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On December 15 2021 05:33 Mohdoo wrote:Show nested quote +On December 15 2021 05:02 Sermokala wrote:
Decideing to kill a major part of consumer spending right as we head into some serious economic issues post covid-19 isn't a smart decision. I don't care how wealthy focused you think pauseing student loan payments are vs the cost of it to the government its undeniable at this point that adding an extra burden to middle-lower class people will represent the same effect as a new tax of $800 or more a month. Thats a margin that will see people become homeless, default on their mortgage, lose their cars, and a ton of other obvious economic effects.
If you really want to make America the nation to start the next global economic downturn then you decide to start student loans. If you want to win midterms in 2022 and avert a massive economic disaster then don't. Corporations and billionaires have already been given an equal amount to just forgive all of it. To your point, All the money I’ve saved on student loans has gone into making repairs or upgrades to my house. It is actual trickle down. The money I save on student loans changes hands many times. Compared to our (already characterized) impact of it vanishing into the interest void? The whole situation is so wild. I honestly just don’t buy it. Until my payment is due, I refuse to believe this is their plan. There is no path to 2022 by resuming payments. Maybe their plan is to cut the payment in half. That’s why they are having people recalculate their payment, to emphasize the impact they have by doing something. I don’t know. I just don’t buy it. This can’t be real. Edit: for anyone who thinks loan payments should resume: do you see a path to democrats retaining control despite resuming payments? What am I missing? How is this not political suicide? If a politician will always protect themselves above all else, how does this selfishly accomplish democrats goals? Aside from obvious “in the pocket of banks” etc
Could be the plan is to get student loans back online to force people back into the menial garbage-wage jobs to end the "Great Resignation," and get us back to the Good 'Ol Before Times.
Really though, whatever their plan is, assuming they even have one, its an idiotic out of touch plan, lol
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United Kingdom13775 Posts
Lol, got yet another one just under an hour ago:
![[image loading]](https://i.imgur.com/NkmNyHi.png)
The cadence with which these get sets out feels quite surreal. There's no way they send email after email like this just to remind people - there's some other agenda in this spam, that's for sure.
Incidentally, I'm between loan servicers for the second time in the pandemic because the last two I had both decided to call it quits on managing student loans. It's a weird limbo to be in on the eve that student loan payments are restarting, for realsies no take-backs.
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Is there anyone of note besides Biden/his administration publicly demanding for student loan repayment to restart?
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On December 15 2021 13:53 GreenHorizons wrote:
Is there anyone of note besides Biden/his administration publicly demanding for student loan repayment to restart?
No, that’s why this is all so weird. As LL pointed out, this feels more like psychological warfare than communication. Someone is trying to manipulate someone. Posturing for Manchin? Naively trying to undo the sociology of loans being frozen for 2 years? Scaring people so that when they reduce payments they are viewed as heroes?
The whole situation is just so bizarre
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Norway28561 Posts
On December 15 2021 09:22 ShoCkeyy wrote:
I currently pay 6% on mine, thankfully I only owe 15k, which is still a lot to others. But man, that loan has been a thorn in my side for years thanks to the interest on it.
This is the weird part to me, and which should be a much easier fix. Why on earth is the interest so high on student loans?
I have about $33k student loans right now, but I'm paying about $180 per month (for the next 16 years) - the interest rate is at 1.312%. If I increase the $1.312% to 6% and plot it into a calculator, I get $274 per month instead, an increase of roughly 50%.
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On December 14 2021 23:39 Mohdoo wrote:Show nested quote +On December 14 2021 20:42 RvB wrote:On December 14 2021 16:08 Mohdoo wrote:On December 14 2021 15:47 RvB wrote:
How will forgiving student loans make education cheaper? You've just given an even larger subsidy to students who will still go to the same university except with more money to spend. You're not adding an incentive for cost control by forgiving student loans. As soon as the federal government forgives student loans, that door is never getting closed. The costs of education will inevitably end up being the federal government's problem eventually. As such, they will work to reduce the cost, since they know they will be paying it. This dynamic can be observed all over the place. The problem is that the wrong people are motivated to fix the problem. The people suffering can't fix it. The people who can fix it aren't suffering. It already is the government's problem since student loans are subsidised and they don't look at the risk profile of the borrower. I don't agree with your conclusion that if the government pays they'll necessarily try to reduce costs. There are many government programmes where they have no problem funding it with increased lending while letting costs get out of hand. The profile of the borrower doesn’t matter because the borrower can never default. If you declare bankruptcy, student loans don’t go away. Either you die or you pay. “Letting costs get out of hand” is not a single scenario. Within the realm of high costs, there are large differences in severity. Your location is listed as the Netherlands. Are you familiar with the specifics of university costs in the US over the last 20 years? Prior to the freeze, we were paying about $800 per month. When we stopped spending that money on loans, we put it into other stuff that, statistically speaking, had a significantly larger impact on the health of the economy. From a purely mathematical perspective, society benefits from student loan payments being frozen. The ethics are up for debate but from a pure growth perspective, student loans being paused is good policy.
sorry, the thread moves a little too fast for me sometimes. It obviously does matter since expected subsidies are already 300 billion:
Using an accounting method that calculates the subsidy to borrowers from getting loans from the government at rates well below those they’d be charged in the private sector, the cost to taxpayers is $307 billion. And that largely excludes the cumulative losses already anticipated on loans issued prior to 2019.
src
I am aware of the tuition costs in the US. I don't disagree that it's a massive problem (and as a consequence so are student loans). I just don't agree that forgiving student loans is the answer. Generally throwing more money at something without the ability to increase supply will only increase costs (as we can see in the economy right now where supply chains can't handle demand causing inflation). Besides that even if you forgive all the student loans now you'll have the same problems in a few decades.
Your economic justification makes no sense to me. You're advocating a demand stimulus when we're dealing with inflation of 5+ % in part due to supply constraints. You're only going to make this worse. Student loan debt fogivesness is also aimed mainly at high incomes who have a lower marginal propensity to consume. If you want to stimulate demand you want to give it to groups with a high marginal propensity to consume to increase the fiscal multiplier. Increasing demand now also increases growth only in the short term. Long term growth is determined by savings(investment) not consumption.
In addition what you're missing is opportunity cost. When the government is spending money it's using real resources and when they forgive student loans they're transferring the ability to use those resources to the debtors. Which means they can't use it for other ends. This is also why repaying the loans doesn't just disappear. It gives the government the capacity to use the money for other ends.To put it into perspective this is what the government could do with the same amount of money:
Forgiving all student debt would be a transfer larger than the amounts the nation has spent over the past 20 years on unemployment insurance, larger than the amount it has spent on the Earned Income Tax Credit, and larger than the amount it has spent on food stamps. In 2020, about 43 million Americans relied on food stamps to feed their families. To be eligible, a household of three typically must earn less than $28,200 a year. The EITC, the nation’s largest antipoverty program, benefitted about 26 million working families in 2018. That year, the credit lifted almost 11 million Americans out of poverty, including about 6 million children, and reduced poverty for another 18 million individuals.
src
Targeted relief for debtors with low incomes combined with policy to reduce costs of university education makes more sense to me.
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On December 15 2021 16:03 Liquid`Drone wrote:Show nested quote +On December 15 2021 09:22 ShoCkeyy wrote:
I currently pay 6% on mine, thankfully I only owe 15k, which is still a lot to others. But man, that loan has been a thorn in my side for years thanks to the interest on it. This is the weird part to me, and which should be a much easier fix. Why on earth is the interest so high on student loans? I have about $33k student loans right now, but I'm paying about $180 per month (for the next 16 years) - the interest rate is at 1.312%. If I increase the $1.312% to 6% and plot it into a calculator, I get $274 per month instead, an increase of roughly 50%.
Indeed. 6% seems like a lot. Is there a government policy in place mandating margins/rates etc. or is this just free market speaking?
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I mean it's probably around the market rate. Home loans are, what, 3% right now and those are backed by a recoverable asset. The rate builds in the risk of default, and the chance that a given grad never pays back their loan is non-negligible so there's a loss to be covered somewhere.
Now, education shouldn't be at the market rate, but if you worship the guiding hand, 6% is probably about where you end up. It's not necessarily gouging, just poor policy.
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Bot edit.
User was banned for this post.
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On December 15 2021 20:07 Belisarius wrote:
I mean it's probably around the market rate. Home loans are, what, 3% right now and those are backed by a recoverable asset. The rate builds in the risk of default, and the chance that a given grad never pays back their loan is non-negligible so there's a loss to be covered somewhere.
Now, education shouldn't be at the market rate, but if you worship the guiding hand, 6% is probably about where you end up. It's not necessarily gouging, just poor policy. But from what I understand there is no risk of default in US student debt. They don't go away when you go bankrupt, the only risk is someone dying before they finish paying.
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On December 15 2021 20:20 Gorsameth wrote:Show nested quote +On December 15 2021 20:07 Belisarius wrote:
I mean it's probably around the market rate. Home loans are, what, 3% right now and those are backed by a recoverable asset. The rate builds in the risk of default, and the chance that a given grad never pays back their loan is non-negligible so there's a loss to be covered somewhere.
Now, education shouldn't be at the market rate, but if you worship the guiding hand, 6% is probably about where you end up. It's not necessarily gouging, just poor policy. But from what I understand there is no risk of default in US student debt. They don't go away when you go bankrupt, the only risk is someone dying before they finish paying.
As a technical matter, it is possible to have student loans discharged in bankruptcy, but the showing a debtor needs to make is incredibly burdensome and I'd guess around 95%+ of those suits fail. On the positive side, reducing that burden and streamlining the student loans in bankruptcy process is increasingly popular and it wouldn't surprise me if Biden comes out in support of those measures.
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On December 15 2021 04:01 LegalLord wrote:Show nested quote +On December 15 2021 03:25 Oukka wrote:
Reinstate the repayment above certain income thresholds (which seemingly can be quite generous), keep the freeze for people below the threshold and direct the money into other places where more public investment is needed. Or keep it as it is and then the payment is eventually spread over everyone in tax increases or public spending cuts (this would likely be the most regressive option). Like... a welfare cliff? Might have to figure out a way to keep my income right below the cliff then. The accountant I'd need to do that would be cheaper than the loan payments. We already have income-driven repayment plans, as my student loan emails make a habit of mentioning; not that it ever gets rid of the debt. Not that the strategy matters anyways. There are ways to do it that don't have to be either forgive or reinstate-all student loans, but we're well past the point of that being an option that is seriously considered. Crash it all come February 1st, or give it another delay. Show nested quote +On December 15 2021 02:30 Oukka wrote:
Why would you say comparing student loan versus lifetime earnings is fraudulent? I'd say that it's fraudulent because it is fraudulent. Sure, there's plenty of evidence to show that college-educated professionals earn more money on average than non-college-educated professionals, and you can look at the people who are 70+ today to get an estimate of how much people who graduated 40 years ago did. There's definitely some useful information to be gleaned in such a comparison, but it all goes out the window when you start justifying the validity of a giant expense now against the supposition that by virtue of paying that expense you'll get a benefit that offsets it over the course of the next 40 years. The fact that those two numbers are within striking distance of each other should set off alarm bells in any sane person's head. Pay $50-200k now, plus 6% or so interest, to buy this College Education Kit that, if you do things right, will give you a tenfold return over your lifetime! If it doesn't work out for any number of reasons (can't finish, no job, career goes off course), it's obviously your fault. Never mind the general decay in the quality of jobs available that drives a glut of college attendance to begin with, essentially guaranteeing that a less than ideal outcome becomes the norm. If that doesn't sound fraudulent, then I have a shitcoin to sell you. Infinite profit guaranteed™.
Change the formula how the income driven repayment happens and you avoid the welfare cliffs, that's not a particularly difficult problem to solve if needed. Based on the article in the link the payments are based on difference between total income and some multiple of adjusted poverty guideline. Increase the multiple and more people pay nothing and the rest pay a bit less. Add in an adjustment to the rate of payment from the now smaller discretionary income and you can make top end pay the same, some people in the middle a bit less and higher amount of people pay back nothing. Still better funded than flat freeze, better for people in the middle and not worse for anyone in the top end.
Also I'm still not getting why you call investment into education a fraud. Sounds like perfectly standard investment to me. You compare the initial investment to the sum of benefits you accrue over time discounted to the present day. There is uncertainty over the outcomes obviously (i.e. your income after education) so you take that into account by considering a range of lifetime earnings (actually the increase in earnings over not doing that degree) with some probabilities and eventually your expected value is the value of the investment. Now there are a billion reasons why doing that calculation isn't actually feasible and whole host of other reasons why society might want to encourage people to go into higher education even when it is not necessarily individually rational.
And if it doesn't work out for some reason, the income adjusted repayments or similar mean that the cost doesn't fall on the individual either. I honestly don't understand why you'd call it a fraud unless you think the whole concept of discounting future cash flows to present day is flawed.
RvB's post is excellent at explaining why the loan repayment freeze is not good fiscal policy.
And regarding the interest rates, yes 6% seems mad for very low risk loan. You could probably tie it to gov borrowing rate + maybe a margin to cover the costs of distributing banks, but whatever the 6% is supposed to be seems mental for something tied to a government program especially when considering the positive externalities of education. Mohdoo's suggested 0% fixed rate wouldn't necessarily even be bad because of how beneficial education is to everyone, not just those who actually participate in it.
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Bisutopia19158 Posts
I don't understand why anyone is bitter about having to resume paying back money you borrowed. You can be mad about interest rates on student loans, tuition prices, etc. but being upset you have to pay back a student loan is just absurd. You are literally stealing if you don't pay it back to the lender. I'm not against policies, like lowering their current interest rates, that help people who own existing student loans, but loan repayment does have to resume and putting if off more years is insane.
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Stealing means taking something without permission, so not paying back loans with permission is not "literally stealing" lol
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On December 15 2021 22:25 BisuDagger wrote:
I don't understand why anyone is bitter about having to resume paying back money you borrowed. You can be mad about interest rates on student loans, tuition prices, etc. but being upset you have to pay back a student loan is just absurd. You are literally stealing if you don't pay it back to the lender. I'm not against policies, like lowering their current interest rates, that help people who own existing student loans, but loan repayment does have to resume and putting if off more years is insane. Because this student loan discussion is about politics. Its not about "you borrowed money, your supposed to pay it back" its about going into the '22 elections with "the Republicans stops your student loan payments as part of Covid relief, the Democrats put them back but Covid is still here" and how the GOP will surely beat the electorate over the head with that and how it will likely destroy any chance the Democrats have of keeping control of the House and/or Senate.
And if control of either is lost we're back to never voting on anything and then in '24 blaming the Democrats for doing nothing.
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On December 15 2021 16:03 Liquid`Drone wrote:Show nested quote +On December 15 2021 09:22 ShoCkeyy wrote:
I currently pay 6% on mine, thankfully I only owe 15k, which is still a lot to others. But man, that loan has been a thorn in my side for years thanks to the interest on it. This is the weird part to me, and which should be a much easier fix. Why on earth is the interest so high on student loans? I have about $33k student loans right now, but I'm paying about $180 per month (for the next 16 years) - the interest rate is at 1.312%. If I increase the $1.312% to 6% and plot it into a calculator, I get $274 per month instead, an increase of roughly 50%.
I pay 0,05% interest rates on my student loans from my free university studies in Sweden and France 
Jokes aside, this sounds like the most reasonable course of action. Not paying back student loans sounds absurd. I'm with Bisudagger on that point.
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Bisutopia19158 Posts
On December 15 2021 22:38 Gorsameth wrote:Show nested quote +On December 15 2021 22:25 BisuDagger wrote:
I don't understand why anyone is bitter about having to resume paying back money you borrowed. You can be mad about interest rates on student loans, tuition prices, etc. but being upset you have to pay back a student loan is just absurd. You are literally stealing if you don't pay it back to the lender. I'm not against policies, like lowering their current interest rates, that help people who own existing student loans, but loan repayment does have to resume and putting if off more years is insane. Because this student loan discussion is about politics. Its not about "you borrowed money, your supposed to pay it back" its about going into the '22 elections with "the Republicans stops your student loan payments as part of Covid relief, the Democrats put them back but Covid is still here" and how the GOP will surely beat the electorate over the head with that and how it will likely destroy any chance the Democrats have of keeping control of the House and/or Senate. And if control of either is lost we're back to never voting on anything and then in '24 blaming the Democrats for doing nothing.
Okay. With that perspective, I'm totally on board with the discussion. Thanks!
On December 15 2021 22:29 farvacola wrote:
Stealing means taking something without permission, so not paying back loans with permission is not "literally stealing" lol
Not to get in the weeds on this, but how many years can the government give you permission not to pay something back before it's considered theft. The profit earned by loans is something a business would undoubtedly be using as a way to invest and grow. Not having that income means losing revenue or potential growth. While I 100% agree, the individual is not stealing, sudden student loan forgiveness (without paying back the lender) or an indefinite pause certainly has the "stealing/just been robbed" feel to it.
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United Kingdom13775 Posts
On December 15 2021 22:25 BisuDagger wrote:
I don't understand why anyone is bitter about having to resume paying back money you borrowed. You can be mad about interest rates on student loans, tuition prices, etc. but being upset you have to pay back a student loan is just absurd. You are literally stealing if you don't pay it back to the lender. I'm not against policies, like lowering their current interest rates, that help people who own existing student loans, but loan repayment does have to resume and putting if off more years is insane.
Can't speak for others, but I'm not mad about it. I borrowed a relatively small amount ($40k, down to $30k now) because it was fairly convenient to do so, more so than not having that cash on hand at the time. It's what I signed up for, so no harm there.
My problem is that it really looks like bad policy to drive straight off the student loan cliff right now. The pause is effectively a $200 billion a year stimulus to people with outstanding student loans, and bringing payments back in force is just going to open up another gash in the debt crisis we've done our best to bury over the past decade (and especially year). Yes, it's only a symptom of the larger problem, but the only outcome I can see from a student loan resumption right now is a major credit crisis.
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And it'll be a crisis that is wildly self reinforcing. If the money people are putting into the economy now goes away due to student loans it will cause an economic downturn which will make more people unable to put money into the economy to pay their student loans and so on.
And the messaging on this compared to the ppp loans that are being forgiven en mass just creates a clear double standard for business and regular people on what loans need to be repaid.
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Bisutopia19158 Posts
On December 15 2021 23:47 LegalLord wrote:Show nested quote +On December 15 2021 22:25 BisuDagger wrote:
I don't understand why anyone is bitter about having to resume paying back money you borrowed. You can be mad about interest rates on student loans, tuition prices, etc. but being upset you have to pay back a student loan is just absurd. You are literally stealing if you don't pay it back to the lender. I'm not against policies, like lowering their current interest rates, that help people who own existing student loans, but loan repayment does have to resume and putting if off more years is insane. Can't speak for others, but I'm not mad about it. I borrowed a relatively small amount ($40k, down to $30k now) because it was fairly convenient to do so, more so than not having that cash on hand at the time. It's what I signed up for, so no harm there. My problem is that it really looks like bad policy to drive straight off the student loan cliff right now. The pause is effectively a $200 billion a year stimulus to people with outstanding student loans, and bringing payments back in force is just going to open up another gash in the debt crisis we've done our best to bury over the past decade (and especially year). Yes, it's only a symptom of the larger problem, but the only outcome I can see from a student loan resumption right now is a major credit crisis.
I can certainly see that. For Dem politicians, it almost would have been better to not have happened at all or just resumed payments on the originally scheduled plan. I personally think payments should resume as soon as possible. However, I'd strongly get behind a large reduction in interest rates. It's better that lenders are being repaid at a smaller profit then nothing at all. I would be way more optimistic knowing when my repayments resume the burden on me is lower, then knowing another year might pass but then it's back to the high interest payments that are really hard to deal with.
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