Back in the Occupy Wall Street hayday, Circa 2011, I wrote my 8th most popular post ever. It was simply titled “I’ll be so pissed if Student loans are forgiven“.
Yesterday I read an article by the New Yorker titled “A Student-Debt Revolt Begins“. Here’s a snippet from the article, but make sure to click through and read the whole piece.
On Monday, Heiney and fourteen other people who took out loans to attend Corinthian announced that they are going on a “debt strike,” and will stop repaying their loans. They believe that they have both ethical and legal grounds for what appears to be an unprecedented collective action against the debt charged to students who attended Corinthian schools, and they are also making a broader statement about the trillion dollars of student debt owed throughout the country.
If you took the time to read the whole piece, you’ll learn that it’s pretty clear Corinthian was likely not putting the students’ needs first. But then again, what would one expect from a for-profit entity? Of course the executives primary concerns are going to be how much money they will make, and how much money they can make for their investors.
It’s also abundantly clear Corinthian was taking advantage of the government’s generosity just as much, if not more, than they were taking advantage of their students.
Does this sound familiar? How about just a few years ago when all the financial institutions utilized predatory lending practices, knowing the fed was there to bail the bank out in the event the crap hit the fan.
Tons of upside. Virtually no downside.
But to be honest, I actually feel for Heiney and think she should pursue legal recourse. If the college operated unethically, and the Dept of Education, requires that colleges do operate ethically, then I don’t know if the blame can necessarily be placed on her decision to enroll.
If she was deceived and lied to, how can I demand she pay back her loans. Lord knows if I was unknowingly ripped off, I’d like a chance to plead my case and get some type of relief.
BUT
If she is successful in getting her student loans forgiven, then I would demand she forfeit any degree or credential she earned from her student-loan subsidized education.
I mean, her whole case is predicated on the fact that the school she attended sucked, wasn’t actually worth a single penny, and she feels her degree is useless.
Fine.
Give up the degree and I’m cool with you being able to explore student loan forgiveness.
Treat student loan forgiveness the same way that we treat foreclosures and bankruptcy.
I don’t get to revolt against my mortgage AND keep my house. No. The bank will kick my butt out, take back the house, and essentially forgive my loan (and damage my credit a good bit).
I don’t get to file bankruptcy, but keep my vacation properties, fishing boat, two dirtbikes, and $40,000 in personal savings. If I go to Bankruptcy court and convince the judge I can’t afford to pay back my creditors, the court takes whatever I do have, and distributes it amongst my creditors. My loan is forgiven, but I have to forfeit most of the things that debt allowed me to acquire.
So yes, even in Ms Heiney’s situation, as sad as it is. I will still be SOOOOOOOOOOOOOO pissed if her student loans are forgiven.
You can not have your cake and eat it too.
Where do you see the student loan forgiveness issue going?
I think it’s inevitable and within 10 years student loan forgiveness will be a thing. And I’m sure it will be abused just like bankruptcy and foreclosure often are.
Heck, I’d take a damaged credit score for a couple years if it means I can swoop a free degree in the process.
*** keep in mind I graduated college with $28,000 of student loan debt, which was above the national average for my graduation year, so I’m intimately familiar with the “Frick, what did I do” feelings that come with a student loan obligation***
My husband and I have a huge amount of student loan debt (140k). We didn’t realize how far in the hole we were, just kept approving our financial aid packages each year. No big deal. We both studied to be teachers. My husband decided to join the military and I teach. It took us 6 years each to get into our mess, it will take us time to get out of it. It really depends on what you are willing to do with your life. So many of my peers are refusing to look for jobs outside of where they grew up, but their job markets are competitive.
Granted, each persons situation is unique….but there are so many payment options that work with those individual needs now. I don’t believe in student loan forgiveness. Would I be mad if it were offered to me, oh goodness no, but we have a rough plan to pay off our debt in the next 6 or so years. Long road ahead, but it is possible.
I would give back my degrees in a second to get my loans forgiven! Even at this point where we’ve already sunk 70k into paying them off! Besides, most places of employment you only need your degree to get into the door. Once you’re there they don’t really give a crap what degree you have. Between my husband and I we know several people who have engineering type roles without a degree.
Nonetheless, student loan forgiveness pisses me off to no end. Mainly because I started paying mine off aggressively pretty soon after school while everyone was buying houses and going on all-inclusive vacations. And here I am, still paying them off now! There are too many people nowadays looking for a free buck through student loan forgiveness, FAFSA scams, strategic foreclosure and short sales, etc. They should all be cast with a scarlet letter on their forehead for skipping out on their agreed upon obligations.
Why am I paying rent while others were irresponsible, bought with no money in savings, and are not even paying mortgage while they live in their house undergoing foreclosure for 6+ months! US culture of lets try to scam everything as much as we can at its finest!
On the one hand, I’ll be slightly annoyed if there’s a student loan jubilee, because I based a lot of my life around not getting into debt and had I not done that I would have made probably very different choices. On the other hand, I recognize that a rising tide lifts all ships and that doing student loan repayment will, though initially costing tax payers, will then allow many millennials who are otherwise mired in debt to actually do other things (like start businesses, buy houses, have the flexibility in their expenses to fight for better wages, etc.) and will help make the economy healthier over the long run. This is the big thing for me. I want to be part of an economy where people actually have choices, because when people have the flexibility to make real choices (and they aren’t, you know, 18) they tend to make better ones, and I think ultimately can better help themselves and their communities.
What I *hope* to see happen is, like you mentioned, that they make student loans defaultable loans so that lenders have to actually consider the risk in their investment when lending tens of thousands of dollars to someone who is ostensibly a teenager. Such measures will also, I think, help curb the ridiculous increases in tuition rates at universities as access to credit (via their students, no less!) diminishes. Realistically this would likely be paired policy-wise with forgiveness for existing student loan debtors for us to not have an economically lost generation.
The only people who should receive loan forgiveness are non-elected public social servants: teachers, social workers, etc. Those positions get paid squat. Sure, some have great benefits, but their salaries are pitiful compared to the private sector. My wife has been teaching for 5 years and she still doesn’t make my starting salary from 10 years ago. They put up with your disgusting, spoiled children. The least we can do is forgive their loans if they stick it out for 10 years (most don’t).
I think there needs to be some type of middle ground here, involving two levers: interest rates, and bankruptcy protection.
As it stands now, lenders have it made with student loans — they can charge high interest rates (certainly far higher than even mortgage loan rates), and also have minimal risk of default because it’s nearly impossible to get student loans discharged in bankruptcy. This seems untenable and rife with the possibility of exploitation and dangerous speculation.
The best idea would be for the federal government to say that all student loans are either (a) dischargeable via bankruptcy, or (b) must adhere to a set, low interest rate (say X plus the prime rate). Lenders/borrowers could choose which one they want — a loan with a higher interest rate that could be discharged in bankruptcy, or a loan with a lower interest rate that couldn’t.
Or, ultimately, a better idea still is the federal government take over all student loans, peg them to as low an interest rate as possible (with perhaps even lower interest rates for students pursuing degrees in STEM fields or other highly sought after positions), only permit them to be used for certain accredited schools that meet necessary requirements (with penalties for schools that falsely advertise high post-graduation employment rates, etc.), and use its bargaining power to curb the ever increasing costs of college.
But something must be done….having student loans at 6-7% interest rates that can’t be discharged in bankruptcy is a recipe for disaster for generations.
Also, I think while many are correct that loan forgiveness seems unfair, I would be in favor of something that, say, forgives loans after 10-15 years or something of on-time payments….less “forgiveness” than “you sacrificed for a long time, you’ve done enough.”
If current student loans are forgiven, they should pay back everyone who ever paid back their loans, either partially or fully. And compensate those who did “pay as you go” and worked – refund them for their actual amount paid, as well as wages lost due to taking longer to earn the degree, etc. Everyone who ever got a degree, ever, living or deceased. Sure, that sounds ridiculous. This whole concept is ridiculous, and I will absolutely be *pissed* if they are forgiven.
Well, I think students should read everything before they accept. While it sucks that people are stuck with lots of student loans, I also saw a lot of people abuse their student loans. They would buy smart phones, new cars, xbox, etc.
Isn’t that the truth! We haven’t graduated yet…but people go out and blow the money on flat screens. It is so shocking to hear people at the start of the school year/semester talking about what they are going to do with ‘all that extra money!”
There is no way that they will forgive student loans, they account for over a trillion dollars. Imagine what that would do to the economy.
When did it become acceptable to think that you can take out massive loans and not have to pay them back? What happened to personal accountability and dealing with the consequences of your actions? Why do people think they are entitled to money for an education without having to pay it back?
Yes, college costs WAY too much (which is another issue) but no one forced anyone to take out student loans or go to a certain school. If you signed a contract to borrow a certain amount of money, you should have to pay it back with interest because that is how loans work. The only people who should have anything forgiven is for public service, and many years of it at that.
There are plenty of ways to pay for a college education without taking out loans and many people wisely do it. I did it by joining the Army, some do it with scholarships, some do it by going to community college and getting financial aid. Some are fortunate enough to have family pay for it.
Not liking loan repayments is not a reason for forgiveness and you original post was spot on! Good on you for taking extra jobs to pay what you owe.
COMPLETELY agree here. No matter how ‘noble’ the cause may be for getting a loan to complete your education, you are still taking out a LOAN. That comes with the expectation to repay the money.
I was fortunate to graduate without loan debt, through scholarship and the generosity of my parents. Mr. Maroon’s parents were not in the same position, so he emerged with ~$50k. Working together we diligently paid our monthly bill until… the day we discovered financial independence and early retirement. That day we decided to drain our savings account to eliminate the remaining ~$17k!! Despite hating seeing that money leave our account each month, we had no illusions that it would be possible to get away with not repaying the debt.
Just because you don’t like it, doesn’t mean you are absolved of your responsibilities. In fact, the more I think about it, that’s the most ridiculous idea I’ve ever heard of… I just don’t like this, so I don’t think I’ll do it anymore.
I’ll be pissed if student loans are forgiven.
I graduated with three degrees – BA in 1971, MA in 1972, and PhD in 1977 – all from good state schools (SUNY at Stony Brook and Rutgers, which is really the state university of New Jersey). This meant about ten years of higher education, but my parents fortunately could afford the undergraduate expenses and I supported myself as a teaching assistant for most of grad school. It was only during the last year finishing my dissertation that I took out a loan for $1500, long since repaid.
My point is that expenses for college have gone through the roof, at a much higher rate than general inflation, and I can’t imagine all these increases are justified. Young people are graduating with tremendous debt and often can’t find good jobs after school. I think there has to be some cap on predatory lending; at the same time, students have to know what they’re getting into when they take on debt and can’t simply make excuses for not paying their loans.
There are however ways that people can reduce their college expenses. I’d say if you’re accepted to Harvard or Princeton, by all means go; but the typical student can lower expenses substantially by starting at a community college, finishing the BA at a state school, living at home, working part-time through college, applying for scholarships, and saving the high-priced private schools for those who can truly afford them.
I agree, if the debt is forgiven, the degree should be given up. You should be aware of what is on the papers you are signing each year at school. Before we were married, my now husband just signed his financial aid papers, no questions asked. After we got together, we sat down and decided how much we could pay for college on our own and only get a loan for the rest of the amount. From then on we were aware of the debt we were taking on and knew we would have to pay it back.
My husband is in his last semester of school and even though we both worked (me full time him part time) up until January (we were both let go from our jobs), our student loans still total up to $78,000 (that’s with $10,000 in scholarships already applied). As people who work really hard to stay on top of things and be debt free, having some of the student debt removed would be a blessing.
On the other side why does it cost $92,000 for an education in a field thats base salary can start at $45,000 (depends on the city). The cost of education is excessively inflated. Teachers are not being paid enough and yet we are paying way too much for our education.
I have an Associates from University of Phoenix that cost me nearly $20k in student loans. With the accreditation of the school constantly in question, I would gladly give back my degree in a heartbeat to stop having to pay nearly $200/month on that loan. To be completely honest, I knew it was a horrible idea a few months into the process. Unfortunately, I also knew that University of Phoenix did not handle withdrawing like other schools do. I forced myself to finish the program and STRONGLY advise anyone and everyone to avoid the company (because it is HARDLY a school).
To be fair, I didn’t read the article because it would probably just piss me off. so I don’t know her particular situation, but still feel compelled to throw my $0.02 in.
At the end of the day, expecting loan forgiveness on student loans is to expect a free ride.. someone is paying for the salaries of the teachers, the facility, etc.. the loan entity you borrowed from fronted that money to the school on your behalf.. you don’t pay, you’re not sticking it to the school, you’re sticking it to the institution that lent you money. the only way you’re getting even with the school by not paying is if they have a direct lending program and they fronted you the money themselves, not a third-party lender.
If you feel there were violations, ethical or otherwise, at the hands of the school, honor your commitment to the loan company and take them to court, just like everyone in America sues everyone. if you win, you pay off your student loans.
you borrowed the money, you are responsible for paying it back. Do your research before you buy – Caveat Emptor, and all that. You can’t get out of your responsibilities just because you don’t like the product that you went into debt to buy, be it a car, a tv, or an education.
Hey! I have been reading your blog for a few years now, and was a bit too shy to comment or participate in discussions since english is not my primary language. But this time I feel compelled to, as I have a different opinion then most of you here.
First you are saying that it is fine to forgive students loans as long as they give up their degree, you are basically telling them, yeah the four years of your life you spent studying give them all up because you cannot find a stable or paying job in the first years after college, which is in my sense totally stupid.
The reason most students struggle with students loan isn’t because they simply because they always buy new useless things (like the new i-phone, gaming console etc…) it is often because their entry salary is way too low compared to their debt or because there is no job in their field of expertise.
We are putting all the young generations in a place they can’t get out or get out with a lot of struggle. Yeah it is easy to say, just do not go to college, or well community college exist, but these are often not a valid option. First if you do not want to live your life on a minimum wage you must go to college, then accumulate a lot of debt which you will or will not be able to pay depending on the job market. Second, community college do not have the same reputation and the same classes as normal college, hence making it harder to find a job.
The United States economy is not doing well, and for me, it is partly because of the studen debt problem and the price of going to college.
Most of you commenters were lucky to have scholarship, parents paying for you, the opportunity to go to the army, unfortuntely most students do not have access to those or do not know they exist. I once had a friend who had a sport sxholarship paying for his college, as he was a great baseball player. He injured himself in a match two months before college. There went the money.
And please, stop saying that students should do their research, be more informed, be more responsible. Most of them aren’t even adult yet and have no clue about finance since their family didn’t teach them anything.
Anybody that has finished paying their loans off and especially if they pay them early is going to be against this as it’s really not fair.
I paid off $80k in student loans within 5 years of entering the workforce. The first year was difficult as I was trying to get employed – I worked a couple part time minimum wage jobs and made minimum payments. After I landed my first engineering job, I then continued living as I was with the minimum wage jobs and put everything else towards the loans for a bit, then life caught up to me and I upgraded my lifestyle.
The cost of education is too high, and I believe it is because of the government’s involvement in the student loan industry. Loans that can’t be forgiven, backed by the full faith of the US and can’t be denied is basically free money for the schools. Tuition rates increased to absorb all the “free” money pumped into the system – why not set prices such that students have to max out loans when the loans are guaranteed?
The fix is one few will like. Let student loans work like any other loans. Let lenders look at the borrower’s history (academic performance in grade and high school), potential employment (choice of major and average starting salary) and family financials (FASFA, tax returns, parents credit scores) and make decisions on how much, how long and at what rate to provide loans. Make the loans forgivable in bankruptcy, but with tighter requirements.
This would reduce the demand for higher education – as the money would not be there. Profit margins at the schools would drop (aren’t most of them non-profits?) and schools would need to cut back on expenses and start operating like many of our businesses do – based on consumer response, not government handouts. For a while education will become more expensive, but eventually either tuition will drop or the value of a degree will increase to balance out the demand.
This solution is not going to be popular because the banks will be discriminatory with lending (just as they were with mortgages) because the decision to loan will be based on the potential of repayment. They will not purposefully be discriminatory, but every special interest group will be able to claim that, based on statistical analysis – the same analyses that led to the legislation loosening up lending and leading to the last financial crisis.
Right now, the value of a degree is low – most employers view it as proof that the candidate is trainable and may have some skill sets already in place. In the ten years between my BS and my MS in engineering, prestigious schools had dropped their curriculums to the point that the MS course work was little more than a poor review of my BS course work. I attended two different schools for each, but both were top engineering schools. I have worked with engineers who got their BS only after our employer mandated it, because a lot of what I paid to learn in college used to be taught in high school. Education itself has been lowering requirements to avoid discrimination by making sure everyone regardless of learning abilities can pass. Another issue the government should not be involved in.
Ok, time to end rant. Loan forgiveness should not be available except for cases of abuse by lenders / schools and for which programs already exist – teachers in very undesirable locations for example. There is no reason anyone out of high school can’t do a simple cost-benefit analysis. Even if not taught in high school, it is something they should be able to figure out on their own or they may not be ready for college level learning – where you do the research for yourself and the professors only provide guidance.
Federal student loans are forgivable (i think) after 25 years of income based repayment. The forgiveness is taxed as income. Public service jobs have 20 years (again, I think – google to be sure).
I think a few things need to happen. Student loan money should not be so easy to access. There are limits to federal loans, but private loans, not really, and no downside for private lenders. This is insane. There is a balance between giving access to college to students who need to take out loans to make it happen, and to letting students borrow money they are going to struggle for life to be able to pay back.
I think that 25 years of income based repayment prior to forgiveness makes sense. Unless you are really struggling, it is probably easier just to pay them off than to forfeit whatever percentage of your income. But there still should be tighter lending requirements.
Totally with you on the “Debt Revolt” thing.
However, why do you feel that current student loan forgiveness programs are or will be abused?
Payment plans and forgiveness options are known at the time of borrowing. It’s part of the loan. I know that my loan will be forgiven tax free if I work for 10 years at a non–profit or 20 years anywhere and I’ll owe taxes.
It’s not abuse anymore than maxing out my 401k is. It lets me save lots of money, is completely legal, and is known upfront.
Maybe forgiveness rules should be changed, that’s a valid opinion to have. But I don’t know how complying with my loan terms is abuse.
I personally think the abuse factor comes into play when you run up a bunch of student loans, using it for party money in addition to school expenses, then decide you don’t wamt to pay or ar dissatisfied with your school and/or degree choice, amd decide you do not feel obligated to honor the terms of your loan amd it should be “forgiven”. Not honoring terms of loan = abuse. Honoring terms of loan and written perks = NOT abuse.
Totally agree that if the debt is forgiven then the degree should be stripped. You can’t have it both ways…there are no free lunches.
Now comes the question: How do you strip a degree?
You can take away the piece of paper, but no employer I have worked for has really bothered to check on the validity of my degree – ie the paper part of it.
How do you take away the years of focused learning, research techniques and skill sets that were gained while the student was in school? These are the real values behind the education, not the piece of paper saying you have a && degree in $%^#&#&#.
Good question!
I unfortunately don’t have an good answer.