An Idea for Student Debt Relief

My idea could also be paired with student-loan reform, where subsidized/government loans are only available on certain conditions. For example, you need to qualify for them either with elite grades or by choosing a highly in-demand major.

I could agree with that. See, this whole thing started when ..idk if they just lowered admission standards or did away with them altogether.

All of sudden there were 200% more students that weren't college material at all with many of them getting loans and washing out in a semester or few.

This led college administrative offices to more than double in personnel and the price of books shot up, too. That was the last couple of semesters I was in school so I saw it all.

I think the government backing student loans kicked it off.
 
It would be nice if America could afford free public university education like how developed nations can.

Your kids get 13 years of free education. Pay your fucking college loans back.

All you're doing by forgiving college loans is teaching them their other loans can also be forgiven.
 
Unlike most liberals, I don't like the idea of generalized elimination of student debt.

Partly that's because I dislike the idea of a net transfer of wealth to people like young doctors and lawyers who will end up making a killing in their lifetimes.

Partly it's that I don't like the injustice of it in a situation where you compare someone who spent years making sacrifices to pay down what she owes, and a peer who lived the high life while making only minimum payments and taking every deferment opportunity, and now they're both put in the same situation.

But mostly it's because I worry about the unintended consequences -- for example, if lenders worry about debts being wiped out again, they'll charge much higher rates to account for that risk, making education even less affordable. Similarly, if people implicitly factor in the chance of having debt wiped out, they'll be willing to take on more of it, which puts upward pressure on college costs.

So, here's my pet idea, in lieu of that:

The government agrees to pay off however much student debt you'd like them to pay off, but in exchange you get a PERMANENT increase in all your tax rates of 0.1 point (income, estate, and capital gains), for each $1,000 of debt the government assumes.

So, say you graduate with $50,000 in student debt at 10yrs/5% terms, but you can only find work paying $30,000 per year. And so that $6,364 per year in loan payments is just killing you. You can wipe it all out, and in exchange your tax rates go up 5 points. Based on a $12,550 standard deduction, you would have been on the hook for $1,895 in taxes, but after the increase you'd be on the hook for $2,270. So, year one, you're relieved of $6,364 in payments, in exchange for $375 in extra taxes. Great deal. And even across a lifetime of earning, you are likely to come out ahead with that deal, unless you wind up making a lot more money down the road. So, you'd probably be smart to take the deal.

Now say that, instead, you're a freshly minted lawyer with a job offer from a big firm to earn $200,000. Well, now, if you take that same offer to wipe out $50k in debt for a permanent 5 point hike in tax rates, then year one you get the same $6,364 off your loan liability, but it's in exchange for a year one increase in taxes of $14,169. So, right out of the gate, it's a garbage deal, and you won't take it. You'll just pay what you owe.

Where it gets a bit tougher is in the middle. Like same deal, but your job pays $60k/year. Taking the deal helps you out in the early years: $6,365/year of debt payment relief in exchange for $3,498 more in taxes. But ten years down the road, that loan would be going away, anyway, whereas that tax increase persists. So, if you're really hurting right now, maybe it's worth paying more in the long haul in exchange for relief when you really need it. But if you're honest with yourself, you may admit the current pain isn't really that bad, so just bite bullet, tighten your belt, and pay what you owe.

You can tweak this idea by adjusting what dollar amounts equate with what tax change. Like if it's 0.1 point of hike for every $2,000, instead of every $1,000, it's friendlier to debtors..... it still wouldn't be attractive the lawyer in the second example, but will look like a better deal for the guy making $60k in the third.

The advantage of this system is that it gives people an incentive to be honest with the government, and themselves, about future earning prospects. If you're genuinely desperate, you'll jump at this, but if you know you're just temporarily strapped and will soon have plenty of money, you won't offload that debt onto the taxpayer when you know it'll mean higher taxes on a lifetime of high earnings. And it preserve the incentive to keep school costs low, since you pay at least some of it in some form, regardless.


I like the idea of paying back loans that we agree to pay back.

Of course it's more difficult to pay to the piper than it is to dance to the music, but, that's life.

For me, simpler is better. They took the loans, now they pay the debt. This is not a thing that requires a great deal of thought.

If they haven't paid the scheduled payments, then don't let them get a tax refund.
 
The government agrees to pay off however much student debt you'd like them to pay off, but in exchange you get a PERMANENT increase in all your tax rates of 0.1 point (income, estate, and capital gains), for each $1,000 of debt the government assumes.

Let's say you would pay 5% interest on that $1,000, and instead spend 0.1% tax on all your income. For that to make sense, you would have to make less than $50k average for life. That means if there is inflation, you are really screwed. If you ever make more than $50k, you are really screwed.

That is a very bad deal. Do not take it.
 
Nonsense, the tax code can be changed at any time, current rulers don't have the ability to decide for future rulers.

Yes, of course it can be changed at any time, but that doesn't change anything I said. The idea would be to make it a surtax that sits on top of whatever the tax is, so even if tax rates are changed, the surtax is maintained on top of that, unless the surtax is specifically repealed.
 
More BS...grades are now outright fraud
If you prefer, you could instead link it to test scores. So, again, you'd have a situation where the academic elite has some discretion about what kind of education to get, while the non-elite would be steered towards the most in-demand fields.
 
I could agree with that. See, this whole thing started when ..idk if they just lowered admission standards or did away with them altogether.

All of sudden there were 200% more students that weren't college material at all with many of them getting loans and washing out in a semester or few.

This led college administrative offices to more than double in personnel and the price of books shot up, too. That was the last couple of semesters I was in school so I saw it all.

I think the government backing student loans kicked it off.

What I'd love to do is get my hands on a detailed budget of a particular university from, say, 1980 and today, so we could really go into detail about what drove costs higher. I suspect administration costs were a major factor, but not from them doubling in size due to having more students. Economies of scale mean that, other things being equal, you'd expect to be able to get away with fewer administrators per student the larger the school is. Like if it takes 5 people to handle a certain task for a student body of 5000, it may only take 9 to handle it for 10,000.

Instead, I suspect what's driving it are the creation of whole new functions that were outside the traditional tasks of a university -- for example, an Assistant Dean for Inclusion and Diversity, a Provost for Community Outreach, or a Chief Sustainability Officer. I could definitely be wrong about that, but if we could find a couple actual detailed budgets for the same school in two different eras, we could check.
 
I like the idea of paying back loans that we agree to pay back.

Of course it's more difficult to pay to the piper than it is to dance to the music, but, that's life.

For me, simpler is better. They took the loans, now they pay the debt. This is not a thing that requires a great deal of thought.

If they haven't paid the scheduled payments, then don't let them get a tax refund.

I'm more sympathetic than that. In our society we have rules that allow those who get in over their heads a way back to the surface. Trump, for example, was involved in six different bankruptcies. I can't justify being lenient when it comes to an inept businessman like that, yet expecting some poor guy to pay back every penny of student debt he started taking on when he was just a child. So, I'd like to provide an avenue to relief for those who are genuinely excessively distressed by their student debt. I just don't want that avenue to be open to those who could afford to pay and are just looking to hand their liability off to someone else so they can get rich faster.
 
What I'd love to do is get my hands on a detailed budget of a particular university from, say, 1980 and today, so we could really go into detail about what drove costs higher. I suspect administration costs were a major factor, but not from them doubling in size due to having more students. Economies of scale mean that, other things being equal, you'd expect to be able to get away with fewer administrators per student the larger the school is. Like if it takes 5 people to handle a certain task for a student body of 5000, it may only take 9 to handle it for 10,000.

Instead, I suspect what's driving it are the creation of whole new functions that were outside the traditional tasks of a university -- for example, an Assistant Dean for Inclusion and Diversity, a Provost for Community Outreach, or a Chief Sustainability Officer. I could definitely be wrong about that, but if we could find a couple actual detailed budgets for the same school in two different eras, we could check.

I may can point you in the right direction: When Uncle Sugar started guaranteeing student loans; Enrollment numbers, and college administrations' personnel rosters, and the cost of books exploded.

It was sometime between 1997 and 2000 A.D. :D

I was on the very end of being done with school at that time. Thank God I got a classical liberal education. All of my psyllabi said "blah blah blah, this course will be taught by the Socratic method".

Some of us did "bla- bla" hands to this back in the day..

Now I realize we were among the last of those receiving a Classical Liberal education in America as had been done for well over 2 centuries. That was the method that made America great.

The previous way was infinitely better than the current way.
 
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Let's say you would pay 5% interest on that $1,000, and instead spend 0.1% tax on all your income. For that to make sense, you would have to make less than $50k average for life. That means if there is inflation, you are really screwed. If you ever make more than $50k, you are really screwed.

That is a very bad deal. Do not take it.
It can be a very good deal for poorer people. Let's say it's a 10-year loan at 5%, with one annual payment (for easy math). In total, it would cost you $1406.90, after interest, to pay it.

Now, let's say that you earn $15,000 per year, year one (about full-time for minimum wage), and get 3.5% raises after that. For simplicity, you're single and only have the standard deduction write off ($12,950). We'll say the standard deduction rises 2% per year for inflation.

Year one, you pay $2.05 more in taxes than you otherwise would have paid ((15k-2,950)*0.1%). That would go up every year, as your earnings rise. But, it would take 60 years for you to have paid more in taxes than what you saved in loan payments. If, say, you took the deal at age 22, you'd be 82 (and earning well over 100k/year) by the time you were coming out behind for having taken it.

But that just assumes you don't do anything with the $140.69 you're saving each of the first ten years in loan payments. Let's say you invest it at 3% per year. Well, at the end of those 10 years, you'd have $1,612.85 invested.... and that would grow each year after that, too. So, how long would it take for the value in that account to be exceeded by the total amount of "extra taxes" you paid?

Here is the age at which that would happen, for someone making the deal at age 22, by starting income level:

$40,000 age 91
$60,000 age 58
$80,000 age 45
$100,000 age 39

Now, obviously, it would be a good deal for the first person, since chances are they'll be dead before coming out behind for having taken the deal. And there's almost no chance their income keeps going up 3.5% per year past their 50's, since most people have their income decline from their 60's onward, thanks to stepping back in their careers or retiring. So, it's a no-brainer there, unless the person imagines some huge future step forward in their career future.

For that second person, I'd also argue it's also a deal worth considering carefully. Sure, over a lifetime they'll likely come out a little behind, relative to where they'd have been if they didn't take the deal. But we'd be talking about a slightly higher long-term cost in exchange for relief when it's desperately needed, early in life, when their income is low. By the time they come out behind, they'll be quite comfortable, regardless. So, why sweat bullets early on for that small long-term benefit? You could go either way on that, depending on what you expect to happen with inflation, your own income growth, time away for kids, retirement age, and so on.

Once you get to that third person, though, it starts looking like a dumb deal, and they'd be better off just to suck it up and pay what they owe. They'll almost certainly come out way, way behind for having taken the deal.

And that's exactly the outcome I'm trying to engineer: one that provides much-needed relief to the poor and the lower-middle class, some flexibility that the middle- and upper-middle class might wish to consider (with a long-term net benefit to taxpayers if they take the deal), but something that the rich aren't going to exploit.
 
I may can point you in the right direction: When Uncle Sugar started guaranteeing student loans; Enrollment numbers, and college administrations' personnel rosters, and the cost of books exploded.

It was sometime between 1997 and 2000 A.D. :D

That could have contributed, but I'm betting some of the major causes predate that, since the run-up in college costs started earlier. Inflation-adjusted tuition and fees were virtually flat between 1969 and 1979 (a fraction of a percent, from $2,440 to $2,444). But then by 1989, they were up 47.5% to $3,605. The rise over the next decades was actually slightly smaller in percentage terms (41.1%, to $5,088). The following decade it was even worse (56.7% to $7,972). Then the decade after that, it moderated even more (up 17.3%).

So, yes, I think it looks like something happened around 1999/2000 that drove a very quick expansion over the next decade. But something had already been pushing college costs far beyond inflation way back in the 1980s and 1990s.

https://educationdata.org/average-cost-of-college-by-year

I suspect some of what happened after 2000 was just generational. The Millennials were the biggest generation in history, and 2000-2009 was the time period when the majority would have been in college. When you have more people pursuing a fairly fixed number of slots, the cost of those slots is going to tend to spike.
 
$200k is good money, even in medicine. .
Not anymore for someone with , say 6 years experience. That's what an experienced, low paid, low self esteem, low ambition, teaching, incompetent military, or VA gubmint employee doc might earn.
(See "Dr." Fauci)
Right out of school, be happy to make a living.
 
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Not anymore for someone with , say 6 years experience. That's what a low paid, low self esteem, low ambition, teaching, incompetent military, or VA gubmint employee doc might earn.
(See "Dr." Fauci)
Right out of school, be happy to make a living.

It's right near the 50th percentile. At $208,000, you'd earn more than about half of all physicians and surgeons:

https://www.bls.gov/ooh/healthcare/...s and surgeons,greater than $208,000 per year.

Granted, that distribution is likely to be uneven. Low-self-esteem people who need ego validation from acquiring more "stuff" are more likely to go to specialties that pay more, versus those who are secure enough in themselves that they focus more on where they can do the most good for others. Similarly, those whose ambitions only extend to their personal salaries, as opposed to having broader ambitions to improve the world are going to be less likely to go into government jobs, so their pay is probably higher on average. As such, you'll probably find a disproportionate share of the unambitious doctors making over $208,000/year. Likewise, those who aren't competent enough in their field to teach it will probably earn more, on average, than the elite doctors who wind up in academia. It's similar with lawyers, where the best of the best tend to become lower-paid professors and judges, while the second-tier students go on to the white-shoe firms, where they'll make more money.
 
It's right near the 50th percentile. At $208,000, you'd earn more than about half of all physicians and surgeons:

https://www.bls.gov/ooh/healthcare/...s and surgeons,greater than $208,000 per year.

Granted, that distribution is likely to be uneven. Low-self-esteem people who need ego validation from acquiring more "stuff" are more likely to go to specialties that pay more, versus those who are secure enough in themselves that they focus more on where they can do the most good for others. Similarly, those whose ambitions only extend to their personal salaries, as opposed to having broader ambitions to improve the world are going to be less likely to go into government jobs, so their pay is probably higher on average. As such, you'll probably find a disproportionate share of the unambitious doctors making over $208,000/year. Likewise, those who aren't competent enough in their field to teach it will probably earn more, on average, than the elite doctors who wind up in academia. It's similar with lawyers, where the best of the best tend to become lower-paid professors and judges, while the second-tier students go on to the white-shoe firms, where they'll make more money.
I've worked side by side w/ military docs as a contractor early in my career and have known first hand VA docs. While a small percentage were conscientious and gave the gubmint more than their money's worth the overwhelming majority were there to do as little as possible and still collect their paycheck. They were most definitely not there to "do the most good". Most of those I just described vehemently hated their profession and were quite bitter. Many had failed private practices. Anecdotal of course, but that was my experience.
The exception were the public health docs. They work their asses off.
 
I've worked side by side w/ military docs as a contractor early in my career and have known first hand VA docs. While a small percentage were conscientious and gave the gubmint more than their money's worth the overwhelming majority were there to do as little as possible and still collect their paycheck. They were most definitely not there to "do the most good". Most of those I just described vehemently hated their profession and were quite bitter. Many had failed private practices. Anecdotal of course, but that was my experience.
The exception were the public health docs. They work their asses off.

My experience with government doctors is in the context of the Uniformed Services University health sciences school in Bethesda. Those I met there were whip-smart and extremely ambitious, but their ambitions were centered around leaving a public legacy, rather than buying a bigger house.
 
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