Forgive Student Loans? Worst Idea Ever.

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There’s an argument going around right now that forgiving the country’s student loan debt would have a stimulative effect on the economy. This online petition by Signon.org, an offshoot of Moveon.org, has nearly 300,000 signatures. Its basic argument is this:

Forgiving the student loan debt of all Americans will have an immediate stimulative effect on our economy. With the stroke of the President’s pen, millions of Americans would suddenly have hundreds, or in some cases, thousands of extra dollars in their pockets each and every month with which to spend on ailing sectors of the economy. As consumer spending increases, businesses will begin to hire, jobs will be created and a new era of innovation, entrepreneurship and prosperity will be ushered in for all.

The idea is also being touted by Michigan Democratic Congressman, Rep. Hansen Clarke:

So we asked Freakonomics contributor Justin Wolfers what he thought of the idea. His response is as follows:

Let’s look at this through five separate lenses:

  1. Distribution: If we are going to give money away, why on earth would we give it to college grads? This is the one group who we know typically have high incomes, and who have enjoyed income growth over the past four decades.  The group who has been hurt over the past few decades is high school dropouts.
  2. Macroeconomics: This is the worst macro policy I’ve ever heard of. If you want stimulus, you get more bang-for-your-buck if you give extra dollars to folks who are most likely to spend each dollar. Imagine what would happen if you forgave $50,000 in debt. How much of that would get spent in the next month or year? Probably just a couple of grand (if that). Much of it would go into the bank. But give $1,000 to each of 50 poor people, and nearly all of it will get spent, yielding a larger stimulus. Moreover, it’s not likely that college grads are the ones who are liquidity-constrained. Most of ‘em could spend more if they wanted to; after all, they are the folks who could get a credit card or a car loan fairly easily. It’s the hand-to-mouth consumers—those who can’t get easy access to credit—who are most likely to raise their spending if they get the extra dollars.
  3. Education Policy: Perhaps folks think that forgiving educational loans will lead more people to get an education. No, it won’t. This is a proposal to forgive the debt of folks who already have an education. Want to increase access to education? Make loans more widely available, or subsidize those who are yet to choose whether to go to school. But this proposal is just a lump-sum transfer that won’t increase education attainment. So why transfer to these folks?
  4. Political Economy: This is a bunch of kids who don’t want to pay their loans back. And worse: Do this once, and what will happen in the next recession? More lobbying for free money, rather than doing something socially constructive.  Moreover, if these guys succeed, others will try, too. And we’ll just get more spending in the least socially productive part of our economy—the lobbying industry.
  5. Politics: Notice the political rhetoric?  Give free money to us, rather than “corporations, millionaires and billionaires.”  Opportunity cost is one of the key principles of economics. And that principle says to compare your choice with the next best alternative.  Instead, they’re comparing it with the worst alternative.  So my question for the proponents: Why give money to college grads rather than the 15% of the population in poverty?

Conclusion: Worst. Idea. Ever.

And I bet that the proponents can’t find a single economist to support this idiotic idea.

[HT: Diana Huynh]

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  1. Marty B says:

    What are your thoughts on making student loan debt dischargable in bankruptcy?

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    • mgnti says:

      I think this suggestion sounds like an interesting compromise. Also, they should reduce loans given to schools that charge excessively high tuition.

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    • Eric says:

      “What are your thoughts on making student loan debt dischargable in bankruptcy?”

      This would be a great way to drastically increase the number of bankruptcies in the country.

      In fact, I could see law or medical students ending their long education experience with a financially cathartic bankruptcy filing.

      I think this country needs to focus more on creating more paying jobs where people can earn their living and less time thinking of creative ways of handing people money (value) in exchange for doing nothing/creating no value.

      It is sort of emblematic of our switch from a ‘buy now, pay later’ society to one that wants to ‘buy now, never pay later’ that we would even consider forgiving student loans to able bodied people and pay for this by passing on on more debt to our children. And why stop at student loans, why not all loans made as ‘investments’? I started a new business which has 4 employees, why not write off my debt also? Why would we only write off education investment debt and not small business investment debt? My debt helped 4 people (plus me) have a job and I could hire more people if the government just pays off all my debt… (BTW, I really do not want the government to pay off my debt, but my point is why cancel some legitimate debt made for ‘investment’ and not other legitimate debt made for ‘investment’?)

      We need to ask when are we going to start paying debts, not how we can forgive them? Or maybe we are hoping that all our debtors will just forgive all the US debt someday?

      Maybe we can ask for a $15 trillion mulligan?

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      • Jon says:

        You have a bizarre view of our bankruptcy system – you have to do more than fill out a form and be on your merry way. There are pretty onerous, long-term consequences to declaring bankruptcy. Not to mention that many State Bars have already indicated that they view a law graduate who is in dire financial straits to be a possible reason to refuse them a license to practice law.

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    • Rebecca says:

      That is just crazy. You may as well just say that no one should have to pay for college. If you can just file bankruptcy, then the first thing a college student would do is file as soon as they graduated.

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  2. Markus says:

    A political sticky wicket, to be sure, and we don’t want a new political arena of college grads pining for handouts. However, the issue of whether it’s better to give the money to poor people who will spend it vs. “educated” folks who will save it needs revisiting. The comments overlook the benefit to society of savings and preserving capital; that capital then reinvested into businesses that then benefit a much bigger portion of society. Give $500 to a grad and $500 to a welfare recipient – who is more likely to make that $500 grow? Is that not a better stimulus than spending it on consumables? Where does all this money come from to begin with? Since we’re just printing more and more fake money anyway, who is the end recipient is irrelevant. Just print more, and then give more to more people. Problem solved. See all you grads in the bread lines.

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    • This Guy 64 says:

      Strong point. When I “save” my money, I’m not just stuffing it in a sack. I’m stuffing it in mutual funds and stocks. That money is doing more than just sitting dormant!

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    • Eric says:

      “Give $500 to a grad and $500 to a welfare recipient – who is more likely to make that $500 grow?”

      Or another way: Give $500 to Warren Buffet and $500 to a welfare recipient – who is more likely to make that $500 grow?

      Put into a larger scope and have Warren Buffet keep his money (against his will, no doubt!) and invest in smart investments will help the economy more than taking more of his money and blowing it on whatever half-witted government ‘stimulus’ scheme we think of next.

      (BTW, I am all for raising taxes on Warren Buffet, myself and everyone, for that matter, if it means we start balancing the budget, but I would not raise anyone’s taxes one cent until we start looking at cutting all non-essential spending first.)

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  3. alyssa says:

    I agree, this is a terrible idea – DH and I have $20k in student loans left to pay and we are proud of it. We worked hard in school, we took on debt we knew we would have to pay in the future and we are doing so now. IMHO do not take on debt if you do not plan to pay it off, it is not right.

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    • Erin says:

      Sorry, but for those of us smart enough to go to college and then onto grad school, but cannot pay out of pocket the insane amount it costs for professional grad programs like law/pharmacy/medical school, you’re basically say only the rich students should enter those careers. My parents are upper middle class, but couldn’t afford to send three kids to professional programs without having to borrow.

      I plan to pay off my six-figure debt (because I am a responsible, accountable person–and note that all of which was only spent on my education. There were no lavish purchases/trips spent with that money), but if someone were to tell me that they’d wipe it all out, I’d definitely stimulate the economy by building a home and purchasing items that we are choosing not to buy.

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      • pawnman says:

        Actually, Alyssa said she’s got $20k in student loans. She didn’t say don’t go if you can’t pay cash, she said don’t sign up for a loan if you don’t intend to pay it back…very different points of view.

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    • stevenbutler says:

      I took on my student debt when I was 18. I’m 30 now. If I had known ANYTHING about life at 18 I would have made different choices. My parents had no advice to give me as neither had even been to college. To them, college just meant opportunities – so going to a great school, like NYU, was obviously only going to result in great things for their child. Fast forward, I’m now a financial advocate for low-income people in New York and an expert in student loan debt crisis stemming from the for-profit college industry (which this article totally fails to mention). My own towers in the 6 figures. Trust me, the person I am today would have laughed at that 18 year old who thought he knew everything. The thing about this article that annoys me the most is the assumption that welfare recipients don’t have and aren’t’ paying student loan debt. That’s hilarious. Please, come meet my clients!

      I agree that student loans should be dischargable in bankruptcy. If it causes the governement to stop giving giant piles of cash to dumb teenagers I’m all for it. The problem with American education isn’t that it is too expensive, it’s that we can finance it at all. THAT is the reason education is expensive. Schools would wither and die without the giant tap of life blood that is federal student loan dollars. And maybe, just maybe, they’d have to rethink their missions and lower their costs.

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  4. Mike S says:

    Instead of complete forgiveness, what about a program that would allow people to repay loans using pre-tax dollars from their paychecks? I am not – nor do I claim to be – an economist but I would think something like this would a) be much cheaper than the current proposal, b) put more dollars in the pockets of Americans, and c) not set an awful precedent.

    I’m sitting on over 100k in student right now and only get a tax break on the interest I pay.

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  5. Robin says:

    Hidden due to low comment rating. Click here to see.

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    • caleb b says:

      “Student loans are for the lazy and should definitely not be forgiven.”

      Um, or they’re for people that didn’t get all those scholarships and grants that you did.

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    • Timothy says:

      While I do not agree wholeheartedly with forgiving student loan debt. Your contention that student loans are for the lazy is well off base. I have a BS which required minimal loans on my part, thanks mostly to my parents who were able to save wisely for mine and my sisters education. I also worked part time durring most of my college years. I am now nearly through a JD program, I do work full time as does my wife, but before I got into the JD program I worked 2 jobs to cover expenses, I had to give one up in order to put the required effort in on my JD. My wife was unable to find a second job due to the poor economy and her background (no College Degree), and so I found myself in a position where I had to take out PLUS loans (aka cost of living loans) in order to make up the difference. Also Robin I’d like to know where you go to school and what your major is. Some majors could not be completed properly working full time. The biggest issue here is the cost of a college education in general. Why does it cost $100K + to go to a private college? Are the professors paid at a higher rate? Are the facilities that much better? The answer in most cases is no. So why do these Colleges and Universities charge so much? The simple answer is that in most cases there is still a stigma attached to attending a State Run University, this is ridiculous. A College degree should be treated equally, and I even mean if it came from the Ivy League, the only real difference there is that those schools are old, other than that I have seen Harvard debate teams shattered by teams from USC or UMass or SUNY, the degree should be what matters not the logo on the top.

      As far as forgiving loan debt goes, I am very much in favor of the income based repayment format we have now, and the public service exemptions. However with the current hiring freeze and budget issues most of our governments are facing, the cold hard truth is there are few if any public service jobs to be had even for those of us who want them because we want to do public service.

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    • Dante940 says:

      I’m in a similar boat as Robin. I graduated from college last year with a degree in mechanical engineering with $0 in debt as I was fortunate to be awarded scholarships and a few grants. I come from a single parent middle class family. I worked part time in retail and at school to have some extra spending money. Nothing extraordinary. What I will say was a differentiator was my choice of university. Among the schools I was accepted in, two were a good but pricey out of state university and a decent but affordable public university in my own city. I stayed in my city because I felt much more comfortable with not having massive debt at the end of my undergrad career. As my colleagues and I will tell you, it’s not very difficult at all to find a job as a mechanical engineer right now.

      So while I think it’s a bit harsh to claim that “student loans are for the lazy” I will say that we as the youth need to be more considerate and realistic of where we stand and our goals. If you find it will be difficult to pay for a prestigious school, there are literally hundreds of amazing affordable schools throughout this country. Also, don’t act surprised if it’s difficult to find a job with a liberal arts degree nowadays. I have nothing against them and have many friends with such degrees but you have to be practical in this day and age. Look at which fields are growing and seem stable and suck it up and apply to one of them. An acquaintance received a degree in Philosophy from a prestigious and expensive school. He comes from a similar financial situation as my family. How do think this economic environment is treating him?

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      • Jeff says:

        Yes. Yes, yes, 1000 times yes.

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      • Irena says:

        “An acquaintance received a degree in Philosophy from a prestigious and expensive school. He comes from a similar financial situation as my family. How do think this economic environment is treating him?”
        So, you are saying that Philosophy degree is a luxury and should be taken only by the rich?
        If everyone would follow your logic, Liberal arts will disappear all together and colleges will become fast-paced training business schools for hot practical carriers. And all brains will be imported from India.

        Hot debate. What do you think? Thumb up 22 Thumb down 23
      • Dante940 says:

        I mean, you did hit the nail on the head somewhat. A liberal arts degree of that sort IS almost like a luxury. I have nothing against those that pursue such degrees but be considerate of your finances and prospects. The claim that all the brains would be imported from India is essentially already happening and that’s a major issue we have today. Go to several engineering campuses and you’ll find that many of the lab assistants and TAs are foreign students. I have nothing against them and some of my better friends have been foreign students from India, China, and elsewhere but we as a nation have lost that competitive advantage. It’s precisely because not enough American students are taking up careers that involve mathematics and science that so much technical work is being outsourced. The lower supply of American engineers there is, the higher the cost they demand. This has unfortunately led to many companies to simply outsource because it’s cheaper since American engineers and scientists have become an expensive commodity.

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      • James says:

        “And all brains will be imported from India.”

        Well, they pretty much are now. Who do you think gets most of the degrees, especially graduate degrees, in engineering and the sciences? Foreign students, and the children of first generation immigrants.

        As for the contention that a philosophy degree, or indeed, most liberal arts degrees, requires much in the way of brains… Well, maybe they should be regarded as toys for the rich. Or perhaps as something you do later in life, after you’ve learned something that will let you earn a living.

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      • pawnman says:

        If you’re going to take out a 6-figure student loan, you should probably study something that is going to give you a good chance at employment upon graduation. It’s been a while since I’ve done a job search, but I don’t recall too many companies posting openings in their philosophy departments.

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      • Eric says:

        “So, you are saying that Philosophy degree is a luxury and should be taken only by the rich?
        If everyone would follow your logic, Liberal arts will disappear all together and colleges will become fast-paced training business schools for hot practical carriers. And all brains will be imported from India.”

        Because we import so many liberal arts students from India now?

        I have a degree from a liberal arts school and I love the study of philosophy, but the US taxpayer is under no obligation to subsidize through loan forgiveness the desire for people without means to go get a liberal arts education that may not lead to economic advantage.

        Now, if we are talking subsidizing engineering, math, hard sciences and medical fields then I may be on board. Of course, people going into those fields do not need subsidy so…

        Put another way: I love music and art, but I really do not feel like subsidizing a student that wanted to study these fields and now cannot pay for their education.

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    • Jeff says:

      I love all the vote-downs this type of comment always gets. Every time an argument comes up over loans and I bring up the fact that I went to public school and worked full-time all four years, everyone acts like I must have gotten some lucky break. No! My school just cost $3k per semester instead of $15k+! Now I make a comfortable living and have no debt. Sure, I don’t have a Columbia degree, but I had the confidence in my skills and interview savvy to land a job and, as one’s career progresses, the institution attended means less and less.

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      • Liz says:

        You went to public school? Um, why do think it’s called “public?”

        The rest of us/government funding paid for it in order to give you a break, doofus. So show a little more gratitude and stop pretending you did it all on your own.

        Hot debate. What do you think? Thumb up 33 Thumb down 37
      • Jeff says:

        Yes, and I took advantage of what was entitled to me as a state resident. Explain how that makes me a doofus. And show gratitude to whom? I pay my fair share of taxes. So thanks, my taxes! You’re right, it clearly would have been smarter to go to a name-brand private school, take the 4 years off, and graduate with $200k of debt.

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      • Dante940 says:

        Since we already pay for some part of these public schools through taxes, why spend exorbitant amounts for private schools that ultimately teach the same material with competitive quality?…

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      • Andrea says:

        Hi Jeff,
        What you did is admirable. I won’t knock your hustle. However, keep in mind that your experiences are the ones that you know best. Just because you were able to do something, doesn’t mean that others could. Situations are always different.

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      • Jeff says:

        Very true! And I hate anecdotes used as evidence as much as anyone. I just think that there’s such a focus in this country not just on a degree, but on *where* it came from. I know as a HS senior I was super-focused on what school I went to. I actually went to one for a year, realized I was never going to make it work financially, dropped out, and finished later. This need to go to a top-tier school and therefore their ability to charge what they do is a real problem.

        But I have to admit: if this were to happen, I’d be pissed. If I had known THIS would be the outcome, I would have gone to NYU, done study abroad, racked up a half million in debt, and then gotten it forgiven. It would be a pretty bad precedent to set.

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      • Irena says:

        “But I have to admit: if this were to happen, I’d be pissed. If I had known THIS would be the outcome, I would have gone to NYU, done study abroad, racked up a half million in debt, and then gotten it forgiven. It would be a pretty bad precedent to set.”
        Do you think it might effect the quality of your education? Do you think you would loose a lot if instead of working full time while studying you would be able to actually concentrate on your studies (as most European students can do)?
        I also worked full time when I studied, but I wish, I would spend more time on my education instead. Or at least to work in related field.

        Thumb up 5 Thumb down 6
    • Michelle says:

      Maybe it’s a little extreme to say student loans are for the lazy. But I think Robin makes a great point.

      I graduated 7 years ago with zero debt. I went to a local (cheap) university & worked to pay my way through – with on campus jobs, tutoring gigs, internships, and most especially working my tail off to receive & maintain an academic scholarship. I didn’t have perks like spring break, nice car, money for movies or going out to eat on the weekends, cell phone, cable/Netflix. I was the cliche Ramen-eating starving college student. I didn’t take semesters off to “discover myself” or unnecessary classes to be more “well rounded”. (That’s what free books at the public library are for.) I rushed through & graduated in 3 years instead of 4 or 5 so I could get a job & get out of self-induced poverty.

      I admit my realm of experience is small, but those I know with student loans fell into one or more of these categories:

      1. “Arts” majors: those who spend 4 or more years wading through college, barely graduate, and then end up with an “administrative assistant” position in some office building doing tasks they could have done out of high school.
      2. Year-round spring break students: I was so jealous of these people who spent their time comparing notes on road trip plans and tailgate parties. But I guess these were the ones who paid me a whopping $9/hr for tutoring help, so I’m indebted in a way.
      3. “Daddy, I really, really need to spend $40,000/year on tuition because this is my dream!” students: Be realistic. If you don’t have rich parents or a sweet scholarship, it’s irresponsible to rack up this kind of debt when there are well ranked universities in almost every state for about 10% of the cost.

      The reality is these people picked up a two sided stick. They got to breeze through college with extra un-earned money. Now they have to pay. If the rates are unreasonable, if tuition is unaffordable without a loan, if the resulting post-graduation job just doesn’t pay enough to afford a house, new car, and student loans, well, I guess you should have considered that earlier.

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      • Vicki says:

        An education is so much more than taking the bare minimum of classes, at the cheapest price, with the smallest amount of time input. A University education is supposed to give you a complete education, not crank you out like a trade school with just a certain set of skills.

        I was much like you the first time around, and now I wish I could go back and do it all over again. Not work full time so I could actually gain an education, instead of just enough info to pass the classes with the needed grade and graduate. I feel sorry for you, just as I feel sorry for myself.

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    • Sarah says:

      “Student loans are for the lazy and should definitely not be forgiven.”

      While I truly don’t think that student loans need to be forgiven (or should be), I do take offense to this comment. I am currently completing my second degree. I attended an excellent, public school for my first degree and was awarded a full-ride academic scholarship. I worked full time throughout college to pay the rest of my living expenses, extra spending money, and, yes, I saved A LOT. However, although I graduated with a STEM degree, and a GPA of 3.8, I could not find a job to save my life. I ended up working in a job making around $20,000/yr. Certainly not what I went to college for.

      So, now I’m back in school. I moved back home with my parents (a big pride cut, for sure!), changed to a different FULL-TIME job, and attend school full time. However, to cover the cost of my tuition, I have had to take loans – a little less than half of the tuition, thanks to my now deflated savings account. I fully anticipate paying them back and am not looking for any government handouts. But in no way do I consider myself to be lazy. There are just some programs that are either too time-demanding or too expensive (read: graduate/professional school) to “pay-as-you-go.” So please step outside of your extremely narrow box and don’t make blanket statements.

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  6. Roger says:

    as a grad student, I feel that it would be a brilliant idea, but of course I am staring at a huge mountain of debt in the near future

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  7. Ardy Cooper says:

    Calling this idea idiotic is idiotic. It might be safe to assume that groups other than graduates with student loans might spend more of what they are “receiving”, but this theory of why forgiving student loans is a bad idea has several dubious assumptions as well. It should be noted that many graduates do not have jobs and have applied for, or exhausted the right to, delaying their payments. The amount of their debt grows as interest continues to accumulate, and many have fallen behind on payments. Those who have been late for payments are putting their ability to get a job at risk due to their new poor credit. Others are underemployed, working only to meet their student loans. This group may live with their parents and are not otherwise contributing to the economy. By lifting their encumbrance they could actually spend and contribute to the economy. I could continue, but I need to go to work to pay off my $1100 a month student loan payments that keep me from spending on things outside of what is totally essential.

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    • sulfide says:

      Hidden due to low comment rating. Click here to see.

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      • Charlie says:

        We all can debate why or why not student loans should be dismissed, but the bigger picture here is the real issue. Student loans program was created in the 1960′s which gave students access to education they couldn’t afford. This created a boom in the 70′s and 80′s to go to college, which drove up prices. The government backed the loans, so university increased their tuition knowing that the loans will be re-payed. At the same time, the US dollar is losing it’s purchasing power, making the cost of living rise. So, in the 90′s and 2000′s, because of these factors, the cost of education is beyond what most students can afford, even in the recent recession, tuition still went up. The US Higher eduction system is now in a Bubble and it’s going to crash in the near future.

        Government intervention in the loan market is the problem, until this goes away, cost will rise and students will pay more, and the debt will increase. This happen in the housing, and the same outcome is coming to higher education.

        Student loans are just a tip of the iceberg in this world debt crises; watch out when the bond market crashes and the dollar gets taken to the wood shed.

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      • Alex says:

        I concur wholeheartedly. I’m in college right now. I room with my friend off-campus and cook my own food to save money. I buy lots of protein and vegetables instead of comparatively-expensive frozen dinners and I never eat out. I work part-time 25 hours a week currently and full-time on breaks, including spring and Thanksgiving. Between my income, government aid, in-state tuition and my parents’ chipping in every now and again I have managed to stay debt-free for two and a half years of my college career. While many of my peers live in kush $1500-a-month apartments, drive late-model cars and drink Grey Goose I work, save money, and live within my means. My job is very nice too, but I worked all through high school to get it and sacrificed the usual “teen party lifestyle.” My point is this – I have made fiscally responsible decisions for my entire young adult life, and I WILL BE DAMNED if a bunch of spoiled freeloaders are rewarded with forgiven debt while my frugality is punished.

        It’s as simple as this – things cost money, loans have interest. IF YOU CAN’T PAY THEM OFF, DON’T TAKE THEM. I could go home every summer, get drunk, smoke weed and take out a loan, *or* I could make money to pay the thousands in tuition that I know is coming at the end of the summer. I have little sympathy for people who don’t think farther than a few hours’ ahead when it comes to the directions of their lives.

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      • lakiesel says:

        I also worked part-time, often upwards of 20 hours, while in college. I always abstained from drinking, smoking and never took a spring break (couldn’t afford one anyway). I studied hard and got good grades. I was raised on welfare, and college to me was a way to rise above my class and get out of a neighborhood filled with drugs and gang violence. For the first two years of school, I went to a private university because I got a scholarship that paid 75% of the tuition and I wanted to be closer to my family. I also had full Pell Grants and SEOGs. When I still couldn’t afford the leftover price of room and board, I transferred to a public state university to avoid taking out loans. Yet still, after only a semester in my new school, I became very ill and had to take a semester off. My mother also got cancer at this time. When I returned to school the following summer, I realized I was no longer in the right state of health to work 25-30 hour work week while taking a full course load. It was just too much. So, I scaled back to only about 10-12 hrs a week and finally gave in and took out some loans while I let my body heal.

        When I graduated, I worked (in child care and education) but always for not as much as I hoped my B.A. in English would get me and I always lived hand to mouth. I decided to go back to school to study a science, which I thought would lead to better job security and pay. You don’t qualify for grants the second time around, so taking out loans was the only way to afford it (after one semester of f/t study, went part-time so I didn’t have to pay as much and could work more. Again I went to a public university to defray costs). I then went on to grad school, and though I got a full-ride–that is, a full tuition waiver and half-time assistantship that paid, the pay was $15K/year was not enough to cover my living expenses, medical expenses, car expenses, or vet bills for my cats. So, I again buckled and took out some loans. Oh yeah, and I don’t have credit cards,

        In my experience as an undergrad, the people who partied hard in college were not taking out loans to subsidize their education, but had their parents paying their way. The kids who took out loans were ones who, like me, came from the inner city (I am from NYC) and whose parents couldn’t afford to pay for them, and yet couldn’t get a scholarship because of the paltry public school system. Here’s the truth: in the past 16 years, college tuition rates have more than doubled, while Pell Grants have remained stagnant. The ubiquity of loans has allowed universities to raise their prices to the point where the only way to afford them is to take out a loan. So, it’s okay to bail out Wall St? To have corporations like Exxon, not pay taxes, or the wealthiest 2% of individuals not pay their fair share, but forgiving student loan debt so the next generation can actually survive, is somehow obscene? Please…take a look at your righteousness and stop stereotyping. If we want people not to take out loans, we have to instill measures that ensure and affordable and accessible education for everyone.

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      • Alex says:

        I am sorry for your situation, and being sick is very unfortunate, but two wrongs do not make a right. Bailing out Wall Street was a horrendous idea as well, and using that as reason to forgive student loans is logically unsound. Economic systems, like any others, must come to a comfortable operating equilibrium through some means or another, and artificially bolstering them so that they don’t fail does not count. Forgiving student loans is just as silly. Oh, and Exxon and other companies have a right to pay their CEOs whatever they want – it’s called *capitalism*. If you don’t like the way that they do business, then you don’t give them your money.

        And I’m not stereotyping. Unless you are trying to tell me that the simple majority of students who take out loans come from socioeconomically-unfavorable backgrounds and have had to fight serious health issues during their educational careers what you are saying should not apply to anybody but special cases like yourself (funny that… there are special government programs that renegotiate student loan repayment in cases of crises. Perhaps you should look into them).

        And the vet bills for your cats are a perfect example of what I am talking about. Know why I don’t have a cat, dog, hamster, squirrel, or any children? Because I can’t afford them. I won’t go back to school for a while, if at all, because I know that my salary and lifestyle won’t be able to afford it. That’s YOUR mistake – it’s not as though you had to go back to school.

        The way things work in a free-market economy mean that things cost money. Sometimes things are out of our reach, but the good thing is this – assuming the government isn’t running around doing things like forgiving debts and bailing companies out, it will all stabilize eventually. If you don’t like how much college costs, don’t buy it, and make sure that everyone else does the same. Something is only worth what somebody will pay for it. People continue to buy into the system and make it work, otherwise none of these evil entities could continue what they are doing.

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  8. caleb b says:

    For-Profit colleges have an enrollment well over 600,000 students. Approximately 90% of all of them are maxing out their federal student loans to obtain a degree that wouldn’t get them into the mailroom at my business. I know for a FACT that my company won’t even look at a someone with the University of Phoenix on their application.

    Take the top six for-profit schools by attendance (623,244 – fall ’09) and assume 90% take out the maximum student loans. For 8 semesters, at the max loans ($88,500) that is ~$50 BILLION in debt. That’s right. $50 BILLION in loans to obtain worthless degrees. Loans that can never be forgiven until death.

    We have a MAJOR problem in the US and someone needs to get on it right away.

    http://nces.ed.gov/programs/digest/d10/tables/dt10_246.asp?referrer=listBased on ONE MILLION students.

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    • kdh says:

      If their degree is “worthless”, then wouldn’t they be as useless in the workforce as well? If their debt is forgiven for choosing a “worthless” career path, .

      Also, using your “facts”, if all student loans only amounted to $50 Billion, it is but a minute portion of our government’s debt. And just as Wolfers writes: “Opportunity cost is one of the key principles of economics. And that principle says to compare your choice with the next best alternative”, and there ARE better alternatives for spending this money elsewhere that would make a bigger difference in our economy.

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      • caleb b says:

        “if all student loans only amounted to $50 Billion, it is but a minute portion of our government’s debt”

        I never said that ALL student loan debt totaled $50 billion. I said that the 600k+ students currently in pursuit of an online, for-profit degree can be reasonably estimated to acquire $50 billion in debt to acheive that degree.

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      • Kelly says:

        Silly, silly, silly. Their degrees are worthless because they didn’t receive the proper training from unaccredited private ‘universities,’ which I’m not sure how they can even deem themselves that. These career/vocational/private schools promoting education in green jobs, nursing, medical coding and billing, etc. don’t teach practical skills, and they target the lower, uneducated class.
        These schools buy lists, target individuals, and cold call (they actually refer to prospective students as ‘leads’, and sales reps close the deals or are fired. They face very high quotas). Because they target the less educated, these people think they are bettering themselves.
        I know this because I worked at a marketing company that got ‘leads’ for these career schools, one huge one on the West Coast is tanking. They offer beautiful images of various ethnicity becoming nurses, technicians, etc, but when all is said and done, they hardly even participate in clinicals (as in, real world training). Nursing homes that run off of LPNs and LNAs wouldn’t look at these grads twice. So what are people, who thought they were bettering their lives (ie, first int he family to go to ‘college’), to do? How were they to know these schools were just factories?

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      • Chloe says:

        “These career/vocational/private schools promoting education in green jobs, nursing, medical coding and billing, etc. don’t teach practical skills, and they target the lower, uneducated class.”

        I dare you to come say that to me and any nurse who takes care of you during your next possible hospital stay.

        I went to a university for 4 1/2 years, had to take an exam for my license, and I have to do continuing education credits to hold my license. I would like to think I’m educated in my field; but according to you, I am part of the lower, uneducated class.

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      • Chloe says:

        To add on… I know you are talking about for-profits/vocational schools, but an issue with nursing schools right now is there are years-long waiting lists for the public schools, whereas some private/for profit take students right away. Those going to those schools have learned the same skills I have, and I wouldn’t assume them to be of the uneducated sort before attending.

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    • Jake says:

      Who is forcing these 623k people to attend the For-Profit colleges? No one is making them choose the most expensive and highly questionable route for getting a college education.

      If anyone needs to take action, its those 623k people.

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      • caleb b says:

        @Jake

        More than half a million people, racking up thousands of dollars worth of pointless and irrevocable debt every year. Yep, I am so SURE that those people won’t end up being YOUR problem in any way.

        There’s no chance that you will be affected by that. Nope, you rest your pretty little head at night and dream sweet dreams.

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      • kelly says:

        Please read the above. And no, I am not that which I describe above. I graduated from a private university, because in my state it was the only school that offered the program I wanted. And no it’s not liberal arts, physch, or any of the other ‘useless’ degrees people are assuming with their comments.
        However, I felt for the quality of my education I was over charged. Can’t get a refund though, can I?

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    • Melissa says:

      THey aren’t forgiven at death if your parents cosigned.

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    • caleb b says:
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