Student Loan Forgiveness

[LongRoad]

A better idea is just to give Pell Grants to everyone as pretty much all kids start out life broke regardless of what your parents make.  Lower the cost of doing this by taking away the free interest on loans while in school and set all interest to a flat 4%.

Something similar to how they handle it in Australia might be nice. Everyone is entitled to an interest-free government loan for their studies, which is not paid back until you reach a certain income level, and then is repaid based on your income (so someone earning $100 000 right out of uni starts repaying a large proportion of their studies immediately, whereas someone earning $45 000 three years after graduating, doesn't pay anything for those first three years, and then only a small percentage of their salary).
It stops universities offering nearly as many useless degrees (because if no one in a specific school is ever able to repay their loan, the government starts asking questions), and allows everyone the opportunity to attend uni if they wish while still putting some sort of cost and limits on study.

Of course, the government there is gutting the system bit by bit, because educated people tend to inconvenient to governments. Perhaps the US could take over for Australia in offering fair and equitable education access.

I don't know, maybe it's all the blood rushing to their brains 'cause they're upside down, but the folks in Oz come up with some pretty neat ideas.

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Over the past 20 years, education costs are up 50%, while wages have increased 10%. (adjusted for inflation)


https://www.npr.org/2020/12/16/941292021...ca-adds-up

Loan forgiveness does not address the problem with this, and instead exacerbates it.  There is NO incentive for schools to rein in costs when the government backs loans, and then forgives them.  Schools will continue to spend like lunatics as long as the government continues to do idiotic things like this.

The only way to get this under control is for the government to stop backing loans, and then banks can decide if they want to loan to people who choose degrees with no job market.  If you only need 10,000 lawyers a year, banks will look at how many people want to go to law school and then decide if that's a good deal or not (it won't be).  If you only need 500 gender studies majors a year because there are no jobs outside of academia for them, then banks won't back those loans at all, and then schools will stop offering them because there won't be enough students to take it...and so on.  Accounting majors will always be able to get loans - as will engineers, and English majors, and whatever else is useful.  Oversaturated majors will dry up.

Then, we need some sort of cap or ratio on how many administrators there can be at a college.  I'd probably look at some private schools and shoot for that.  Private schools are usually run more like a business, and don't have near as much overhead as public, because public schools is just another name for "taxpayer funded" schools.  It's not their money, so they don't have to be careful with it.  The amount of overhead there is at colleges now is absolutely ridiculous.  The costs are out of control.

How many times did Donald J. Trump declare bankruptcy before he became president? Sometimes, all of finance seems to me to be like a big Ponzi scheme. Banks, etc. do questionable things in pursuit of profits, and they just try not to be the last investor holding useless paper.

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If you only need 10,000 lawyers a year, banks will look at how many people want to go to law school and then decide if that's a good deal or not (it won't be).  If you only need 500 gender studies majors a year because there are no jobs outside of academia for them, then banks won't back those loans at all . ..

That's quite an optimistic and benevolent view of banks. If banks were truly so wary to loan money to people who couldn't pay it back, there'd be a lot of financial crises that would not have happened.

Someone who can pay their loan back in 10 years is FAR less valuable to a bank than someone who can barely pay it back in 30 years, and along the way incurs all sorts of late fees, interest, and financial penalties. A college graduate with a loan is someone with a long lifespan ahead of them, which is plenty of time for a bank to draw money from them.

The poor and the young are generally great targets for banks. The poor and the desperate are great for truly malicious loan terms, while the young are good for reasonably-awful loans, because they tend to have just enough assets (and hope) to make bankruptcy unpalatable, but insufficient earning power to escape the loan before the bank has maximised their profit.

Well, the housing bubble of the early 2000's was due to the GOVERNMENT forcing banks to make loans to bad risks, rather than banks doing that themselves.  They were penalized for NOT giving out loans to people they'd decided couldn't afford them.  If the government would have stayed out of it, we probably would not have had such a terrible crash in the mid-2000's.

Yes, banks are not altruistic.  But they do know how to measure risk.  They want their loans paid back, and giving loans to people who they don't think can pay them off is not a good long-term plan.  One way to see how they work: those with better credit get better rates.  If they only wanted people who wouldn't pay them back for a long time, they'd give better rates to those with bad credit, and worse rates to those with good credit.

So, I don't really buy your premise.

According to research done at the Sloan School of Management at MIT, the crash wasn't based upon the Community Reinvestment Act of 1977. (That would be the law which would be the basis for your opinion that our government forced banks to make loans to risky borrowers.)  Mortgages increased in all income levels, and regardless of whether the borrowers were prime or subprime, and middle- and upper-income borrowers, regardless of credit scores, were defaulting. Here's the study, https://academic.oup.com/rfs/article/29/...#114359937. 

Big business, and that includes banks, are out for profit. As I wrote before, none of them want to be the one left holding the bad paper, but they don't mind profiting off of it.