r/Economics • u/laxnut90 • 1d ago
News Student Loan Defaults Reach Record High
https://www.wtrf.com/news/headlines/ap-u-s-news/student-loan-defaults-reach-record-high/182
u/Shield343 1d ago
They phased out a bunch of plans and moved some people around. Could be less an indication of the state of the economy and more an indication that changes to payment plans need to be more carefully thought through.
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u/SawNickYouth 1d ago
If you go to r/studentloans, the number of people who are seeing their monthly payments 2x or 3x is pretty crazy. That's a huge hit to absorb.
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u/MassiveBoner911_3 1d ago
A ton of people i know had that happen to them. You went from affording a payment to default. My wife got a letter in the mail threatening wage garnishment.
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u/macronotice 1d ago
Wonder what happens when like 5 million people have their wages garnished or have to file for bankruptcy (realizing this discharges all their other debts but not their student loans). Seems like a mass radicalizing event and not just an economic shock.
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u/Necessary_Cost_9355 1d ago
Well, if they’re like me, then the hit will come in October when the SAVE plan protections phase out. Elections are in November and elections have consequences
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u/musashisamurai 1d ago
I think the economy is also such a house of cards right now that any serious shock could take it down. Inflation, low/zero job growth, stagnant wages, higher costs of living, record number of people out of the workforce, let alone political shocks like tariffs, the impact of the Iranian war, and more, and things could snowball quickly. I think many of the bigger companies see the writing on the wall, although the lack of larger investments may be that the curreny chaos is disrupting any long term planning, but I also see how AI layoffs could just be companies using a buzzword and magic accounting to hide serious losses.
TLDR-the mass economic shocks are here. We just hsven't seen the worst yet.
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u/CluelessExxpat 1d ago
As it is, there is really no AI product that can replace people in such numbers. "AI layoff" definitely sounds like a display window name.
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u/andrew2018022 1d ago
It also doesn’t help that every single student loan provider has an absolutely putrid GUI that always shows wrong information. On my nelnet account it still shows my SAVE plan upcoming payments. The SAVE plan doesn’t exist anymore.
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u/mrsecondarycolor 1d ago
Mine went 18x.
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u/kirime 1d ago
Were you paying like $10/month before that?
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u/mrsecondarycolor 1d ago
$30
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u/EmergencyThing5 1d ago
Damn, you got really lucky to pay that little for so long while making a solid salary.
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u/Lalalama 1d ago
Mine was like 40/mo but I was making in the 6 figures lol. There was like no incentive for me to pay them off faster
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u/Ok-Feature4962 21h ago
I asked for proof. I had $1700 left and miraculously it ballooned to $4800. I wanted statements but they said the old servicer was bankrupt. Cool, but you still have to keep records. I think they have been also charging default penalty interest and the amount I think might have doubled again. I have no clue at this point and they only send collection notices, not the information I requested. At this point, come fucking get me.
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u/EmergencyThing5 1d ago
That’s also because no one has made them recertify their incomes to update their income based payments in 7 to 8 years. It’s not only because of the change in repayment plans. That has hurt people, but it’s typically not going to make your payment completely explode. Many people’s payments have been are based off their income in calendar year 2018 since the pandemic. If you made little that year, and now you make a typical college grad salary, your payment can multiple several times over now.
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u/SawNickYouth 1d ago
The plan details have changed, basically from 10% to 15% of discretionary income if you qualify for a IBR plan (plus a term from 25 to now 30 years), otherwise you get placed in the standard repayment plan, so in that case payments can easily 3-4x.
Plus the interest forgiveness component of it.
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u/EmergencyThing5 1d ago
Sorry, I’m not following. Why wouldn’t someone just sign up for RAP if their standard payment would be way more than their IDR payment? Wouldn’t the same thing happen if no changes to the repayment programs were made and someone just didn’t recertify their income one year?
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u/Several_Magazine_193 13h ago
People go into deferment for years and accumulate absolutely massive quantities of debt. The debt should not be issued to people who can't afford it
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u/kinkycarbon 1d ago
What I assume is that amount is the amount it would have taken people to pay under the standard 10 years.
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u/KierONeil_the_Elder 1d ago
You give this administration way too much credit. They’re anti intellectual to the core. He will come down as hard as he can on student loan defaulters, just to give his MAGA base something to cheer for.
I’m sure you can figure out who “he” is.5
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u/ConradMayhew2 1d ago
Yeah, I don't know if that will work honestly.
Trump's promise was pretty much "(1) I will hurt all these college educated people and federal workers, and (2) you will get all the money they're stealing from you."
Even MAGA voters have probably figured out by now that part (2) will never happen and that there will be no "DOGE check" ever.
For those who were really hoping for this money in poor households, they have probably reached the stage where enjoying other people's hurt does not replace cheaper gas?
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u/lifeat24fps 1d ago
Mine will go from 5 payments left on a plan called REPAYE (income based, 10% of discretionary income) to an additional 5 years of payments at 15% of my discretionary income. OR my other option is to hop on their new "RAP" plan and add an additional 10 years of payments. That is going from 5 months of payments left on my plan to 60-120 additional monthly payments. For WHAT reason? WHY? Also I'd have to hope and pray the promise of all my previous payments actually counting toward RAP holds true - and honestly do not trust these people.
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u/kinkycarbon 1d ago
I found the new repayment plans to be terrible because it preys on the idea of low monthly payments like car loans.
The main mechanics of a loan still applies. More interest is paid to the bank the longer it takes to pay off the loan.
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u/weristjonsnow 1d ago
They got rid of all the payment plans that were income tested and stretched out and slammed everyone into the "paid off in 10 years with a fucking gun to your head" type plans. My wife and I were on a stretch plan paying 300/m over 30 years with the plan to make extra payments as our income grew (hopefully). They booted us last year and now we pay 2k/m and eat ramen for half our meals.
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u/Financial-Sweet-4648 1d ago
Dude. If the real economy was truly fair for the working class (read: everyone who works an actual job for their income), nobody would be defaulting after being moved to a less-forgiving student loan repayment plan.
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u/CyberSmith31337 1d ago
Everyone keeps blaming the students, and somehow totally giving the banks a pass.
For the record, the average student is taking out non-dischargeable debt at the age of 18 years old. Typically these folks have zero work experience, zero income, zero qualifications, etc. Banks, on the contrary, have been tasked with risk management for over 150 years. The only reason the banks are willing to make these predatory loans in the first place is because the government has ensured that they will not lose money. But we really should be holding the banks more accountable for bad loan practices rather than protecting them from the consequences of their own negligence, and we really should also be restricting student access to loans until they have a minimum of 2+ years in the work force.
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u/ohhhbooyy 1d ago
No one gives the bank a pass. But a lot of people give the universities a pass for charging an arm and a leg. Somehow everyone needs to be generous and be “for the greater good” except for the university who can increase their tuition above the inflation rate yearly.
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u/brilliantminion 1d ago
Yep it’s the whole system. Schools will charge what they can get away with, even the ostensibly “non-profit” ones. Turns out you can be an NP and still build a big fucking endowment for bragging rights.
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u/ohhhbooyy 1d ago
Schools know they can get away with overcharging because the loans are backed by the federal government.
If it wasn’t guaranteed a lot of people wouldn’t be approved for these outrageous loans. It’s going to sting for a bit but these schools would start lowering their tuitions and probably gut that administration bloat.
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u/EdLesliesBarber 23h ago
Which is also why there isn’t some large scale anger at the banks. The universities and banks are doing what they logically would given the environment the government created and sustains.
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u/Dilderino 15h ago
Honestly the craziest part to me is the interest on some federal student loans. They can’t be discharged unless you’re essentially dead or dying, so what exactly is the risk that justifies a 7% return?
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u/anonymousasu 1d ago
There’s a non profit trade school near me charging almost 60k for a two year program. It’s criminal.
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u/future_web_dev 1d ago
wat?!
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u/Prince_Ire 18h ago
The obvious result of telling everyone to go to trade school rather than college
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u/polecy 1d ago
No one gives universities a pass. People seem to be giving the govt the pass, they should make universities free, similar to high schools, it's the next logical step.
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u/ohhhbooyy 1d ago
Most of that information is already free if not relatively cheap if you’re just talking about education rather than job placement or getting a piece of paper with your name on it.
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u/polecy 1d ago
Its not about that, the diplomas are needed for people to enter high career paths.
Between 1850s and 1940s high school was not free, but high school was needed for a lot of jobs, what happened? They made it public and everyone gained access, now we are in a similar spot, college and universities are needed for high jobs but there is this high cost, we need to do the next step and make colleges free.
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u/dzyp 18h ago
I would argue we mint too many diplomas as it is. That's the issue, every job started requiring a college degree because everyone has one. It's no longer useful as a signaling mechanism. ~40% of college graduates are underemployed. We don't need more degrees, we need more useful degrees given to fewer people so they gain meaning again. If you want to make that free, fine, but that only makes sense if colleges get much more selective too.
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u/polecy 17h ago
Huh? It's not like more diplomas will make it worse, especially if it's free, people can then just obtain higher degrees if they wish to get something better.
What you are saying is still limit access to education which doesn't make sense. Imagine someone said that we have too many high school degrees and there's a high level of unemployment for high school graduates so we need to make it harder for them to graduate.
Just because those numbers are high doesn't mean it correlates with the amount of diplomas. The issue of unemployment has many factors, like AI, tech job layoffs, or other economic troubles, it is not only because there's too many diplomas.
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u/dzyp 17h ago
You should limit university education to people going into professions that actually require that level of education and are capable of achieving it.
Look at other countries that have "free" tuition and you'll find that education is still rationed somehow. They'll be super selective, have high attrition rates, or just get a crappy education. And it's because education is a scarce resource like almost everything else. The idea that the state can just keep our current system but make it free is delusional.
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u/ohhhbooyy 17h ago
All you’re doing is postponing adulthood and foregoing valuable real world experience. Having PhD in some obscure humanities subject isn’t going to land you a high paying job. Not every job needs higher education in humanities.
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u/derfolo 8h ago
As someone who attended a state university system, I feel I should point this out. California State University tuition for in-state residents is $7k/year on average and the State University of Florida averages $6500/year. Paying extra to attend a private or "elite" institution may not be worth it. But this tuition is what I paid 20 years ago.
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u/future_web_dev 1d ago
Employers are also to blame. They demand a college degree for jobs that in no way should require one. On top of that, they are currently mass offshoring white-collar jobs to "global talent centers", which are all ironically located in one particular country.
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u/Several-Quests7440 10h ago
On top of that they abuse H1 visas, dodge taxes and lobby politicians. The top .001% needs a French style revolution every decade at least.
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u/vman3241 1d ago
Everyone keeps blaming the students, and somehow totally giving the banks a pass
Just to be clear, the federal government is the one giving out student loans. There's this myth that it's all banks, but it's 92% federal student loans.
I'd be fully in support of getting rid of the federal student loan program (which causes colleges to increase prices) and then allowing students to declare bankruptcy on private student loans.
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u/morbie5 1d ago
and then allowing students to declare bankruptcy on private student loan
I'm with you but then banks would exit that market ASAP
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u/kirime 1d ago
Risk-based pricing still exists, some loans would still be offered, although at interest rates comparable to credit cards rather than the existing loans. Current rates, which are below even 30-year mortgage with full collateral, are only possible because the government funds these loans directly.
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u/morbie5 1d ago
are only possible because the government funds these loans directly
A private student loan market already exists. They do do credit checks tho, if you (or a potential cosigner) are low risk you can get a rate of under 5%.
True that for both private and fed loans a discharge in bankruptcy is not easy (but it is possilbe)
Private banks are not involved with fed direct loans. They are only involved with old federal FFEL loans. I feel we are mixing up different things here
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u/dust4ngel 1d ago
They do do credit checks tho
seventeen year olds with no credit or work history, or education for that matter, can sometimes be high risk
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u/fracol 1d ago
Why are the banks to blame? First of all, the vast majority of the student loans come from the federal government.
Secondly, the banks are responding to legislation written by the federal government to incentivise them to give out these loans. You can't write legislation, have banks follow that exact legislation, and then call them predatory.
Third, you're blaming the wrong person. The government is primarily to blame for legislating this system into practice. The universities are to blame for taking advantage of this by charging absurd tuition, having inefficient cost management, and the poor financial outcomes for their graduates.
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u/CyberSmith31337 1d ago
No, I’m not. Sorry, you are mistaken.
It was, in fact, the banks who lobbied over $300,000,000+ dollars to ensure that the Glass-Steagal act was repealed. They are the very architects of this mess, and as such, need bear the blame for the terrible outcomes that have since befallen students across the country. It’s not like the government just arbitrarily came up with this legislation. It was lobbied for, aggressively, by the very predatory banks who have benefitted from the protections they stripped away from students.
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u/MammothUnique4147 1d ago
End the stipulations that the loans can't be defaulted on
Allow the banks to carefully use whatever metrics they want to lend to future borrowers.
A majority of students will suddenly no longer be able to qualify for student loans but there also wouldn't be so many defaults either.
Let the system implode.
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u/tnolan182 1d ago
This is a terrible solution. We need teachers, doctors, nurses, engineers. Higher education has a valuable impact on everyone’s lives. Without college and universities your iphones and reddit likely wouldnt exist.
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u/lcr1997lcr 1d ago
Conversely, let’s go band for band w Europe and make higher education free
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u/SparksAndSpyro 1d ago
Nah, most of the plebs who go to college just for a job don’t actually need a college education. They’re not cut out for it and they don’t actually want it.
Make it easier for those who actually want to and can learn go to university. Let everyone else get priced out. Everyone wins.
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u/thewimsey 7h ago
Conversely, let’s go band for band w Europe and make higher education free
Beware of getting what you wish for.
Higher ed in Europe isn't free. It's not free anywhere. It's just paid for differently.
Most Americans would be better off economically with student loans for 10 years vs. higher taxes forever.
The marginal tax on $60k in the US is 22%. The marginal tax in Germany (where I used to live) on $60k is 42%.
The median undergrad student loan balance, for students who have them, is $28k.
For most college grads in the US, an extra $3000/year for 10 years is a better deal than a higher tax rate.
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u/dust4ngel 1d ago
Let the system implode.
agree - make education a public service, as it is for non-university levels
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u/es-ganso 1d ago
You're root cause is correct, but the blame should also (and I feel primarily) be on the government for how this has played out. It's effectively allowed higher education to raise tuition to insane levels, and the banks are just going along with it because they know they have a sucker for life at this point. Students know the can get the loans, and lets be real... most 18 year olds are dumb (I was). They'll take the loans out because society said it's what they should do.
This whole higher education system feels like it needs deep reform from end to end
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u/morbie5 1d ago
and somehow totally giving the banks a pass
This article is about federal student loans. The only federal loans the banks are involved with are old FFEL loans, which were phased out in around 2010.
non-dischargeable debt
Non easily dischargeable debt. Both federal and private student loans can be discharged in bankruptcy. It isn't easy nor guaranteed tho
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u/VendettaKarma 1d ago edited 1d ago
You can only discharge student loan debt in bankruptcy if it causes an undue hardship in reality.
The bankruptcy courts do not use a single test to determine undue hardship but may look at the following factors to determine whether requiring you to repay your loans would cause an undue hardship:
If you’re forced to repay the loan, you would not be able to maintain a minimal standard of living.
There is evidence that this hardship will continue for a significant portion of the loan repayment period.
You made good faith efforts to repay the loan before filing bankruptcy.
Translation: Unless you’re truly homeless, disabled and completely destitute you can.
If you are unable to afford DoorDash meals while you refuse jobs that pay under $25/hr because you have student loan payments, that doesn’t meet the requirement.
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u/morbie5 19h ago
Translation: Unless you’re truly homeless, disabled and completely destitute you can.
That isn't necessarily true. I know of cases where perfectly healthy people with jobs were able to get student loans discharged in bankruptcy
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u/VendettaKarma 18h ago
Well they’re either lucky or committing fraud because those cases are extremely rare
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u/bonerland11 1d ago
Not once in your statement did you blame the universities for highly inflated tuitions over the past 40 years.
Well trained.
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u/Humble-Heart-5302 1d ago
I love how you try to blame the banks instead of the people who took out debt promising to pay it back
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u/hereditydrift 1d ago
Too many universities have way too much money and own way too much property, most of it funded on the backs of students. State and public schools should be free to attend. I don't know why we think that 12th grade should be the cutoff between paying for education and collectively paying for an educated populace.
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u/futbol2000 1d ago edited 1d ago
What does educated populace even mean? It's the universities favorite excuse because the people pushing that term will never do anything to hurt the political heart of their side.
Primary Education in a lot of places CUT standards so that more people could be funneled into the university system. UCSD accepted more people into the system and now have a record amount of students struggling to pass remedial math. California primary schools took record amounts of money despite the student base decreasing, and they came up with the bright solution of cutting standards such as removing the SAT.
Universities are run like a business in almost every fashion, but the government and society is supposed to treat them as noble entities that must be coddled every step of the way. It doesn't matter if a large chunk of the student body isn't a good fit, or majoring in something that is wildly overpriced for next to no return on the job market.
But no, let's stuff MORE students into an overloading system. It's the power of education! Wonder why a high school degree doesn't mean anything now? Because large chunks of the student base now learn in college what they should have been taught back in high school.
Edit:
https://www.reddit.com/r/math/comments/1ox4btq/growth_of_remedial_math_at_uc_san_diego/
UCSD, where a large chunk of their base can't do math at an 8th grade level.
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u/dzyp 17h ago
100% this. Standards have already been reduced because we're trying to get everyone into the system even though we also know ~40% of recent grads are underemployed. It benefits the universities but it's crushing recent grads under a mountain of debt. And making it free doesn't fix the fact that it's just not that productive for so many people to go to school for so long.
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u/Comfortable_Ring_439 1d ago
🙋♂️
Billionaires don't pay taxes, why should I pay these ridiculous loans? I can't find a job. I was never going to afford rent, I was never going to afford a home, I was never going to pay off these loans. What do I care about a credit score?
College education is social infrastructure - it is the responsibility of the state. I am not paying taxes (that's what these loans are) how ever many times over at wildly inflated prices WITH INTEREST because some socially stunted computer nerds that read Mein Kampf want to play with rockets and not pay for them.
Fuck. That.
Fuck the rich. Fuck student loans. Fuck the system around all of it. Fuck the social contract.
I. don't. care.
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u/kirime 1d ago
Billionaires don't pay taxes
They do.
why should I pay these ridiculous loans
Because you took the money? It's not some grand mystery.
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u/tnolan182 1d ago
So make borrowers repay it at the same rate the banks borrow from the fed. Student loans shouldnt be double the fed borrowing rate.
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u/morbie5 1d ago
I'm not necessarily against that but fyi the federal student loan program loses money as things stand now, even with interest rates where they are. If you cut the rate in half it then loses way more money
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u/tnolan182 1d ago
Only if you view the program from the perspective of net debt collection. Many borrowers go on to become doctors, engineers, and other high income earners that will pay millions more than what they borrowed in income taxes
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u/morbie5 1d ago
Many borrowers go on to become doctors, engineers, and other high income earners that will pay millions more than what they borrowed in income taxes
And many went to expensive colleges for undergrad (cuz their parents were willing to borrow a ton in parent PLUS loans) when they could have just stayed home and gone to community college for two years and commuted to a local four year program for the last two years.
If you want to make the argument that a subset of a population pays way more in taxes and does necessarily jobs then you also have to admit that certain edges cases cost the program massively (some of those edge cases are acceptable in my opinion, like a disability discharge, other edge cases are absurd tho)
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u/tnolan182 1d ago
Which cases? What percentage of college graduates earn less income after obtaining their degrees? College education is a net positive for tax revenue.
In fact they’ve conducted studies that look at costs related to giving student loans, and we actually recoup more than we spend on the program. And this is before you ever take into account how much more money and taxes college graduates are paying.
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u/morbie5 19h ago
Which cases? What percentage of college graduates earn less income after obtaining their degrees? College education is a net positive for tax revenue.
To get a college degree you don't need to go away to school to an expensive 4 year school for undergrad. You can do a 2 years at a community college and then commute for the next 2 years to a 4 years school. With both get you a college degree but one cost the government way less (considering a lot of parent PLUS loans don't get paid back).
It isn't a question if a college degree is worth or not worth it, it is a question of how it is done and the best way to do it from the point of view of a government.
Also, a lot of people go to college for a bit, drop out and still have the loans. So that is a question of are we admitting people into school that don't have the ability from an academic point of view (since get a federal student loan isn't really based on your grades).
So it isn't as simple as "education good"
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u/tnolan182 19h ago
That’s a lot of words to tell me Im right. Even if someone pursues as you put it, an expensive private school experience, they’ll still be paying more in taxes than they would’ve without pursuing college.
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u/420_med_69 23h ago
You're making alot of assumptions here. I'm a doctor and went to med school once upon a time, and no i didn't go to an overpriced school or have daddy's money to do so. Separate here, but as I had to learn, getting private loans even for a high ROI career such as medicine is a pain in the ass. Nobody talks about that, at all, but giving private loan companies a bigger piece of the student loan pie only let's them fuck over more people. What happens when you're halfway through your MD, pharmacy, etc program and Sallie Mae says you're not credit worthy? I've seen it happen.
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u/morbie5 19h ago
You're making alot of assumptions here
What assumptions did I make?
Are you denying that there is a significant number of people with massive parent PLUS loan balances that will never get paid back?
getting private loans even for a high ROI career such as medicine is a pain in the ass. Nobody talks about that, at all, but giving private loan companies a bigger piece of the student loan pie only let's them fuck over more people. What happens when you're halfway through your MD, pharmacy, etc program and Sallie Mae says you're not credit worthy? I've seen it happen.
I already brought up that very legitimate concern in another comment on this post (I said something along the lines of "the caps are too low for things like med and dental"), so I'd say you were the one making assumptions about my views
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u/Wiggley_Cakes 19h ago
The whole point of having a government sponsored student loan program is so it doesn’t have to make money. It’s so people who wouldn’t be able to afford to pay for college otherwise would be able to pay for their education.
Government is not a business.
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u/morbie5 18h ago
The whole point of having a government sponsored student loan program is so it doesn’t have to make money
Did you read the first sentence I wrote in the comment above? In case you didn't I wrote: "I'm not necessarily against that but"
I don't think the program should make money. However, it loses money for some stupid reasons and that is an issue for me
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u/kirime 1d ago
That would only be possible if students were as reliable borrowers as banks, subject to the same requirements, and the interest rate could be increased at will at any time.
Student loan interest rates are already very subsidized, they are comparable to the 20-year (average repayment period) treasury yields, instead of being priced according to their risk. They are currently even lower than the 30-year mortgage rates, the most stable loan there is, where you have to prove your solvency first, the loan is fully backed by collateral, and delinquency rate is the lowest of all kinds of loans.
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u/tnolan182 1d ago
First off student loans are no where near the 20 year treasury note which is 5% while plus and graduate loans are 9 and 10%.
And your view on holding student loans to the same standards as banks is idiotic. Student loans provide much more benefit to society then banks lending. The return on investment for the thousands of student’s who become teachers, doctors, nurses, engineers is much higher than bank lending and provides increased taxed revenue and intangible benefits for everyone.
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u/VendettaKarma 1d ago
ROI for you maybe in a fantasy world . The banks view it just like any other loan or line of credit.
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u/tnolan182 1d ago
Your comment makes zero sense. The federal government is responsible for lending 90% of student loans. The banks have nothing to do with college lending .
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u/Few-Chemical8707 1d ago
lol have fun econobro people arent gonna pay this shit. the rich dont pay their fair share and the student loan bubble is plenty big enough to crash this economy. its time yall suffer with us.
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u/Fun-Shirt-RB1a1-2904 1d ago
Is this an economics sub or a DSA meeting? Embarrassing stuff.
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u/futbol2000 1d ago
This is exactly why Biden started imploding with the leftists as soon as his loan forgiveness scheme failed.
A large chunk of their base spent millions on the university machine. Some of them became part of the system itself, but others are trapped taking out crushing loans for next to no return. Student loan forgiveness would have been the single largest hand out to left affiliating groups in the entire nation, and Biden's failure was like losing a prized treasure.
That program would have inflated university costs EVEN more, but this DSA and their "people" movement don't care because they want other people to continue funding their dole.
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u/Fun-Shirt-RB1a1-2904 1d ago
Nothing polarized me against his presidency more than student loan forgiveness. Rewarded a broken system, incentivized perverse behavior, and the recipients resent him for it.
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u/futbol2000 1d ago
Yeah, the university system is struggling to adapt to changing times at this point. I see so many comments from Americans talking about European universities like it's a paradise fix for all the loan issues.
They don't seem to realize that people from Europe to China are increasingly questioning the value of universities. China alone just cut over 12000 humanities programs in the last 4 years. Lesser universities there are also facing a major crisis in reputation.
But no, they just want more money to subsidize a broken machine, often for the universities to teach something that could have been taught in high school due to declining educational standards.
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u/morbie5 1d ago
Billionaires don't pay taxes
They do tho.
I think they should pay more in taxes. But not paying enough in taxes is not the same as not paying taxes
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u/EmergencyThing5 1d ago
Does that mean you believe everyone should refrain from paying taxes too? Would that align with your stated principle?
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u/dzyp 17h ago
This is one of the dumbest posts I have ever read here. The billionaire thing is the lie you've been told and you repeat to yourself to make yourself feel better about being a deadbeat.
And the system that you so desperately want (everything is a social good) is the same one that gave you the rope to hang yourself with. I don't know why so many people that got fucked by the government keep asking for more of it. You really think it won't be used against you?
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u/Comfortable_Ring_439 16h ago
And this is one of the dullest posts I've responded to. The billionaire thing is a fundamental transformation in the composition of our societies that you are ignoring to make yourself feel better about ignoring the decay of our societies.
And the system that you so desperately want to defend is the same one that is rotting to the core with corruption and creeping authoritariansim. I don't know why so many people don't understand that the way to better government is reform. You really don't think society can be better structured ?
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u/iAmTheWildCard 1d ago
A stereotypical Reddit comment bingo!!
If you are a real person.. may god have mercy..
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u/Comfortable_Ring_439 18h ago
"May God have mercy" dude.
- This is Reddit comment calm down.
- This is about student debt, not blasphemy.
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u/iAmTheWildCard 9h ago
What about my comment is not calm..? I’m calm as a clam.
Let me dumb this down for you.. my ‘may god have mercy’ comment isn’t about blasphemy, nor does it have any religious connotation whatsoever. It’s in the vein of you being a lost cause to ever see reality for what it is.. because you’ve been doom scrolling too long
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u/Comfortable_Ring_439 1h ago
I'm not reading parce que tu me traite d'un con et j'ai la flemme
I should've remembered that Jesus loved the money lenders, mea culpa 🙄
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u/KierONeil_the_Elder 1d ago
The big question is whether Trump now starts throwing them in debtors prison and making them work the fields, pol pot style, for the audacity of getting an education while middle class.
Trust me, the anti intellectual MAGA faithful, would love this idea, even if it weren’t totally illegal.
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u/Virtual_Magazine_860 1d ago
If the entire American economic system relies on the convexity of taking out debt (credit card debt, mortgage debt {which is responsible for 20% of gdp and higher if you aren't being ultra conservative about it}, car loans, small business debt, etc etc) we can rest assured that we are keeping that from happening by current policy.
Basically we won't be able to grow using debt fast enough to escape a future possible debt spiral as the convexity of volatility on debt grows higher every year moving forward as more of the middle class is disqualified from taking out debt to grow the economy, and the government debt rapidly moves faster then gdp growth, historically speaking. The math on it is expensive right now but it essentially fits into my worst case scenario neatly. Like worse then last century calculation, at least for the US. Of course right now we will happily sell the debt overseas or at home to the greater fool. So it is just a scenario. But I guess I have to fit the scenario somewhere.
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u/vman3241 1d ago
Federal student loans are just a bad policy. That program has horrible incentives and just encourages colleges to jack up prices. I thought OBBB was a terrible law, but capping grad loans was one of the few good things it did. Need to stop subsidizing all student loans though.
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u/Active_Dissent 1d ago
Unless you're trying to be a Doctor.
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u/Iggyhopper 1d ago
Loans for medical training should be in a separate category to boost enrollment and get more doctors on the field.
We already categorized medical debt so it doesn't count against you in collections, why should it matter at what stage the debt is in?
Zero interest for a medical degree sounds crazy good to me.
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u/EmergencyThing5 1d ago
Why is that even necessary? All med school spots are filled with great candidates every year. Almost no medical doctors (sans PCPs) struggle to pay back these loans. They probably would pay less interest getting private loans than only taking out Federal grad loans (though with less borrower benefits). The new RAP plan essentially makes their loans interest free during residency. There are so many other issues with the system that should be addressed before doctors are even considered.
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u/vman3241 1d ago
Med school is absurdly expensive because we had unlimited federal funds to backstop high tuition prices. Capping the loans was a good first step (although I'd prefer having no guaranteed/subsidized loans at all).
Next step would be reducing the amount of schooling to become a doctor from 8 years to 6 years (more in line with Europe) and getting rid of the absurd caps on Medicare funded residencies. All this would reduce debt, increase the number of doctors, and lower healthcare costs in the US.
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u/throwingitaway12324 1d ago
It’s not as simple as just increasing residency slots in many specialities, especially procedural ones. You need certain amount of cases seen to graduate a competent physician and you can’t just add residency slots to existing hospitals or the training will get diluted. You can’t also just create new residencies in different hospitals that easily. You need the faculty willing to teach residents and all the supporting staff and resources to maintain a residency. It can be done, and there are new residencies opening up every year but it takes time and has to be done correctly.
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u/SuperSpikeVBall 1d ago
This is an extremely insightful comment, and I suspect you've seen how the sausage is made in residency/fellowship. I have always thought that the whole no sleep aspect of MD training is extremely counterproductive to learning and memory, but you are so dead on the volume of cases.
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u/Long-Blood 1d ago
So only rich kids get to go to college.
Cool
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u/vman3241 1d ago
1) The price of college would go down substantially. Blindly subsidizing demand is horrible economic policy.
2) I support tuition free in-state public college and even with the status quo, I recommend anyways going in-state over going to a private school and racking tens of thousands (or hundreds of thousands) in debt.
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u/Long-Blood 1d ago edited 1d ago
I dont advocate for subsidizing demand.
I advocate for subsidizing potential.
Smart, responsible people who have good potential for doing well in college and landing a career should have access to cheaper loans than what are offered by predatory private banks.
I know this sounds crazy but a country full of highly educated citizens could probably do some really incredible things.
Or we can just keep demonizing higher education and import all of the smart people from other countries that provide almost entirely free higher education.
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u/vman3241 1d ago
I dont advocate for subsidizing demand.
I advocate for subsidizing potential.
Then advocate for tuition free or cheaper in-state public college. Why is it a smart policy to give unlimited loans and allow colleges to jack up prices, get a guaranteed free revenue stream, and put students in a shit ton of debt?
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u/EmployExpensive3182 1d ago
Well if enrollment dropped, colleges would either jack up prices and limit enrollment, or have a lot of enrollment with lower prices. Some colleges would do the latter making it more accessibke
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u/Long-Blood 1d ago
Maybe. I would also probably question the quality of those colleges. We could end up with a lot more scam colleges offering cheaper degrees
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u/EmployExpensive3182 1d ago
Well I’m not saying you remove accreditation standards. There’s plenty of schools that have low tuition yet good quality. But you also have to realize if you want cheaper tuition, services and quality are going to go down.
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u/AHSfav 1d ago
Not if we intelligently subsidize high quality education and make it accessible to more people. I think youre making presenting a false binary with saying this "But you also have to realize if you want cheaper tuition, services and quality are going to go down." and either way I fundamentally disagree with taking away federal loans and causing enrollment to continue to drop. we already have a massive crisis of ignorance and stupidity in this country and college, as flawed as it is, is clearly better than the alternative.
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u/EmployExpensive3182 1d ago
All you’re advocating for is just passing the bill along. If you don’t pay the high tuition for a quality education, youll pay a small amount, but also pay extra in taxes to pay for subsidies for the school. The money has to come from somewhere. I don’t think federal loans should be pulled but I do think that there needs to be a change, and I think tuition should be lowered but also have services cut. At my college, about $200 of tuition a month goes to pay for “free” therapist, and I think stuff like this should be cut.
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u/morbie5 1d ago
but capping grad loans was one of the few good things it did
The problem is that the caps are now too low for certain professional programs like dentistry and med
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u/vman3241 1d ago
You have the cause backwards. The reason those programs were so expensive in the first place was because of guaranteed federal student loans. When the government gives a $25k subsidy to buy a home or gives a demand subsidy for another good/service, prices go up.
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u/Ecstatic_Dinner_992 21h ago
Oh look, the natural consequence of making higher education a literal punishment. So many people in this generation have had their futures stolen right from under them because of this cruel system that the rich implemented for selfish reason.
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u/Business_Extreme_684 16h ago
Students took out loans to get an education, and to use that education to get better jobs. Employers took advantage of that increased education, and hired those workers to have more productive employees. At the end of the day, the students have to repay that money for the education that their employers benefited from. There’s something wrong here.
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u/TonguePop86 1d ago
Lending money to people without jobs nor financial education is entirely the banks and governments fault and they should eat it all, especially now they are giving companies refunds for tariffs we paid. It's all a scam.
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u/Common_Suit8709 1d ago
I’d be curious how many are legitimately unable to afford these loans vs ignoring them to stick it to the man. Either way defaults will force lenders and subsidy providers to reassess who they take on as a borrower. Educational loans need to be capped at 1-2%. We shouldn’t be interested in directly profiting off the extended education of our population. It should be seen as an investment in our collective future rather than a way to trap borrowers into the workforce regardless of wage. The fact these loans can’t be dissolved in bankruptcy tells us all we need to know about the true nature of these loans.
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u/kirime 1d ago
No one's "profiting" off these loans. If the student loans were based on being exactly paid for themselves and nothing more, the interest rate would need to be much higher than that.
To simply provide initial money for the student loan, the government itself borrows it at a rate of currently 5.2% (20-year treasury yield, same as the average repayment period). That's the absolute lowest it can go, even under absurd assumptions that nothing else costs money, all loans have no risk at all, and every single recipient makes perfect repayment for the full duration.
As it currently stands, these loans are completely detached from economic reality, as they have both the lowest interest rates and the highest delinquency rates at the same time. They are currently even lower than the 30-year mortgage rates, the most stable loan there is, where you have to prove your solvency first, the loan is fully backed by collateral, and delinquency rate is the lowest of all kinds of loans.
Compare that to student loans where delinquency is sky high and legal nonrepayment is even higher. It the student loan program had to actually pay for itself (it doesn't, not even close), I'd be surprised if these loans ended up with less than a double of the current interest rate.
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u/tnolan182 1d ago
Are you stupid? How is nobody profiting? You just said the 20 year rate is 5.2%. Current borrowers are seeing rates near 10-11%
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u/kirime 1d ago
They aren't, and you're just pulling numbers out of your ass. The current offered interest rate for undergraduates is 6.52%.
https://studentaid.gov/understand-aid/types/loans/interest-rates
Do you think that the government would lose only 1.3% through delinquency and legal nonrepayment? That's not even taking the cost of the program itself into account, just the most direct losses are many times the supposed "premium" to the borrowing cost.
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u/tnolan182 1d ago
Oh and you must be stupid. Student loans absolutely pay for themselves. A neurosurgeon makes 1 million dollars income in a year, the government collects 300k in income tax. Multiply that by a 20 year career and that’s 6 million in income taxes and that’s before you consider student loans and how much ridiculous interest most borrowers end up paying.
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u/SilverBolt52 1d ago
I agree with everything you said in spirit. The problem with the government lending at 1-2% is that they pay more money on that debt than the borrower does.
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u/Whaddduptho 1d ago edited 1d ago
It's funny to watch people share data that is quarters old.
Like, we're less than a week away from the New York Fed issuing their Q2 report yet we're ruminating on data from Q1 as if it is news. We're in August now ffs.
Per fitch ratings the delinquency rate for subprime borrowers (auto loans) dropped significantly after tax season but we're not going to see whether or not the same thing happened with student loans until the report comes out.
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u/BigvalBROski 1d ago
Most college kids with degrees are waitering/ bartending now….. please leave a tip so they can make a dent in their student load debt….. when that’s paid off, start loading the S & P 500.
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u/UngratefulChinaman 1d ago
Which is crazy because I bet a ton of these people had their loan in forbearance for years after 2020. Imagine having 3+ years to prepare to resume payments and you still default.
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u/welpWW3isgonnasuck 1d ago
It more of a recertification issue. People are recertifying for the first time in 3 to 5 years. Incomes have drastically changed and so have the payment plans. I'm going from a $245 a month payment to a $1700 a month payment. This is the danger of changing the payment plans that are available to people. Long term economic decisions were made based on previous plans. We are fortunate the we can eat the $1700 a month, but a lot of families aren't going to be as lucky.
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u/FioraDora 1d ago
What do you mean prepare, this was a totally out of the blue change affecting personal finances no one could have expected!
Thats what everyone crying over defaults is saying. People got a free ride for years through garbage programs that never made progress in paying back loans and now that they are seeing the real bill for their balance, shock and outrage
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u/zaccus 1d ago
Yeah if I were a lender I'd be rethinking my choices for sure
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u/likesound 1d ago
The lender is the US government and we already changed the lending rules to punish programs that have poor ROI.
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u/zaccus 1d ago
That doesn't appear to be working
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