"The case for cancelling student debt isn't political"

[Porfirii]

Source: Businessinsider

Hi all!

I don't like politics. I have studied some politics myself, and I simply don't like it: it is used to oppose people more than unite them, for shady purpose sometimes.

I open this topic to share something that just happened to me on twitter (nothing unexpected ) because maybe I can learn about the topic, with your help. I won't self-moderate this thread so please, stay polite, be humble, open minded and avoid fallacies and ad hominem arguments. Let's try to gain some insight among all.

--------------------------------

I was wandering in crypto-twitter when suddenly I have seen this news linked above. I am not american myself so I may not be very versed in this topic, but I shared my on beforehand foreseen unpopular opinion:

Something like I have got a debt myself (mortgage) and I knew the consequences of what I was signing, so I don't expect my debt to be simply condoned. Added that people asking loans of ten thousands, hundred thousands of dollars to go to University when nowadays there is plenty of free information available in Internet wasn't intelligent at all, and that if they got their debt condoned they would learn nothing from this big mistake. That maybe if people refused to pay those quantities in the future to old, legacy Universities, they would innovate and prices would go down in the future.

And that, for me, the case for cancelling student debt is political propaganda (not because it is Biden, all politicians are the same to me honestly), because this is the way rhetoric works: you state that something is not what it is, and many people who want to believe it just believe it. I guess that it has economic implications too, obviously, but isn't this news convenient politically speaking?

Suddenly, I was a neolib who thinks “what about the investment slave owners put into buying slaves?" , someone who thinks something like "I don’t like it when things get better for the younger generation" (I truly expect the younger generation to don't fall in the same mistake as the older one, by prioritising self learning and avoiding being conditioned), and worse.

These replies, despite being out of context from my point of view, got liked, while none of mines did. So I am considering the possibility of being wrong, because as an outsider I may easily be ignorant on how this is affecting the people in the country. It would be logical too, on the other hand, to be more objective with this topic as an outsider. But I don't really know.

--------------------------------

I can't assess my opinion anymore so I am curious what you think on this topic. Again, please, be polite, try to be constructive, I won't reply to any posts so keep this as a space for reflexion and debate. If you are american yourself, it would be constructive if you point that too, otherwise I will suppose posts are from foreigners as this is an international forum.

I'm a bit nervous before pressing the "Post" button. This is the reason why I don't like politics, I have the hunch that I may end making enemies for sharing my opinion Please, prove me wrong.

[squatz1]

I love seeing new people in P&S, so I just want to thank you for coming over to our section and contributing. We love new contributions and it's great to have you here. Onto the subject of this thread:

My personal opinion is that cancelling student loan debt is a horrible idea without actually fixing the problem behind student loans and government backing of these loans. If you didn't know this, and many do not, the government guarantees / backs student loan debt to the people that you're accepting private loans from when you're going to college. This is one of the key reasons that student loans CAN NOT be discharged in bankruptcy. Another reason these can not be discharged in bankruptcy is that there is nothing that can be reposed from you / nothing has been put up as collateral.

In regards to your mortgage, if you stop paying for it the bank can take your house. If you stop paying your Auto loan / Lease then the bank can take your car. You can't really take away the knowledge that people learn while in school.

Further, the government backing of these loans is BECAUSE no one would ever loan up to 70k a year (for tuition and room/board) to an 18 year old fresh out of High School with no assets, income, etc. Government backing of these loans is the reason that everyone can get these crazy loans to go to school.

The government SHOULD step in and try to set some limits on school costs as ONLY reason that school costs have continued to rise in price at a much higher rate then inflation is because these schools know the government money is just a faucet of cash. Real reform has to happen to ensure that government money isn't wasted maintaining things that don't contribute to academics and are excess. As an example, some state schools (I think this is Univ of Florida or Univ of Miami) have multiple pools on their campus.

I love this post by the way and can't wait to see the other contributions here.

[BADecker]

^^^ Correct. It isn't political. Why not? Because the loan is from the students to the government. The government owes them, and they wouldn't want to cancel debts until they have received it back. How is the loan from the students to the government?

When the student is applying for a loan, will the loan be granted if the student doesn't sign the loan paperwork? No, of course not. Without the signature, the paper has no value. But with the signature, the loan paperwork suddenly has value. It is worth the amount of the loan, at least to the student.

The government or bank accepts the valuable, signed loan paperwork, and grants the loan. But since the paperwork had enough value that the bank or the government granted the loan, it was really an entire prepayment on the whole loan. In other words, it was really a student's creation of new money that the student loaned to the bank or government. The bank or government simply repaid this loan by giving the student the money. So, even though the student didn't know it, he paid off his loan before he received a penny of it.

Since then, he has made payments on a loan that doesn't really exist. The payments were for nothing... except, maybe, buying a good credit rating for the student. Since the bank or government has his payment money that wasn't deserved by them, they owe it back to him.

So, don't cancel your loan until you get all your payment money back.

Btw, this holds true for any bank loan, and maybe any government loan, as well... not only for students.

[ChiBitCTy]

Agreed. I think before this can even be touched we need to fix healthcare in the US first. Hospital stays can be far more damaging and charging $100 an aspirin is straight up corrupt.

College cost is an extremely overblown argument. No one is forcing anyone to go to Harvard or Northwestern. One can go to community college for 2 years , then go to an in state school for the final two. Many who take this approach work while going to school and have much of it , if not everything paid off by graduation.

Fact is for the most part it’s not about where you went to school but just simply having a degree, being a good interviewee and of course who you know.

[squatz1]

Agreed. I think before this can even be touched we need to fix healthcare in the US first. Hospital stays can be far more damaging and charging $100 an aspirin is straight up corrupt.

College cost is an extremely overblown argument. No one is forcing anyone to go to Harvard or Northwestern. One can go to community college for 2 years , then go to an in state school for the final two. Many who take this approach work while going to school and have much of it , if not everything paid off by graduation.

Fact is for the most part it’s not about where you went to school but just simply having a degree, being a good interviewee and of course who you know.

I don't think I would say that we have to fix Healthcare first, though I do think that before we are to 'cancel student debt' we have to fix the issues that got us here in the first place.

Not every school is crazy expensive like NYU or something like that. Though I wouldn't compare schools to the ones that are the most expensive. There's still no reason for college costs to have increased 3x or so the pace of inflation over time for no real reason.

It's just the creation of more and more bureaucracy and administrators in these schools rather then improving schooling. Most of the money has just went straight down the drain.

[Spendulus]

Agreed. I think before this can even be touched we need to fix healthcare in the US first. Hospital stays can be far more damaging and charging $100 an aspirin is straight up corrupt.
...

Actually, the current state of student loans is not well understood.

Almost all today, are federal direct debt, or federally insured. They are at a substantial interest rate. Let's say for discussion here, 6-8%.

Who gets the profit? To the extent it's the federal government, they have zero cost in the money printed for the loan, and thus make the profit from nothing invested. "Out of thin air."

Now if the fed "forgives the loan," it does not lose the principal, that essentially never existed, it loses the interest/profit.

When the FED printed money to the point where it could not pay the interest at market rates, then it had to take steps to force interest rates to near zero. Student loans became a nice source of income for the fed.

[sirazimuth]

Fair enough on all your points.
So I'm just curious... in your opinion.... should the fed forgive these loans?

 Asking for a friend...

[franky1]

ok lets handle this little ditty about how banks/governments can write off the debt easy without any argument from banks

first you have to understand the bank side.
lets say there is a total of $1.7trill outstanding student debt
and each year there is $300bill new loans (10mill students(69% of allnew students) average debt of $30k)

and bank of america authorised $80bill of those loans
the bank sells this debt to the government at pennies on the dollar. average 5cents:$1
so it can cost the government $4bill but the government could over time recover $80bill if everyone paid
..obviously many dont. but even if people pay just 1 years interest of 6%. .. its profit(over break even)
so government is happy too. they get $4.8bill back
thats the summary of all debt refinancing

banks are happy too because they are declaring their $80bill asset loss value as a tax loss.
they can have a tax bill of minus $16bill(before declairing profits from other ventures).
so when they then declare their tax profits from other financial ventures. they end up not paying any tax.
(this is how the financial crisis occured where government had to bail out banks for hundreds of billions)

yep.
banks make money on loans they cant recover or end up selling at pennies on the dollar. because it offsets the tax they would have paid if they made profit

so yes. while the student gets a piece of paper saying they still owe on average $30k... behind the scenes its 'value' is now only $1.5k government asset. and if students pay just 1 year interest. the 'value' (cost to debt asset holder) would be $0 (6% of $30k=$1.8k)

so relax. government wont lose out
...

so writing off 33% average(from $80b to $53bill) (first $10k of average $30k debt per student) costs nothing.
the government can still get 6% a year on the remaining $20k per student($52b all student).
which again if students just pay 2 years of interest, nets the government over $6bil.. yep it cost the gov $4bill and they earn over $6bill in just interest for just 2 years of doing nothing

so folks..
dont worry about it costing the treasury. they will still earn more than the initial outlay eventually.

[Jet Cash]

Cancel the debt for engineers and scientists who are working and using their degrees. Subsidise courses for new students. leave the political and economist students to sink, and lets get countries back to being productive.

[Spendulus]

Fair enough on all your points.
So I'm just curious... in your opinion.... should the fed forgive these loans?

 Asking for a friend...

Probably not, but certainly not without fixing the problem that caused the high debt.

"Forgiving the loans" would just incentives universities that are over charging to charge even more.

Also it's very bad business to all a student to get a useless degree say in women's studies, encouraging him to accumulate debt that could never possibly be paid off.

The evil villain at the center of the problem really is the university, not the government.

[eddie13]

Cancel federal loans period and get the government’s fingers OUT of the free market..

If you can’t pay for your own college, then you probably aren’t smart enough to go to college, so no college for you..
The way it is now any halfwit can get a fed loan and go to college, therefore college degrees are quite meaningless..
Bunch of college educated idiots out there barely fit to work at gas stations..
On that note the government should get out of education period imo..
“School” is a joke and so are most college degrees..

So glad I never went to college..
I’ve been to a many courses and trainings, some college accredited, but all paid for by my employers..

[Spendulus]

Cancel federal loans period and get the government’s fingers OUT of the free market..
...

But you see, if a commercial firm made a loan, say at 6%, their operating costs might use 5% and profit then is 1%. If cost of money is 1% that's not profitable, so they must charge say 8%.

If the government makes the loan it profits 8%. Meanwhile it forces the interest rate to <1%.

So it's a situation created by government and then used by government to increase income to government. The prime interest rate cannot be raised, because then government would not have sufficient income to pay interest on the loans.

Really, "cancelling federal loans" is just part of a socialist marketing ploy. It makes no sense without free college going forward. But the colleges have jacked their fees up in accordance with what's allowed in fees.

Meanwhile the free market can compete by obsolescing traditional college entirely. 3/4 of a degree can be online, with canned lectures by the world's best professors, the other fraction in person. The entire cost of an under graduate degree program doesn't need to exceed a few thousand USD per year.

[franky1]

But you see, if a commercial firm made a loan, say at 6%, their operating costs might use 5% and profit then is 1%. If cost of money is 1% that's not profitable, so they must charge say 8%.

'operating cost might use 5%..' nah they literally create money. it costs much less

math
a loan manager on say
$100k/year
/52=$1923 a week
/40=$48 a hour
  /2=$24 a half hour
add in 20x postal stamps, A4 pieces of paper and envelope costs. for yearly reminders for 20 years
add in another 30minute labour for putting 20 letters in envelops.

lets call it $80, all in
$80 vs $30k=0.266%

remember a banks admin 'costs' are not real costs

[Spendulus]

But you see, if a commercial firm made a loan, say at 6%, their operating costs might use 5% and profit then is 1%. If cost of money is 1% that's not profitable, so they must charge say 8%.

'operating cost might use 5%..' nah they literally create money. it costs much less

math
a loan manager on say
$100k/year
/52=$1923 a week
/40=$48 a hour
  /2=$24 a half hour
add in 20x postal stamps, A4 pieces of paper and envelope costs. for yearly reminders for 20 years
add in another 30minute labour for putting 20 letters in envelops.

lets call it $80, all in
$80 vs $30k=0.266%

remember a banks admin 'costs' are not real costs

I stopped reading your idiotic nonsense on this thread back when you said...

ok lets handle this little ditty about how banks/governments can write off the debt easy without any argument from banks
...
banks are happy too because they are declaring their $80bill asset loss value as a tax loss.
....

so writing off 33% average(from $80b to $53bill) (first $10k of average $30k debt per student) costs nothing. ....

[mu_enrico]

It's political like any other bailouts/free stuff. Let's see their reasoning:

(1) Just $10,000 in forgiveness could wipe out debt for millions
(2) Student-debt cancellation could boost the economy
(3) Affluent households won't be the only ones who benefit
(4) Forgiveness would help narrow the racial wealth gap

Source.

Refutation:
(1) The government could randomly distribute the $10k and probably could wipe out debt for millions as well.
(2) The free $10k would boost the economy temporarily before inflation catch up.
(3) Students came from different "classes," the point is that they want to give students free stuff, and taxpayers' money funds it.
(4) Garbage.

(1)&(3) make it clear that they want to get votes from students, probably more from non-white students (4).

[Poker Player]

Further, the government backing of these loans is BECAUSE no one would ever loan up to 70k a year (for tuition and room/board) to an 18 year old fresh out of High School with no assets, income, etc. Government backing of these loans is the reason that everyone can get these crazy loans to go to school.

The government SHOULD step in and try to set some limits on school costs as ONLY reason that school costs have continued to rise in price at a much higher rate then inflation is because these schools know the government money is just a faucet of cash.

The solution simple: the government should stop backing those loans. If that happened, fees would go down right away.

Cancel federal loans period and get the government’s fingers OUT of the free market.

Like in many other cases, the government supposedly trying to help people ends up getting them into a mess.

[squatz1]

Agreed. I think before this can even be touched we need to fix healthcare in the US first. Hospital stays can be far more damaging and charging $100 an aspirin is straight up corrupt.
...

Actually, the current state of student loans is not well understood.

Almost all today, are federal direct debt, or federally insured. They are at a substantial interest rate. Let's say for discussion here, 6-8%.

Who gets the profit? To the extent it's the federal government, they have zero cost in the money printed for the loan, and thus make the profit from nothing invested. "Out of thin air."

Now if the fed "forgives the loan," it does not lose the principal, that essentially never existed, it loses the interest/profit.

When the FED printed money to the point where it could not pay the interest at market rates, then it had to take steps to force interest rates to near zero. Student loans became a nice source of income for the fed.

CBO estimates that the government is losing a substantial chunk of change on student loans every year, see here:

The cost of federal student loan programs is widely debated. The CBO provides two different estimates based on low discount rates and "fair value" discount rates. If you rely on the fair value estimate, the government loses approximately $100 billion to $250 billion per year, including $40+ billion in administrative costs. In other words, the government does not recoup the value of the loans, putting present and future taxpayers in the position of guarantor.

Government hadn't always taken on these loans though, back in 2010 when the ACA was passed the government began to do this though. Prior to this, the government would guarantee the majority of loans and have them held by private banks while only holding a bit.

Prior to the Affordable Care Act, a majority of student loans originated with a private lender but were guaranteed by the government, meaning taxpayers foot the bill if student borrowers default.

The main culprit is student loans, which the federal government effectively monopolized in a little-known provision of the Affordable Care Act, signed into law in 2010.

Many different people say different things though, as I've seen many sites quoted by people saying that government makes tons of money off of these loans. Pretty sure that is also one of Elizabeth Warrens talking points.

[Spendulus]

....

CBO estimates that the government is losing a substantial chunk of change on student loans every year, see here:
....
Prior to the Affordable Care Act, a majority of student loans originated with a private lender but were guaranteed by the government, meaning taxpayers foot the bill if student borrowers default.

The main culprit is student loans, which the federal government effectively monopolized in a little-known provision of the Affordable Care Act, signed into law in 2010.

....
[/quote]

You can think it out for yourself, you don't need me to tell you and you don't need to look up opinions.

(A) Government prints money
(B) Government loans money
(C) Government gets payments

This is fantastically profitable, because there is no cost to the product sold.

[af_newbie]

Source: Businessinsider

Hi all!

I don't like politics. I have studied some politics myself, and I simply don't like it: it is used to oppose people more than unite them, for shady purpose sometimes.

I open this topic to share something that just happened to me on twitter (nothing unexpected ) because maybe I can learn about the topic, with your help. I won't self-moderate this thread so please, stay polite, be humble, open minded and avoid fallacies and ad hominem arguments. Let's try to gain some insight among all.

--------------------------------

I was wandering in crypto-twitter when suddenly I have seen this news linked above. I am not american myself so I may not be very versed in this topic, but I shared my on beforehand foreseen unpopular opinion:

Something like I have got a debt myself (mortgage) and I knew the consequences of what I was signing, so I don't expect my debt to be simply condoned. Added that people asking loans of ten thousands, hundred thousands of dollars to go to University when nowadays there is plenty of free information available in Internet wasn't intelligent at all, and that if they got their debt condoned they would learn nothing from this big mistake. That maybe if people refused to pay those quantities in the future to old, legacy Universities, they would innovate and prices would go down in the future.

And that, for me, the case for cancelling student debt is political propaganda (not because it is Biden, all politicians are the same to me honestly), because this is the way rhetoric works: you state that something is not what it is, and many people who want to believe it just believe it. I guess that it has economic implications too, obviously, but isn't this news convenient politically speaking?

Suddenly, I was a neolib who thinks “what about the investment slave owners put into buying slaves?" , someone who thinks something like "I don’t like it when things get better for the younger generation" (I truly expect the younger generation to don't fall in the same mistake as the older one, by prioritising self learning and avoiding being conditioned), and worse.

These replies, despite being out of context from my point of view, got liked, while none of mines did. So I am considering the possibility of being wrong, because as an outsider I may easily be ignorant on how this is affecting the people in the country. It would be logical too, on the other hand, to be more objective with this topic as an outsider. But I don't really know.

--------------------------------

I can't assess my opinion anymore so I am curious what you think on this topic. Again, please, be polite, try to be constructive, I won't reply to any posts so keep this as a space for reflexion and debate. If you are american yourself, it would be constructive if you point that too, otherwise I will suppose posts are from foreigners as this is an international forum.

I'm a bit nervous before pressing the "Post" button. This is the reason why I don't like politics, I have the hunch that I may end making enemies for sharing my opinion Please, prove me wrong.

Canceling debt is just plain crazy.  It undermines the whole capitalist system.  It is inflationary and destructive.

People who get themselves into debt have no right to demand others to pay their debts.

Your student debt is yours, not mine.  Deal with it.

The problem with universities is that they allow too many morons in. The US colleges and universities are no longer academic institutions.
Shutdown all sports teams, athletic programs, amenities, pubs, clubs, frat houses, etc.  Build more libraries, labs, classrooms, lecture halls.