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What would happen if the US forgave all current student loan debt?

R

RBIII

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Would the economy crash? Can we afford it without causing much harm to the overall economy. What kind of unforeseen consequences do you think would result from such action? Just curious...thoughts?

1.2 Trillion Dollars that would be forgiven for all students of this country is what i am talking about. I believe that debt is split about evenly between government and private loans.

But for my argument, lets say the government just eats it all. Good? Bad? Does the economy collapse? Were already at 19 trillion, tack on 1 for student loans and the nationally debt goes a bit higher but this would be an American issue/debate that could be put to rest and we could move on.
 
I think their biggest loss will be the loss of income. The gov may have 1.2T owed to it in loans, but those loans have 6%+ interest rates they will reap profits on. In actuality they lose much more than that. The education system exists to subsidize federal spending as a means to indirectly tax the young, they won't give that up.
 
Nothing really. As digsbe said, the treasury is getting ~ 4% over inflation fir its money.

The students will be relieved, IRS will count it as taxable income.

Fees for education will go through te roof. The student body will become even more populated with freeloaders fleeing the job market.
 
digsbe said:
I think their biggest loss will be the loss of income. The gov may have 1.2T owed to it in loans, but those loans have 6%+ interest rates they will reap profits on. In actuality they lose much more than that. The education system exists to subsidize federal spending as a means to indirectly tax the young, they won't give that up.
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True but that's the exact position i disagree with, the government shouldn't be making money off educating its citizens. That is insane to me, a more educated population will yield much better financial results than a few interest rate points can deliver. Less poverty, less welfare, less health cost, more entrepreneurship, more innovation, and more educated decisions by the populous as a whole.
 
chuckiechan said:
Nothing really. As digsbe said, the treasury is getting ~ 4% over inflation fir its money.

The students will be relieved, IRS will count it as taxable income.

Fees for education will go through te roof. The student body will become even more populated with freeloaders fleeing the job market.
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So are you saying that people with jobs would quit their jobs and go back to school? I don't understand and if that's what you are saying i disagree. Maybe a person with a job would go to school part time while keeping there job but an employed person would not quit a good job to go back to being a broke college student.
 
Just to clarify my position, a part of me thinks the economy would boom...knowledge is free, and if institutions are going to charge for "knowledge" an intangible product, it is more of a hinder on the economy than a benefit. I do not disagree with charging for schooling, everyone should have some skin in the game...but the prices are outrageous and we may be better off forgiving everyone of there student debt and the government making money the intended way...taxes, not interest rates like a bank.
 
RBIII said:
So are you saying that people with jobs would quit their jobs and go back to school? I don't understand and if that's what you are saying i disagree. Maybe a person with a job would go to school part time while keeping there job but an employed person would not quit a good job to go back to being a broke college student.
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Im saying that as unemployed people go on to disability because they are desperate, now they have another source of funds. The government does a lousy job of tracking compliance.
 
The first thing I'd is demand a refund of all my student loan payments.
 
RBIII said:
Would the economy crash? Can we afford it without causing much harm to the overall economy. What kind of unforeseen consequences do you think would result from such action? Just curious...thoughts?

1.2 Trillion Dollars that would be forgiven for all students of this country is what i am talking about. I believe that debt is split about evenly between government and private loans.

But for my argument, lets say the government just eats it all. Good? Bad? Does the economy collapse? Were already at 19 trillion, tack on 1 for student loans and the nationally debt goes a bit higher but this would be an American issue/debate that could be put to rest and we could move on.
Click to expand...

The economy would get a $1.2 trillion stimulus. Well, probably most of that would go to banks, as the government would pay off the loans - but it would free up a lot of income that the borrowers could now spend.

Would it harm the economy? Just the opposite, as there would be more income available for spending.
 
chuckiechan said:
Im saying that as unemployed people go on to disability because they are desperate, now they have another source of funds. The government does a lousy job of tracking compliance.
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I don't understand, there is no other source of funds if the funds can only be used for education, not withdrawn as cash.
 
JohnfrmClevelan said:
The economy would get a $1.2 trillion stimulus. Well, probably most of that would go to banks, as the government would pay off the loans - but it would free up a lot of income that the borrowers could now spend.

Would it harm the economy? Just the opposite, as there would be more income available for spending.
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Exactly my thoughts, so why don't you think that has even been part of the election conversation? Just forgive it, tack it on to the national debt..and move forward with a more educated and economically free populous.
 
RBIII said:
Exactly my thoughts, so why don't you think that has even been part of the election conversation? Just forgive it, tack it on to the national debt..and move forward with a more educated and economically free populous.
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Two reasons - because most people are still afraid of the national debt, and because people don't like to see one group benefit while other groups do not - and students who borrowed too much for college don't elicit much sympathy from people who have to pay their bills.

Remember back in 2008, when there were calls for large-scale mortgage debt forgiveness, or some sort of jubilee at the banks' expense? While it would have been great for the economy, I think it ultimately failed because most homeowners kept on paying their mortgages, and it just wasn't fair to those who paid.
 
JohnfrmClevelan said:
The economy would get a $1.2 trillion stimulus. Well, probably most of that would go to banks, as the government would pay off the loans - but it would free up a lot of income that the borrowers could now spend.

Would it harm the economy? Just the opposite, as there would be more income available for spending.
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There has to be that tipping point though right?
 
digsbe said:
I think their biggest loss will be the loss of income. The gov may have 1.2T owed to it in loans, but those loans have 6%+ interest rates they will reap profits on. In actuality they lose much more than that. The education system exists to subsidize federal spending as a means to indirectly tax the young, they won't give that up.
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I think the bigger loss would be to all the students just starting out or about to, forgive the loans and there would be no more. Borrow money - pay it back, it is how the world works.
 
Casper said:
I think the bigger loss would be to all the students just starting out or about to, forgive the loans and there would be no more. Borrow money - pay it back, it is how the world works.
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I think it's fair to pay it back, but 6%+ interest rates make it much more difficult. I could understand 1-2% due to inflation but the government is going to reap a major profit on that money considering you can't bankrupt on it and there are legal issues you get into when the money is owed to the gov vs a private lender. I know in many state if you hold a professional license that can be revoked if you are delinquent on payments, not to mention them dipping into tax returns and other such things. It's a high interest rate, the gov has more power over you, and they make money off of it in the end. It's great for them, bad for students.
 
What will cap the rise of education costs? Costs have escalated as loans have become richer and more available. Now they have caused their "customers" to go broke. Just like the car salesman who sold a Cadillac to a guy with no job, by telling him it will help him get one.

University and college overhead has become outrageous, and to add insult to injury, underpaid grad students do most of the teaching, starving along at ~ $30k a year, while the professors are off doing something or other on the student's dime. For example, the UC System in California, 30% is for academic salaries, 21% for staff, and 18% for benefits. In simple terms, 30% of the pig goes to market.

Now suddenly, there is an even larger pool of money to grab.
 
Why stop there. Forgive all debt. Just give me a week or two before you pull the trigger so I can hit up the banks.

The reason college tuition rates have outpaced inflation is the ease in which people can get loans. Forgive that debt and watch college tuition rates go bananas.
 
RBIII said:
Would the economy crash? Can we afford it without causing much harm to the overall economy. What kind of unforeseen consequences do you think would result from such action? Just curious...thoughts?

1.2 Trillion Dollars that would be forgiven for all students of this country is what i am talking about. I believe that debt is split about evenly between government and private loans.

But for my argument, lets say the government just eats it all. Good? Bad? Does the economy collapse? Were already at 19 trillion, tack on 1 for student loans and the nationally debt goes a bit higher but this would be an American issue/debate that could be put to rest and we could move on.
Click to expand...

Why stop at a free education, we should pay all debt owed off by everyone.
 
digsbe said:
I think it's fair to pay it back, but 6%+ interest rates make it much more difficult. I could understand 1-2% due to inflation but the government is going to reap a major profit on that money considering you can't bankrupt on it and there are legal issues you get into when the money is owed to the gov vs a private lender. I know in many state if you hold a professional license that can be revoked if you are delinquent on payments, not to mention them dipping into tax returns and other such things. It's a high interest rate, the gov has more power over you, and they make money off of it in the end. It's great for them, bad for students.
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You do realize in the world of interest rates, that 6 percent is a very average rate

People are paying way more than that on revolving lines of credit

One of the issues with borrowing money is that there is a cost associated with it

6 percent isn't exorbitant....it just isnt
 
RBIII said:
Would the economy crash? Can we afford it without causing much harm to the overall economy. What kind of unforeseen consequences do you think would result from such action? Just curious...thoughts?

1.2 Trillion Dollars that would be forgiven for all students of this country is what i am talking about. I believe that debt is split about evenly between government and private loans.

But for my argument, lets say the government just eats it all. Good? Bad? Does the economy collapse? Were already at 19 trillion, tack on 1 for student loans and the nationally debt goes a bit higher but this would be an American issue/debate that could be put to rest and we could move on.
Click to expand...



The economy wouldn't collapse, but it would be a bunch of new debt: The 1.2 trillion not collected + interest over all those loans.

I don't think they should forgive debt just because people miscalculated the probability of repaying the loans.



I honestly don't understand the decision to take out $200,000 in loans to attend a top private university or college. If you can't afford it, go to a far cheaper state school. If you work hard and take it seriously, your only disadvantage will be the name on the diploma BUT that advantage disappears once you've been working for a couple of years and have had an opportunity to prove yourself.
 
Mr Person said:
The economy wouldn't collapse, but it would be a bunch of new debt: The 1.2 trillion not collected + interest over all those loans.

I don't think they should forgive debt just because people miscalculated the probability of repaying the loans.



I honestly don't understand the decision to take out $200,000 in loans to attend a top private university or college. If you can't afford it, go to a far cheaper state school. If you work hard and take it seriously, your only disadvantage will be the name on the diploma BUT that advantage disappears once you've been working for a couple of years and have had an opportunity to prove yourself.
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Well said!
 
RBIII said:
Exactly my thoughts, so why don't you think that has even been part of the election conversation? Just forgive it, tack it on to the national debt..and move forward with a more educated and economically free populous.
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Contrary to the MMT nonsense that's being perpetuted in this and other threads, sovereign debt is consequential.

Adding another 1.3 Trillion dollars to it by letting a generation of people who don't seem to comprehend the concept of personal responsibility off the hook for loans THEY took out would be a terrible idea.

If debt doesn't matter why cant Venezuela borrow and or print their way back to prosperity ?

Why can't Japan just print what they need instead of raising sales taxes ?

Why couldn't the EU just borrow and or print away Greece's debt ?

Ideas like " Free education " and our debt being a figment of our imagination are pushed and accepted by ideologues and the uniformed. A distinctinction without a difference.
 
let's just give everyone 100k

it is just as ridiculous

are we going to pay back all the people who just finished paying off their loans?

how about the ones that paid for their college, and worked full time doing both

life is full of choices....

no one told you you had to rack up 60, 70, 100k in college loan debt

those were choices.....

now, you get to live with those....and the results

i hope you got a stem degree and a good job for all the debt....i really do

maybe you should have thought of all of this before you signed your name....
 
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gdgyva said:
let's just give every 100k

it is just as ridiculous

are we going to pay back all the people who just finished paying off their loans?

how about the ones that paid for their college, and worked full time doing both

life is full of choices....

no one told you you had to rack up 60, 70, 100k in college loan debt

those were choices.....

now, you get to live with those....and the results

i hope you got a stem degree and a good job for all the debt....i really do

maybe you should have thought of all of this before you signed your name....
Click to expand...

Hard economic times always breed crackpot ideas and " theories " and crackpots for that matter

Now we have MMT. A monetary theory being used by progressives to justify progressive economic " solutions ".

Bigger Govt and exponential increases in Govt spending. I heard once Bernie Sanders was a proponent of MMT.

Lol...ya think ?
 
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