Ask HN: Was there always going to be student loan forgiveness?

[brad0]

Currently 45 million people in the USA have total student loan debts of $1.6 trillion[1]. A moratorium was placed on student loans since 2020. As a result, owners of the debt did not have to pay down their debt every month.

A knock on effect from this is that the debt servicer is not getting the expected rate of return on that debt. Debt servicers provide loans based on the return and risk. They can use that data to make other investments, purchases etc.

A bunch of investments were made thinking that there would be $X coming in each month. Instead, $0 was being coming in each month. The difference is radical. Expected vs actual risk is -Infinite%.

So those investments are now at risk of failing. Which causes knock-on failures on other investments. On and on.

These loans will have to be forgiven anyway, it's just that by getting ahead of it now, we can avoid people losing their jobs (theoretically).

What's everyone's thoughts around this? Are there other areas where debt risk is higher than expected?

[1] https://www.msn.com/en-us/money/other/verify-how-many-people-have-federal-student-loan-debt/ar-AA1114T8

[logisticseh]

It's only your investments that are failing (assuming you are a US taxpayer).

The servicers are paid to service; they don't own the instrument. You own the actual debt.

Think of it as a particularly regressive tax -- levied against everyone (including the SEVENTY PERCENT of people who couldn't access higher education) to fund the relatively small and precious set who got a four year degree and couldn't even manage to pay off a used Toyota Corolla with the skills they learned.

If this angers you, write your congressperson and urge them to completely defund the research agencies -- NSF, NIH, DARPA, AFRL, the National Labs, and so on. These institutions are rotten to the core and are today completely controlled by twitter personalities. We can get a working man's jubilee by killing off funding for useless junk.

I have a college degree and a PhD. I have faculty in my immediate family. We feel the same way. Hit academics -- and academia -- where it hurts. The research these agencies fund is NOT an investment in research. It's just BS soft money that allows professors to be a jet setting group.

I promise you that these faculty literally laugh about their obligation to the US taxpayer, right before flying off to Europe for skiing or a nice summer vacation after their conference. Pick a faculty member and go read the names of countries where they present their papers.

I also promise you that the research is useless. Go read the proceedings of any CS conference.

To pay working class folks back for student loan jubilee, we should start by cancelling Twitter-personality-cum-faculty's summer jet setting vacay by defunding the NSF's Division of Computer and Network Systems.

[legitster]

As the recipient of subsidized loans, I was already fixed at an interest rate lower than inflation. So I have already been costing taxpayers money every year my debt has been on the books.

The current White House announcement only applies to federally held debt. Private lenders are not included. Forgiveness for federal debt-holders involves forgoing future revenue. A hypothetical forgiveness for private debt-holders would likely involve just paying the companies some sort of discounted rate.

[syzar]

Loan servicers are paid a fixed amount per loan they service. The repayment pause has not hurt servicers.

https://thecollegeinvestor.com/36556/how-much-do-federal-stu...

[sp332]

You know it only applies to federally held student loans, right? https://studentaid.gov/debt-relief-announcement/

[daviddever23box]

A public college education should be free for an intellectually-qualified individual student, period. Anything else is madness.

And lest that sound elitist, the same should apply to training acquired via trade schools.

The same people excoriating the current administration's loan forgiveness are the ones that have conveniently forgotten the effects of the Reagan administration (both at California state as well as US federal level), knowing full well that an educated populace with sufficient critical learning skills (and no debt) is a danger to authority.

[legitster → daviddever23box]

> intellectually-qualified

What could this possibly mean?

Your argument doesn't really make sense since debt in now way held back enrollment numbers at college (if anything, just the opposite). And even if we wanted to make college free today, it doesn't solve the problem of what to do with existing debt.

[daviddever23box → legitster]

"Intellectually-qualified" means selective admission based on aptitude, prior work, and initiative.

There are too many students in four-year colleges (public or private) who might be better suited for technical / trade schools, or, alternately, traditional career-based training (e.g., the older two-year, non-college nursing school model). This creates a scenario where negative achievement is built into the coursework of larger-sized classes, in order to reduce demand to those students who have the aptitude and initiative to achieve positive results in a smaller class size.

We need to remove the stigma associated with an, errm, associate degree. Nothing about academic credentialing matters at the corporate level when the actual work starts, hence the "or equivalent work experience" callout in most modern job postings.

And–at the opposite extreme–some highly-motivated persons might not benefit from post-secondary education at all, which is the recruitment challenge that many top schools face (i.e., the talent and achievement exceeds the formation and knowledge transfer that can be provided by the school at its price).

I cannot solve the problem of existing debt, for which capped loan forgiveness (as currently proposed) is a first attempt. How does one deal with evil in the world? Don't be evil, for starters.

[rdtwo]

Knock on effect they may have standing to sue which would make the whole thing moot and unconstitutional

[tssva → rdtwo]

The federal government is going to sue itself for forgiving loans it made?

[rdtwo → tssva]

No servicing companies that work for the government collecting student loan dollars

[tssva → rdtwo]

And what would be their basis for suing the federal government for changing the terms of loans the federal government originated and owns?

[rdtwo → tssva]

My thought is that the servicer can show Harm my having fewer loans to service. That would give them standing to sue that the whole process was done improperly and that Biden does not actually have the authority to cancel student loans.

[tssva → rdtwo]

That gave me a chuckle. Good luck with that.

The contracts they signed with the government doesn't guarantee them any number or percentage of loans to service. By contract twice a year the federal government evaluates the loan servicers and decides what percentage of existing and new loans the servicer will receive. The contracts even contain terms which allows the government to completely block servicers from getting new loans at the government's sole discretion. Servicers also get a bonus depending upon percentage of loans they service which are in default. Reducing the loans would reduce the percentage of loans in default which means more bonus for the servicers.

[rdtwo → tssva]

Yeah perhaps not, that was always the question. Who has standing to sure the student loan reductions. If the Anwser is nobody that truly creates an interesting problem