a good way to solve these sorts of social problems.

Charity is random and arbitrary, and does not fairly address problems by actual need. Yet, many people still argue that charity should be our social safety net, and we don’t need to fund programs that help people.

i was following you until you started talking about destroying peasants

I think that bit was tongue in cheek.

Burn them! Burn them at the stakes!!! ;)

Not to begrudge anyone's generosity, but if my parents / I had worked to save for my tuition completely and I got no benefit in a scenario like this, I think I'd feel a little frustrated. Of course you'd be lucky to have had that position in life, but frustrated nonetheless. Why didn't I just take out loans like everyone else?

It sure sounds to me like you’re begrudging this generosity. Be grateful for what you have. Don’t be resentful for what others get, it only hurts you.

The idea that nobody should get a goody if I can't get a goody, is the beginning of the race to the bottom.

Maybe - but you should also recognize that if you made sacrifices and spent a lot of money on something it would be annoying to discover that if you had made a less fiscally responsible choice it would have wound up working much better for you.

I think GP has a point that needs to be addressed if we ever want to do a debt forgiveness on a large scale without alienating a bunch of hard working people. It's not about keeping people from getting goodies, it's about rewarding responsible behavior.

Imagine two students, Andy and Brady. Andy decided that it would be best to get good grades, so he took out more loans and worked less. Andy had more time to study so he got mostly A grades. Brady decided it would be best to get graduate debt free, so he worked long hours instead of taking more loans. Brady had less time to study so he got more B grades. At the typical US university, you might be able to call their outcomes balanced- Andy can maybe get a better job because he got better grades, but has to pay off more debt. Brady won't get quite as good of a job because of his B grades, but gets to start saving for retirement faster because he is debt free.

But then some billionaire (call him Robert Smith, if we're trying to come up with the most generic name ever) comes and pays off Andy's debt. Now instead of a balanced outcome Andy is debt free and has a better job. Which is great for Andy, so I'm not saying the billionaire should't pay off his debt. But you have to think that Brady is probably kicking himself right now for not making a different set of choices. He's now behind in the race, and being behind sticks with you for a long time when it comes to careers.

If we could find a solution that kept Brady from feeling bad, but still gave Andy his goodies, then I'm sure that most people would agree that is a good outcome. An easy one that comes to mind is instead of saying, "I'm paying off all your student loan debt," Smith could say, "I'm giving you each $100k." That way Andy and Brady both get goodies, and Andy doesn't have crippling debt any more. Brady also doesn't kick himself for working hard during college because he now has a nice sum of money to do something responsible with (invest, save for retirement, down payment on a house, etc.).

Agreed, a flat $ gift to every person would be more satisfactory.

Does this also apply to the common complaints against the 1%?

Just be happy that they have a ton of money even though you don’t?

I think it applies when you make the argument "They shouldn't be able to make millions if I can't also make millions."

As you said, you got the benefit of having parents that are able to afford to send you to college debt free...

Maybe you think that the only people who save and pay for their kids' college are rich people. Probably that they can "afford" not to be the beneficiaries of generosity like this as well.

Far more common is for middle class (and immigrants) to be in this situation, not even to mention the 2-shift-a-day poor parents who paid outright to stay out of debt, worked overtime, scrimped, and planned ahead. They get nothing. I'm sure they can afford not getting any gift...

As I said, I don't begrudge a generous benefactor's actions that help people. It's his choice.

It would be a wholly different matter if government took this approach. In that case, you'd better be dammed sure that someone else getting something and you nothing, isn't going to remain at "be grateful for what you have".

Cf. that company experiment a few years ago (or think through if it applied at your job) that everyone got paid the same. You're probably not so eager in that case.

From a purely logical standpoint, why struggle to put your kids through college when student loans are available? They have a longer time horizon to pay the loans off than you do as a parent.

Almost every financial planner says that you should put your own retirement before your kids college for the same reason.

If you can afford to save for your own future and pay for your kids to go to college then of course that’s different.

I have a step child that I haven’t saved a penny for them to go to college. But, between cash flowing what we can and loans he will have the opportunity to go. Yes, I plan to help her pay the loans after she graduates or probably pay most of them myself - but not at the expense of our retirement.

Lots of lower middle class families have been deep in debt at some point. They know how tough it can be trying to pay off debt, especially with an entry level job right out of college. Since they know how tough that is, they want to sacrifice for their children to give them the best possible chance at living a good life. That's why some people struggle to put their kids through college even though there's "free money" available. It's not hard to understand, because "free" loans aren't free, even if the college graduate does have a decent chance at being able to pay them off over the next decade.

I'm not saying that parents that let their kids take the loans are bad parents, but it shouldn't be hard to see why some parents don't want their kid to be saddled with debt upon graduation.

I understand the emotion of it. But, your kids can borrow money to go to college. You can’t borrow money to retire and it’s a lot harder to borrow money if $life_happens to you as a parent especially for lower middle class families.

If you as a parent want to help your kids after they graduate to pay off their loans once your own situation is secure, help them pay for their loans out of a combination of current cash flows and savings you might have for it.

If $life_happens as a parent and the child can’t pay their student loans, they can get deferments, income based repayments etc.

If the parents don’t have savings because they were trying to avoid student loans and then they lose their jobs or are unable to work, then what?

Wow, well that's probably a story worth a thread of its own.

A convergence of demographic shifts, generational priorities, economic policies (interest rate + cheap money), and personal circumstances.

Some of the students who took loans might also have parents who are able to afford it, but the students decided to take loans instead.

There are also additional scenarios of frustration like ambitiously graduating a semester early, or failing to graduate with this class on account of missing credits. In the latter case you might have consoled yourself of the lost wages for a semester, and then you hear this happens...

I'd be a lot sadder if I'd scraped and taken loans and graduated the previous year from that school with a lot of debt. Even worse if you rushed through and graduated early or something (maybe to save money?).

What percentage of people legitimately make financial decisions on the assumption a rich benefactor is going to cover them in the future?

This is the benefit of being in the right place at the right time. I'm sure people would be salty to not this windfall, but who knows maybe they will be lucky somewhere else.


In this situation, YOU got a free education regardless.

I paid every freaking dime for my education out of pocket by sacrificing my nights and weekends during college. For plenty of people, college was a time where they made a ton of life-long friends. For me? College was a time where I spent half my time on campus passed out in the student union or library trying to get a bit of a nap between classes so that I could work an 8-6 schedule at night.

other people getting lucky certainly brings out the worst in people


You believe your parents or you would have worked harder than the parents of those students or those students; who have debt?

Exactly. One family takes a loan and a vacation every year, the other works over holiday...

I would go one step further and say if you don't have a major loan these days, you're a sucker. Get a loan at low interest, buy up assets, get additional loans on those assets as they appreciate.

That's basically the basis of this whole "economic boom". You can rely on the Fed being unable to raise interest rates, or this house of cards will collapse and everyone will need another bailout.

The Fed keeps talking about low inflation while asset prices have exploded on their watch, it's hilarious.

Point me to these assets that are guaranteed to go up. I’ll force my kids to get loans and I’ll invest in these instead.

I suppose the tongue-in-cheek was lost on a lot of people here, this is not financial advice, especially not for the average Joe.

Having said that, this is what companies (and certain wealthy individuals) have been doing for a while now: Get cheap loans, buy back your own stock, buy more real estate, drive up the value, get more loans based on those inflated valuations.

You may be able to do this as an average individual, that's what happened in 2008 when every schmuck would get a mortgage based on another already mortgaged house. The difference is, when you're an individual the government is not going to bail you out personally (unless maybe Liz Warren or Bernie Sanders are in power). You can at least declare personal bankruptcy if you didn't incorporate.

Now the reason why this is a fairly safe bet today is that the governments of the world absolutely don't want to repeat 2008. They will create any amount of money necessary to keep the party going. This means asset prices will rise due to pure inflation. Anyone with cash or long-term bonds will be left holding the bag, which also coincides with the interest of the heavily indebted governments.


Maybe so, but can you please not cross into personal rudeness or post unsubstantive comments here? We're trying for better than that on HN. "Better" in this case might mean pointing out better advice and explaining why it is better. But for sure it would mean following the site guidelines, which ask you to do a bunch of things when posting here, including Be kind.


That's incredible.

Anyone know the odds of winning Free Tuition From a Billionaire vs Lotto scratch tickets?

Also you know there's gotta be a guy that buckled down and graduated last year instead of this year that's kicking himself.

In addition, some parents are probably reflecting on their choice to pay for everything. I'm not as concerned about the very wealthy for whom the cost of sending their child(ren) to school was a minor expense, I'm more concerned about the parents that made extreme sacrifices.

And then there's the student that juggled work and school to minimize or eliminate any student loans.

The generosity of Robert F. Smith is admirable. I'm unsure how to reconcile it with some students paying vs others getting a free ride.

Life is full of serendipity and chaos. Yep, some folks are going to get a massive break and some are going to be mad because they scraped by and are not going get a benefit. Neither diminishes the great generosity of a man who should be praised. Envy will destroy your soul and frankly is the most deadly of emotions. Celebrate the good fortune of others and remember you are no worse off then you were yesterday. Nothing has been lost and you were caused no harm.

Well-put. If someone is going to get mad that they lost out on this windfall, they may as well get mad every time anyone other than them wins the lottery.

I'm more concerned about the parents that made extreme sacrifices.

Those parents should have insisted that there children go to a much cheaper school....

You could say the same about everyone with student loan debt.

And I wouldn’t disagree. I told my children that they would get loans in their own names and that if/when they graduated, we would help them pay it off up to a certain amount. I also suggested that they stay at home and go to a two year college and then transfer.

Those people are no worse off today than they were yesterday.

The point is that they're worse off today than they would have been if they hadn't been so responsible. Their sacrifice ended up being for nothing and put them at an overall disadvantage.

This is the same sort of idiotic thinking that gets people depressed about selling their stock before it skyrocketed.

You can’t predict the future. You do the best you can. Your choices mean that you didn’t get to benefit from a gift that nobody knew was coming? Might as well complain about not winning the lottery. That some people was helped doesn’t mean the others have been hurt.

I’m amazed and appalled at how common this sentiment is. So many comments here are complaining that some of these graduates will miss out on this charity because they have no debt. At the risk of violating site guidelines, what the fuck is wrong with you people?

(For the record, I went to a cheap school and was fortunate to have family support that left me with no student debt.)

You could make the same argument if he had given the money only to people without any debt as a reward for their good planning.

There are two problems with rewarding only the least responsible people. The first is that it will encourage people going into college to behave less responsibly due to the hope that their debt will be forgiven.

The second is that this gift isn't happening in a vacuum. It's happening as part of a political movement to make this sort of charity part of public policy. People don't want public policy to move forward in a way that puts the people who tried to do the right thing in the least advantageous position.

Responsible people with good planning get rewarded for it constantly. People rarely complain about it. You certainly could, and should, make the same argument about them, because the argument also applies to them.

i'd read he was expecting people to 'pay it forward'. it may be consistent of him to give some sort of one-time payment to the "debt-free" folks in order for them to be equally able to 'pay it forward'.

Turns out "to each according to their need" is harder than it sounds.

Or how about the student who’s taking an extra semester to finish a double major? Anyone who missed out on this deal must be feeling pretty sad. This is why we can’t only rely on philanthropy to solve systemic problems.

It’s true. But those are the breaks. Don’t dwell on it and move on; life awaits.

This is the issue with all the discussions about loan jubilee.

The people who busted their asses to do things the right way are the ones who get shafted.

The better approach is to just give out cash to all grads. How do you account for people who are richer vs those who are poorer benefitting similarly? Simple. Progressive income taxes, wealth taxes, and inheritance taxes. Keep everything else blind to income/wealth.

>Simple. Progressive income taxes, wealth taxes, and inheritance taxes.

Your argument that "The people who busted their asses to do things the right way are the ones who get shafted" could also be applied to progressive income taxes: why should the student who busted their ass through college to get good grades and a well-paying job upon graduation pay more tax to support the D-student who drank their way through college and bullied people who cared about intellectual things?

Graduating debt-free is a curious definition of “get shafted.”

This piece tries to explain how conservatives think about fairness. Including making sense of the Tea Party cry “Keep your government hands off my Medicare!”.

It will make you understand this thought, if perhaps not agree with it.


For those shedding a tear for the kids and families who worked hard to cover their bills ... I assure you, this leavening of a playing field is relatively minor in the scheme of setbacks people face in a career. And I say that having just finished paying my student loans at the tender age of 43. Those who suddenly find themselves with no debt may in fact end up worse off because their razor-sharp, college-educated judgement, finely honed by the whetstones of education and capitalism, just got blunted. We've yet to see how this experiment of Mr. Smith's plays out.

I paid my debt off a year out of uni, and if anything I’d say the lifted burden has sharpened my ability to think.

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