Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Soaring Student Debt Prompts Calls for Relief

wsj.com

Post reply on HN
Print view View original

461–470 of 535 posts

Re: Soaring Student Debt Prompts Calls for Relief

#461

Post by zo1 »

morgante wrote: post #181
atombath wrote: post #28

Earlier quoted context omitted.

I understand that feeling... I'm nearing the end of my loans and dropped $3k on one of them yesterday. I would have rather had a vacation if it's just going to vanish! ...but don't get salty because the debt won't vanish. I have no doubt that if an education loan is forgiven, it WILL affect that persons credit rating. Much like when a debt is forgiven/charged-off. Also, charge-offs are typically treated as a form of…

> Also, charge-offs are typically treated as a form of taxable income That's not much consolation. I wouldn't be happy if the government decided to simply pay people for making poor financial decisions, even if we recovered x% of those payments through taxes. I'd still be paying for it with my massively higher taxes. Just get the government out of the student loan industry. Let the market signal which degrees are val…

>"I wouldn't be happy if the government decided to simply pay people for making poor financial decisions"

Government already does that in a myriad of ways, some more morally accepted than others. It's almost part of the base definition of what we expect the government to do, if you really think about it. Paying for the poor that made bad life decisions and lost their job, the sick that didn't save for medical expenditure, the parent that had one-too-many kids and can't pay for their food/schooling, etc.

I would argue they are all very similar, buffering and protecting those that are incapable of providing for themselves, either by inability or conscious inaction/abuse. It's just that some people think this should be done by private efforts, instead of by government which uses it's power to force people to obey and pay.

Re: Soaring Student Debt Prompts Calls for Relief

#462

Post by h4nkoslo »

Neeek wrote: post #436
h4nkoslo wrote: post #374

Earlier quoted context omitted.

No, I didn't. OP is trying to make this a lovely cost-free dynamic, where all we have to do is let our brother crabs get out of the bucket without dragging them down, man. That's bullshit. In reality OP proposes to transfer money from me to people who made investments in human capital that didn't pan out. Maybe that's their fault, because they invested foolishly. Maybe it's nobody's fault, because they invested in a…

But it does have to do with you? All of this affects the world you live in, the world that you interact with directly every single day. The house you live in, the wage you're paid, the food you eat, the medicine you receive, everything in your life depends on other people. Whether you agree with the way your government is handling this or not, it all still has everything to do with you.

Yeah man, like, butterfly effect, you know?

Rather more direct when they're taking my money to do so. This isn't an abstract "ask not for whom the bell tolls, it tolls for thee" scenario, and the alternative is not personal autarky. OP is proposing a direct transfer, from me to a stranger, to which I am opposed, and therefore one which must be imposed by force. The alternative is not imposing such a transfer. Cut a check yourself if you think it's a good idea. Bullshit about the universal brotherhood of man and unity of the volk does not excuse arbitrary impositions.

Re: Soaring Student Debt Prompts Calls for Relief

#463

Post by dragonwriter »

dredmorbius wrote: post #409
dragonwriter wrote: post #273

Earlier quoted context omitted.

> The international slave trade was abolished in 1800, but existing slaves, and their children, could still be kept, bought, and sold, until 1863. 1865 (with the ratification of the 13th Amendment), actually.

Well, if you want to go there, technically slavery is still legal, but only as a punishment for a crime: "Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted , shall exist within the United States, or any place subject to their jurisdiction."

The point about 1865 is that 1863 refers to a military order that applied only to the states in rebellion. There were, IIRC, on the order of 50k permanent chattel slaves in the Union that were not affected by the application of the proclamation to rebel states as the Union secured control of them, and we're only freed by the ratification of the 13th Amendment.

Re: Soaring Student Debt Prompts Calls for Relief

#464

Post by gozur88 »

pjlegato wrote: post #447
gozur88 wrote: post #397

Earlier quoted context omitted.

>Federally-backed student loans, undischargeable and given to all and sundry, to be spent wherever on whatever, is a gigantic short in the moral-hazard circuit. I'm not sure you're using the term "moral hazard" correctly. If the loans were dischargeable that would be a moral hazard, because the smart thing to do would be to borrow up to your eyeballs and then declare bankruptcy ten years later on graduation day.

It's a moral hazard for the banks and schools, not for the students. It induces banks to knowingly make loans that are unlikely to be repayable. It induces schools to tell students to take loans to attend programs that are very unlikely to ever lead to employment that will pay enough to be able to pay back the loans.

I don't agree. The whole point of the program is to get banks to lend money to students when the spreadsheet says it's a bad idea.

And the schools should not be in the business of telling students what they can afford. For one thing, they probably can't know.

Re: Soaring Student Debt Prompts Calls for Relief

#466

Post by dpark »

gozur88 wrote: post #429
dpark wrote: post #417

Earlier quoted context omitted.

Is it not also a moral hazard to lend unceasingly knowing that you'll destroy the economy before taking a hit on the bad loans you've issued?

I don't think so. Getting companies to lend to students was the whole point of the program. Normally you'd use the term to describe unwanted side effects.

The term describes the situation in which the cost of one party's risks are born by another party. Whether it's "unwanted" doesn't actually seem that relevant. If foolish incentives create a moral hazard, the moral hazard still exists regardless of the intent behind the incentives.

Re: Soaring Student Debt Prompts Calls for Relief

#467

Post by dragonwriter »

dpark wrote: post #421
dragonwriter wrote: post #259

Earlier quoted context omitted.

> How would one repossess an education? You can't. > Isn't that the reason student loans are not dischargeable? No. First, student loans are, in fact, dischargeable, though there is a higher bar to discharging them. So expalanations of why they are not dischargeable are unnecessary (and necessarily incorrect.) But, more to the point, unsecured loans in general are dischargeable without the heightened requirements tha…

> First, student loans are, in fact, dischargeable, though there is a higher bar to discharging them. So expalanations of why they are not dischargeable are unnecessary (and necessarily incorrect.) Explanations of why they are more difficult to discharge is certainly necessary, though. I'm also curious how student loans can be discharged except via death of the lendee. It probably happens, but I don't personally know…

Regarding discharge, the standard in bankruptcy is "undue hardship": http://www.studentloanborrowerassistance.org/bankruptcy/

(Also, "borrower" is the more usual term, rather than "lendee".)

Re: Soaring Student Debt Prompts Calls for Relief

#468

Post by MrQuincle »

morgante wrote: post #217
MrQuincle wrote: post #213

Earlier quoted context omitted.

Schools can charge a lot because other people pay a lot. As individual you cannot single-handedly decide to pay less. Compared to Europe the education system in the US looks like a system that is trying to get as much money out of young adults as possible rather than getting as many people as possible an affordable education.

There are vast differences in the cost and benefits of different degrees. Nobody forces you to go to an expensive, low-benefit university. In fact, there are lots of free calculators which will show you the expected earnings and cost of different degrees. You can single-handedly decide to go to a cheap community college for the first 2 years.

My wife went to Ohio State, and although its tuition is "only" 10k a year, compare that with 1k overseas. If we will have kids the question where they get their education is a nobrainer.

Apart from that she also went to Columbia University. Totally overpriced in my opinion, but it made her really happy. Because of her decision back then, now, as a couple we have a "second mortgage". Not all financial decisions in your life are under your own control.

Re: Soaring Student Debt Prompts Calls for Relief

#469

Post by dpark »

nstj wrote: post #453
dpark wrote: post #426

Earlier quoted context omitted.

That's not really true. If you're truly poor, you'll spend every dollar basically as soon as you get it. If you're moderately wealthy, an extra dollar you receive might pay off a dollar on a loan, or turn into an extra dollar in your savings account, both of which actually reduce the amount of money in circulation. This isn't "hoarding" but has a different effect on the economy than spending.

So if you're wealthy and that dollar goes to pay off the loan - where does it go? The person you're giving it to will either spend it on consumption, or loan it to someone else until (ultimately) it is spent. And if you deposit the dollar into the bank then the bank have to loan it to someone (they need to make money too!) who will then spend it on consumption. It won't reduce the amount of money in circulation[0]. S…

> So if you're wealthy and that dollar goes to pay off the loan - where does it go?

It gets wiped off the books and a dollar leaves the economy.

> The person you're giving it to will either spend it on consumption

Did you take a loan out from a person? No. You took a loan out from a bank. They don't spend deposits on consumption. They cover their expenses and profits with the interest you pay.

> or loan it to someone else until (ultimately) it is spent.

The amount of lending a bank makes is almost unrelated to the amount of deposits they hold. Reserve regulations impact this somewhat, but the reality is that banks make profitable loans whenever feasible. If they don't meet reserve regulations at the end of the day, they borrow at exceedingly low interest rates to cover the gap. A bank can make a billion in loans at 5%, borrow at 3% to meet regulations nightly, and still come out ahead. (Specific numbers made up. Overnight rates are actually closer to 0.25%. So a loan at 5% with no reserves is actually crazy profitable.)

> And if you deposit the dollar into the bank then the bank have to loan it to someone (they need to make money too!) who will then spend it on consumption.

The fed pays 0.5% on reserves that banks hold. As of a few minute ago, Chase's interest rate sheet showed If your savings has a "good" interest rate of, say, 1%, a single loan of $100K at 4% could still cover the cost of $800K in deposits. Banks absolutely do not have to loan out every dollar deposited to make money.

http://www.federalreserve.gov/monetarypolicy/reqresbalances....

https://chaseonline.chase.com/resources/RateSheetForCons7021...

> It won't reduce the amount of money in circulation.

When a bank loans you money, they are creating money. When you pay it back, you are destroying money. The view that your deposit is "loaned" to someone else is very inaccurate and misleading in a modern banking economy.

http://www.bankofengland.co.uk/publications/Documents/quarte...

Re: Soaring Student Debt Prompts Calls for Relief

#470

Post by MrQuincle »

whyenot wrote: post #281
zeveb wrote: post #263

Earlier quoted context omitted.

> Am I the only one who hates the notion of being forced to pay for other people's bad financial decisions? Not just that: this is, ultimately, a giveaway to the academic classes, who have lucked into the business of selling things to unwise consumers spending someone else's money. When these loans are forgiven (let's not fool ourselves: they will be), the federal government will have moved $1.3 trillion into the cof…

I don't see it. Academia already has this money. It was paid to them as tuition. If loans are forgiven, the money will be "moved" (so to speak) to the bank accounts of the indebted, not academia. In the case of state schools, student loans also benefitted the tax payers. Student loans means such schools can charge a higher tuition, which means they need fewer subsidies from the the state.

We (my wife and me) would be so happy if we can just pay the principal and not accumulate interest anymore. The latter amounts to a bill of $700 each month. Or if the interest rate would be capped at 5% or less.

Moreover, I wish it went to the professors etc. but with intermediaries like Great Lakes I also fear that even that is not the case.

Post reply on HN