AuthorTopic: Subprime Student Loans  (Read 4674 times)

Offline RE

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https://www.nytimes.com/2019/05/11/opinion/sunday/student-loans.html?save=nyt-gateway-stories

What’s Scarier Than Student Loans? Welcome to the World of Subprime Children

Income share agreements sound like a better deal than today’s student loans, but what will they do to society?

By Malcolm Harris

Mr. Harris is the author of “Kids These Days: Human Capital and the Making of Millennials.”

    May 11, 2019

Credit Tim Lahan

As American families refresh the wait lists and weigh their aid offers, yet another cohort of children sets foot into our disaster of a national higher education financing system. Student debt in the United States is over $1.5 trillion, with half of it accumulated in the past decade. Income share agreements — in which borrowers pledge a percentage of future income against debt — present the first plausible alternative. That’s what we should be afraid of.

There’s a lot to dislike about the student debt status quo, which is now almost completely controlled by the federal government. Although the Democrats don’t like to talk about it, the Obama administration effectively nationalized a vast majority of student borrowing in 2010 when it ended federal guarantees for outside lenders as a cost-cutting provision of the Affordable Care Act. The government has a number of advantages as a lender, including an exemption from regulations on debt collectors and the ability to print money. Private investors have thus been pushed to the margin of what has become the largest nonmortgage debt category in the United States; the federal government has over 90 percent of the market.

Income share agreements, or I.S.A.s, began as an experimental model of education funding. One of the first income share programs was designed in the 1970s with the help of the Nobel Prize-winning economist James Tobin at Yale. It was poorly structured in a number of ways — students signed on as a class and kept paying until the whole debt was gone, but wealthier graduates who were able to pay a large chunk at once could opt out — and it closed down (without full repayment) in 2001. One big problem with I.S.A.s is that there is no collateral to these loans. You can’t repossess a classics degree. And as Gary Becker, the University of Chicago neoliberal economist, once lamented, “courts have frowned on contracts which even indirectly suggest involuntary servitude.”

Purdue and a few other universities have come up with I.S.A. programs that could point the way forward. They assess different rates and repayment durations depending on the borrower’s major. If you’re a chemical engineering major at Purdue, you enjoy better terms than if you study English: Under its I.S.A. schedule, chemical engineers are expected to repay $33,000 at the rate of about 8.5 percent of their income for seven years and four months, while for English majors it’s almost 15 percent for nine years and eight months. But these university I.S.A.s are meant to supplement rather than replace student loans.

Now private capital is starting to find its way into I.S.A.s, through a handful of online computer science training programs. With names like Pathrise, Thinkful and the Lambda School, these “career accelerators” provide tech companies with certified coders and provide participants with a credential in months, not years. Students in these programs can pay by way of an I.S.A. that is financed and serviced by investors gathered under their own Silicon Valley-style names like Leif. By my estimate, the private I.S.A. sector has yet to reach 1 percent of the $100 billion-plus in annual higher-education lending, but it’s growing fast.

A company called Big League Advance has started lending to algorithmically approved minor-league baseball players; something similar might appeal to college athletes whose scholarships fail to cover all their costs. From there, it’s only a few steps before investors sets their sights on other reliable investments: Ivy League finance, Stanford biology, engineering at flagship state universities.

What’s the appeal of an I.S.A. over a regular student loan? From a capitalist’s perspective, the federal government has a weakness: It treats all borrowers the same. Borrowers face the same interest rates whether they are mediocre art students or valedictorians studying quantum computing at a top engineering school. But private I.S.A. lenders can skim the cream of students off the top.

The returns on higher-education loans are already high — new student-loan borrowers will be paying the Treasury 4.5 percent to 7 percent for the 2019-20 academic year — so private lenders can offer better terms to students who are the most reliable bets. And while it’s difficult to fit all but the bare necessities of college life under federal loans limits, promising students will be able to borrow enough with a private I.S.A. to simulate the worry-free college experience of their wealthy peers.

If you can convince investors you’re going to be rich for the rest of your life, why spend your college years poor? I.S.A.s bridge the gap. It’s hard to think up a better advertisement for free-market capitalism.

But I.S.A.s are premised on the idea of discriminating among individuals. Once the high-achieving poor and working-class students have been nabbed by I.S.A.s, the default rate for federal loans starts to rise, which means the interest rates for these loans have to go up to compensate. A two-tiered borrowing system emerges, and the public half degrades.

If I.S.A.s take off as a desirable funding source, it’s inevitable that they will begin to reshape childhood. Instead of just trying to build a résumé that appeals to admissions committees, students would spend their adolescence trying to build profiles that scan as successful to investors. Every child becomes his or her own start-up. I.S.A.s will no doubt protect their child-ranking algorithms as trade secrets, but if years of research on tech bias is any guide, we can expect they’ll perpetuate existing inequalities.

For students who are risky bets, rated as less than investment-grade, lenders can tweak repayment periods and terms until the algorithm approves. Computers can make practically infinite distinctions among potential borrowers, and there’s nothing to stop future applicants from optimizing themselves into anxiety and depression even worse than what we see now.

Welcome to the world of subprime children. This is the path we’re on, and it ends with teenagers being careful to always smile in front of their laptop cameras lest the I.S.A. algorithm find them uninvestably dour. The alternative is to reconsider education as a social good and make capitalists pay for it, not as an investment but via taxation. If we’re not careful, investors from Silicon Valley and beyond will reshape the country’s children in their own image.

Malcolm Harris (@BigMeanInternet) is the author of “Kids These Days: Human Capital and the Making of Millennials.”
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🎓 Map: Cities in the South are being held back by student debt
« Reply #151 on: May 15, 2019, 03:32:13 PM »
This is CFS.  There are more poor cities in Old Dixie.

RE

https://finance.yahoo.com/news/student-debt-cities-map-175110486.html

Map: Cities in the South are being held back by student debt
Aarthi Swaminathan
Finance Writer
Yahoo FinanceMay 15, 2019


There are more than a trillion dollars in outstanding student loans, affecting millions of Americans, and a new study by WalletHub details how borrowers in the South are feeling the pain more than most.

The study — which looked at 2,510 cities across the U.S. and divided the median student loan balance held by adult borrowers living in those cities by their median earnings — identified cities when residents were most and least indebted relative their salaries.

Thirteen of the bottom 20 cities were in the South (i.e., south of the Mason-Dixon line and east of the Mississippi River). On the other end of the spectrum, 10 of the top 20 cities with the best debt-to-earnings ratio were in California.
(Graphic: David Foster)
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(Graphic: David Foster)

"What's worrying is that overall, post-college debt is a huge financial burden to Americans,” WalletHub analyst Jill Gonzalez told Yahoo Finance. “High balances, combined with long payoff timelines and low earnings, make graduates delay other financial goals like owning a home or saving for retirement."
‘Trillion-dollar black hole’ caused by student debt

The hotly debated issue of student loans features a wide cast of characters from presidential candidates — who are calling for broad cancellations of debt — to economists who consider it a “micro” problem.

But with more borrowers going delinquent and defaulting on their loan repayments — as well as a gradual decay of existing loan forgiveness programs — the student loan crisis has created a “trillion-dollar black hole in our financial market” that has left people “drowning under the weight of this unprecedented burden,” former CFPB student loan ombudsman Seth Frotman told the Committee on Financial Services on Capitol Hill in March.

In the WalletHub study, the cities in the 99th percentile — those with borrowers who saw their student loans comprise of around 68% to 85% of their income — were at the highest levels in Sun City West in Arizona, followed by Green Valley in Arizona and Palatka in Florida.
Student debt has soared in the 21st century. (Graphic: David Foster/Yahoo Finance)
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Student debt has soared in the 21st century. (Graphic: David Foster/Yahoo Finance)

The median student debt held by borrowers in those three cities was between $17,000 to $21,000, while their earnings were between $21,000 to $25,000, yielding a student debt-to-income ratio of more than 83%.

"The common thread among the 99th percentile was low median earnings for bachelor's degree holders, some even as low as $20,000 annually,” Gonzalez said. “This is why even cities with a lower amount of debt such as Forest Park, GA or Lexington, NC still manage to have a student debt to median earnings ratio around 75%.”
What the top cities have in common

Conversely, cities in the top percentile saw a student debt-to-earnings between 15% at the lowest end and 21%.
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Offline RE

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Let's see... Student Debt is around $1T.  So if you got 1000 Billionaires to contribute $1B Each you could solve the problem!  lol.  According to Forbes, there are only 540 Billionaires in the FSoA, and I doubt Chinese Billionaires will contribute to solve this problem.

Nice gesture though.

RE

https://deadline.com/2019/05/billionaire-producer-robert-f-smith-vows-to-pay-off-morehouse-grads-debt-1202618558/

May 19, 2019 6:20pm

Philanthropist Robert F. Smith speaks at Morehouse College graduation. (Credit: YouTube)   

Philanthropist Robert F. Smith delivered a life-changing commencement speech Sunday at Morehouse College in Atlanta.

The billionaire businessman, who received an honorary degree from the historically black school, surprised the nearly 400 graduating seniors by announcing his family would provide a grant to pay off student debt for the entire Class of 2019.

“On behalf of the eight generations of my family who have been in this country, we’re gonna put a little fuel in your bus,” Smith said in a video posted on social media.

“This is my class,” he added, “and I know my class will pay this forward.”

The gift to the private, all-male school is said to be worth about $40 million. It comes in addition to a $1.5 million donation Smith gave Morehouse earlier this year for scholarships and a new park.

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Some students told the Atlanta Journal Constitution they were graduating with up to $90,000 in debt.

Smith is a Cornell grad, and has an MBA from Columbia University. He founded Vista Equity Partners, a software and technology investment firm, which has $46 billion in assets, according to its website.

He is the richest African-American in the United States, with a net worth of $5 billion, according to Forbes. This year he ranks #355 on the Forbes Billionaires List of the world’s richest people.

Smith has Hollywood ties as well after investing in Hidden Empire Film Group — which is run by Deon Taylor and Roxanne Avent. The group’s recent releases include Meet the Blacks (2016), Traffik (2018), and The Intruder, a psychological thriller released on May 3. The film stars Meagan Good, Michael Ealy, and Dennis Quaid. To date, it has grossed $28 million domestically.
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Re: Subprime Student Loans
« Reply #153 on: May 20, 2019, 12:47:13 AM »
Quote
we’re gonna put a little fuel in your bus

 :aola: :multiplespotting: :hello: :wav:
Under ideal conditions of temperature and pressure the organism will grow without limit.

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🎓People are fleeing the US to keep from paying off their student loans
« Reply #154 on: June 01, 2019, 12:14:38 AM »
https://www.businessinsider.com/student-loan-debt-high-people-are-fleeing-the-country-2019-5

People are fleeing the US to keep from paying off their student loans
Allana Akhtar


India Painted Elephant Shutterstock / ostill

    Some student-loan borrowers are leaving the US to keep from paying off their debt, according to CNBC.
    The federal government can't garnish wages for borrowers working abroad. Yet the loans do not go away, and they are likely to balloon after late fees and interest.
    Visit Business Insider's homepage for more stories.

Some student-loan borrowers have fled the US to keep from paying their loans, according to a report on CNBC.

One borrower told CNBC he relocated to India after failing to find a well-paying job after college. There, he found the cost of living much cheaper than in Colorado. While there isn't data surrounding how many borrowers have gone abroad to avoid paying off debt, CNBC observed Facebook groups and Reddit channels where people described fleeing the US over the student-debt crisis.

The federal government can garnish wages and tax refunds for borrowers working in the US but not for those working abroad. The debt does not go away, however, and typically would increase quickly with compound interest and late fees. Borrowers who reenter the US and continue not to make payments could be sued, according to Joshua Cohen, a lawyer specializing in student-loan debt.

Americans who stick around are struggling to pay off their loans. Student-loan debt has the highest 90-day delinquency rate of all other household debt, like mortgage and auto loans, according to Bloomberg. Some economists say nearly 40% of borrowers could default on their loans by 2023.

Solutions to student debt are likely to be at the forefront of the 2020 presidential race. Sen. Elizabeth Warren, a 2020 Democratic presidential candidate, has offered a plan to eliminate student debt for 42 million Americans, funded by taxing billionaires.

One borrower who fled to Japan told CNBC she worked multiple jobs to pay off her loans but still could not afford health insurance. "I wish I could come back to America and not be scared," she said.
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https://www.nbcnews.com/politics/politics-news/hbcus-crushing-student-loan-debt-symptom-even-bigger-problems-n1014171

At HBCUs, crushing student loan debt is a symptom of even bigger problems


Sonny Ross / for NBC News

“When these institutions were created they weren't created on equal footing with historically white institutions,” one expert said.
Illustration of hand pouring change into a cracked piggy bank shaped like a Paul Quinn College building. A group of college graduates stand on the lawn.
Sonny Ross / for NBC News
June 9, 2019, 8:10 AM AKDT
By Dartunorro Clark

When Michael Sorrell became president of Paul Quinn College 12 years ago, he assessed the dire situation his school was in and made a bold choice: No more football.

“I mean, we're in Texas. We're an HBCU in Texas,” Sorrell said. “I got a little flak for that, OK?”

But to him, eliminating the program was the only way the historically black college in Dallas, which was founded in 1872 by a group of preachers from the African Methodist Episcopal Church to educate freed slaves and their children, could get back on track.

Football had cost the school roughly $600,000 to $1 million a year, he said, and scholarships went mainly to the players. Meanwhile, other students struggled, faculty and staff members were leaving, and buildings had fallen into disrepair.

"We were roughly 18 months to 24 months away from closing. We had financial problems. We had academic problems. We had morale problems, and it was the prototypical scenario for an institution that had been struggling for a long time and the end of the road was coming,” he told NBC News in a phone interview.

The challenges Paul Quinn College faced are not unique, experts said, even if its solution was one of a kind.

Last month, when billionaire philanthropist Robert Smith thrust historically black colleges and universities (HBCUs) into the national spotlight by pledging to eliminate up to $40 million in student loans for Morehouse College's almost 400 graduates, his gift was heralded as both historic and likely life-changing for those students.

But student loan debt is merely a symptom of a systemic problem that dates back to the schools' beginnings, according to Marybeth Gasman, a professor at the University of Pennsylvania and an expert on HBCUs.

“When these institutions were created they weren't created on equal footing with historically white institutions,” she said. “So what happens is basically you end up with a situation where the majority (white) institutions continue to get wealthier because wealth begets wealth, and the HBCUs are behind.”
Philanthropist Robert Smith pledges to clear student debt of Morehouse college grads
May 20, 201901:30

HBCUs were founded and subsidized by states, the federal government, philanthropists or churches to educate black Americans who were barred from attending majority-white colleges. But in recent years, financial woes, among other issues, have forced a number of the schools to the brink of closure or put their accreditation at risk. And, lacking large endowments for generous scholarships compared to many non-HBCUs, much of the burden can fall on the students to depend on substantial loans to make up gaps in aid.

Gasman said that more than 70 percent of those who attend HBCUs rely on federal Pell Grants, which is aid for students who demonstrate financial need. But for these students, there's usually still a gap between the Pell Grant money and the aid the school offers — which is where loans come in.

Student borrowers owe close to $1.5 trillion in student loan debt nationwide. However, when race is factored in, black college graduates owe, on average, $7,400 more than their white peers, and that number is expected to more than triple to $25,000 in the next few years, according to the Brookings Institution, a Washington-based think tank.

A 2016 United Negro College Fund (UNCF) report also found that a higher percentage of students at HBCUs — 80 percent — used federal loans to pay for college compared to 55 percent of students not attending an HBCU. It also found that a higher percentage of students — 12 percent — at HBCUs combine federal, state and private loans to finance their education, compared to 8 percent of non-HBCU students.

HBCU students also borrow more money and are more likely to tap into unsubsidized federal loans and rely on their parents to also take out loans, according to Gasman.
President Michael Sorrell of Paul Quinn College poses with students in Dallas, Texas on May 4, 2019.Roberto Hernandez / Paul Quinn College

“And so if we could get more of an investment in HBCUs, they could have more institutional aid,” Gasman said, referring to federal and state funding inequities.

Advocates say a concerted effort from lawmakers is needed to ensure HBCUs get equal and consistent access to federal funds — though being so reliant on government dollars has its pitfalls.

Since the Higher Education Act of 1965, HBCUs have received funding from the federal government — called Title III funding — to, in part, make up for past discrimination in higher education. States also provide funding to some of these institutions. However, those sources of funding have not been steady because of unequal funding in state budgets and largely stagnant funding at the federal level.

Democratic Sens. Kamala Harris of California, who attended historically black Howard University, and Elizabeth Warren of Massachusetts have proposed plans to boost HBCU funding on the 2020 campaign trail. Warren has one of the boldest, proposing an unprecedented $50 billion investment in HBCUs.

Victor Santos, the director of government relations at the Thurgood Marshall College Fund, said that these plans are admirable, but HBCUs need a long-term funding solution.

Researchers from the UNCF raised those concerns in a report for the American Council on Education earlier this year in which they found that HBCUs are more dependent on federal, state and local dollars than their counterparts. For instance, those resources make up 54 percent of revenue at HBCUs compared to 38 percent at other colleges and universities. Because of this, the report warned, HBCUs are particularly “susceptible to economic downturns, state divestments from higher education, or policy changes.”

Santos said that one way the government could help HBCUs is to steer federal research contracts to many of these schools, which could pump big dollars into not only student aid but also the infrastructure of the school for long-term sustainability.

“So basically what we're doing right now with Title III is we're keeping the house clean on the outside. We're able to, basically, keep the doors open with this money but we need some money to help us build a stronger foundation,” he said.

“We need some research dollars that help us push off. Because once we get that, then we can start actually building new floors on the house. We can start adding new bedrooms. What Title III is doing is really keeping the lights on and keeping us going.”

Ivory Toldson, a professor at Howard University, agreed. He runs the group Quality Education for Minorities, which aims to address the disparity in research funding. He noted that Johns Hopkins University, for instance, received, more research funding than all HBCUs combined.

“We know that if HBCUs can build up their research apparatus they can not only get more money for their research and also lead to things like patents. But they could also contribute more knowledge to our society,” he said.
Paul Quinn College entrance sign.Roberto Hernandez / Paul Quinn College

At Paul Quinn College, 85 percent of its students rely on Pell Grants and 70 percent of students have zero expected family contributions, where the on-campus, full-time tuition is roughly $15,500 a year for a bachelor’s degree.

“They're taking out the loans because there's less money in their families and in their communities,” Sorrell, the college’s president, said. “So, part of the reason there's less money is that they've had to deal with systemic inequities for their entire lives.”

The school has had a six-figure surplus, Sorrell said, for most of his tenure, which has allowed the school to open new buildings, turn around its enrollment numbers and support its students and faculty. The football field is now an organic farm, and Sorrell said he has no plans to reinstate the program.

He said he’s now more focused on the academic and financial stability of the school.

“When you've given your heart and soul and time to an institution that is failing, you suffer great remorse and there's great sadness, but it doesn't mean that you give up, but you just breathe, you find another way,” he said.
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https://www.nbcnews.com/politics/politics-news/hbcus-crushing-student-loan-debt-symptom-even-bigger-problems-n1014171

At HBCUs, crushing student loan debt is a symptom of even bigger problems

When Michael Sorrell became president of Paul Quinn College 12 years ago, he assessed the dire situation his school was in and made a bold choice: No more football.

“I mean, we're in Texas. We're an HBCU in Texas,” Sorrell said. “I got a little flak for that, OK?”

But to him, eliminating the program was the only way the historically black college in Dallas, which was founded in 1872 by a group of preachers from the African Methodist Episcopal Church to educate freed slaves and their children, could get back on track.

Football had cost the school roughly $600,000 to $1 million a year, he said, and scholarships went mainly to the players. Meanwhile, other students struggled, faculty and staff members were leaving, and buildings had fallen into disrepair.

"We were roughly 18 months to 24 months away from closing. //

“When you've given your heart and soul and time to an institution that is failing, you suffer great remorse and there's great sadness, but it doesn't mean that you give up, but you just breathe, you find another way,” he said.

I don't think any of us can imagine how much guts it takes for a college president to make such a decision, since he is going to have several decades worth of alumni crawling his frame. He's a hero.

I would suspect the he is at the leading edge of a contraction that will be more widespread in the next ten years. Collge football is an obscenity anyhow, and is a "keeping up with the Joneses" thing among college presidents and alum. It's gong to become increasingly unsupportable as sports schools continue to separate into haves and have-nots. Most SEC schools actually have better facilities than several NFL teams (thinking Oakland and Buffalo here) and operate professional style programs. The fact that student fees go to subsidize some part of this (when the schools are awash in $millions in TV money) is criminal.

Just another conduit scheme coming to an end, as the credential becomes increasingly less able to reward the pile of student debt that finances its acquisition, and people becomes increasingly less relevant to how people have to live their lives.

"It is difficult to write a paradiso when all the superficial indications are that you ought to write an apocalypse." -Ezra Pound

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https://www.cnbc.com/2019/06/13/bill-would-cancel-most-of-the-countrys-outstanding-student-loan-debt.html

Bill would wipe out most of the country’s outstanding student loan debt
Published 2 hours ago
Annie Nova
@AnnieReporter
   
Key Points

    Democratic presidential candidate Elizabeth Warren isn’t waiting for the election to push forward her proposal to erase the majority of the country’s outstanding student debt.
    The Massachusetts senator and Rep. James E. Clyburn (D-S.C.) announced on Wednesday their plan to introduce legislation in the House and Senate to eliminate up to $50,000 in student loan debt for 42 million Americans.


Democratic presidential candidate Elizabeth Warren gestures as she speaks during a campaign stop at George Mason University in Fairfax, Virginia on May 16, 2019.
Mandel Ngan | AFP | Getty Images

Democratic presidential candidate Elizabeth Warren isn’t waiting for the election to push forward her proposal to erase the majority of the country’s outstanding student debt.

The Massachusetts senator and Rep. James E. Clyburn (D-S.C.) announced on Wednesday their plan to introduce legislation in the Senate and House to eliminate up to $50,000 in student loan debt for 42 million Americans.

“It’s time to decide: Are we going to be a country that only helps the rich and powerful get richer and more powerful, or are we going to be a country that invests in its future?” Warren said, in a statement.

Outstanding education debt in the U.S. is projected to swell to $2 trillion by 2022, surpassing credit card or auto debt levels. Today, the average college graduate leaves school $30,000 in the red, up from $10,000 in the 1990s. Nearly one-quarter of borrowers are in delinquency or default.

In a post on Medium in April, Warren introduced her campaign proposal to eliminate student debt. The details of the bill are likely to be similar.

Borrowers with household incomes under $100,000 would be eligible to have $50,000 of their student debt scrubbed.

People who earn between $100,000 and $250,000 would be eligible for less forgiveness. For example, Warren writes, “a person with household income of $130,000 gets $40,000 in cancellation, while a person with household income of $160,000 gets $30,000 in cancellation.”

More from Personal Finance:
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Michael Avenatti allegedly failed to file tax returns. That’s a bad idea

And those who earn more than $250,000 would not be eligible for any debt forgiveness.

In all, more than 95% of student loan borrowers would see at least some of their debt cancelled.

The plan would be funded with a 2% annual tax Warren proposes to levy on accumulations of wealth exceeding $50 million, with an additional 1% on wealth exceeding $1 billion.
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VIDEO01:52
Senator Elizabeth Warren’s college plan would cost $1.25 trillion over 10 years

In a recent Politico/Morning Consult poll, 56% of registered voters said they support the Massachusetts senator’s proposal to wipe out $640 billion in outstanding education loans by raising taxes on the wealthiest Americans.

Just 27% of voters said they opposed the plan.

In an interview on CNN on Sunday, Democratic presidential candidate Bernie Sanders suggested he, too, would soon be putting forth a plan to forgive student loan debt.
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https://slate.com/business/2019/06/student-debt-forgiveness-no-one-knows-what-it-would-cost.html

Nobody Actually Knows What Forgiving Everyone’s Student Debt Would Cost

By Jordan Weissmann
June 25, 201911:58 AM



Nope, not even them.
Saul Loeb/AFP/Getty Images

As of now, three separate Democratic presidential candidates—Elizabeth Warren, Julián Castro, and Bernie Sanders—have released proposals to cancel vast quantities of America’s student debt. In doing so, they’ve taken an idea that once seemed like a fringe enthusiasm of the internet left and thrust it straight into the center of the White House race.

That makes now a good time to share an odd quirk about this topic that rarely if ever gets mentioned: Nobody really has any idea how much canceling all of the country’s student debt would cost.

I mean, somebody might. I imagine there could be some poor, Vitamin D–deficient creature locked deep inside the U.S. Department of Education guarding this secret knowledge. But I haven’t found them yet. Meanwhile, I have talked to economists, think tankers, and congressional staffers who all say the answer is still a mystery. “We spent a while thinking about if we could figure it out, and we just had no way,” Ben Miller, who heads up the higher education team at the Center for American Progress, told me. Adam Looney, a former U.S. Treasury economist now at Brookings who has long studied higher-ed finance, said much the same. “I agree that no one knows what it would cost,” he wrote in an email. Warren’s campaign tried to ballpark a price tag for her plan, but it was basically a guesstimate. According to one source I spoke with, the Congressional Budget Office believes that trying to calculate the figure would be “complicated.” In other words, Capitol Hill has no idea what a student debt jubilee would do to the budget, either.

Here’s the basic problem: In order to know how much student debt forgiveness would cost the government, you would need to know how much Washington actually expects to collect over time on its portfolio of outstanding loans. Bizarrely, the feds do not share that information. It publishes related figures. But there is no simple accounting statement that says, “We’ve already collected X dollars on these debts, and we expect to collect X more.”

Outsiders can’t reverse-engineer those numbers, either. Consider: The Department of Education currently has $1.16 trillion of direct loans on its books. In theory, it could collect more than that amount, or less. But how much more (or less) depends on the interest rates students pay, which repayment plans they choose, their remaining balances, how many borrowers eventually default, and how much debt the government will cancel at some point through the various forgiveness programs that already exist. Those details are not all publicly available; think tankers just don’t have enough pieces of the puzzle to complete the picture.

All of this might come as a surprise if you’ve read about how Washington sometimes makes a profit off student lending. But those estimates are based on how much the CBO thinks the government will make on new loans it issues over the coming decade, not the loans it already has on the books. When it comes to those, the government doesn’t really tell us much. The best we get is an annual report by the Department of Education that shows how much the value of its loan portfolio has gone up or down, but that doesn’t put a figure on what the whole thing is presently worth. Imagine if you could see that your 401(k) went up by $5,000 this year but had no way to figure out how much was actually in it. That’s more or less the conundrum education wonks who are interested in this issue are stuck dealing with.

All of this ambiguity can make it a little hard to debate the pros and cons of cancellation. After all, one of the big arguments against the idea is that it could be expensive, and there are other things the government might be better off doing with the money. But it’s possible that mass forgiveness would cost less than many suspect, since the government is already planning to wipe out a good deal of debt through different debt relief programs that are available to borrowers today, such as Public Service Loan Forgiveness. We just don’t really know.

There are some things about the economics of debt cancellation that we can more or less figure out. For instance, government surveys give us plenty of data on how much student debt different households owe and how much those Americans earn. As a result, it’s possible to say with some certainty that Elizabeth Warren’s plan, which caps forgiveness at $50,000 a person and lowers it for higher earners, would mostly help the middle class. At the same time, it’s pretty obvious that forgiving all debts, as Bernie Sanders has proposed, would give a disproportionate amount of help to lawyers and doctors with expensive professional degrees. In other words, we know enough for people to argue about it. “To be honest, the exact cost seems somewhat irrelevant given that I’m opposed to it on so many fronts,” Beth Akers, a senior fellow at the Manhattan Institute, told me. “If it were good policy then I’d endorse it even without a solid price tag.” The people who do think it’s a good policy feel that way too.
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Offline K-Dog

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Re: Subprime Student Loans
« Reply #159 on: June 25, 2019, 12:23:39 PM »
It is only debt, don't fret.
Under ideal conditions of temperature and pressure the organism will grow without limit.

 

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