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Erase student loans?
Justin Wolfers
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Kai Ryssdal: Whatever degree you have on your resume -- associate, bachelor's or more -- they have one thing in common: They don't come cheap.
Student loan debt in this country now exceeds the amount we collectively owe on all our credit cards. Best guesses are it's going to hit $1 trillion by the end of the year. Perhaps not coincidentally, that's one of the things the Occupy Wall Street protesters have been protesting. There's even a petition circulating that asks Uncle Sam to forgive student debt. More than 400,000 people have signed it.
Commentator Justin Wolfers isn't one of them.
Justin Wolfers: There's an argument going around that forgiving the country's student loan debt will stimulate the economy. The basic argument is this, the president signs a bill, and millions of Americans would suddenly have hundreds -- even thousands -- of extra dollars each month. Consumer spending increases and then businesses will start hiring again.
Sounds promising, but here's the thing.
If government money is just to be given away, why on earth would we give it to college grads? They are on average richer than most, and they are suffering the least during the recession.
Plus, if you spend money for stimulus, you want to get a big bang for your buck. But forgiving $50,000 worth of debt is not an ideal. It an expensive way to get these folks to spend the few hundred dollars that currently goes to loan repayment. Much better to give fifty poor people $1,000 each. That money will be spent much more rapidly.
And think about the incentives. If we give one generation a free trip through college, what will happen during the next recession? I reckon the next generation will feel entitled to the same privilege, and they'll lobby to get it. So we'll end up with more spending in the least productive part of our economy -- the lobbying industry.
I know that my arguments won't be convincing to those of you struggling under mountains of debt. They'll say, "Bail us out, not the millionaires, billionaires, and corporations!"
But this isn't the choice we face. Economists talk about opportunity cost. It's a principle that says you should compare your choice with the best alternative. Relieving student loans may be a better idea than more tax cuts for the rich. But is it better than providing stimulus to the one-in-seven Americans currently living in poverty.
My conclusion: Yes, let's stimulate the economy. But let's do so in a way that serves the greater good, rather than just ourselves.
Ryssdal: Justin Wolfers teaches public policy at The University of Pennsylvania's Wharton School of Business. Got a comment? Send it along -- write to us.
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College students graduating today have bleak prospects for finding jobs. Of the few that do find jobs, most of their income goes to pay back on student loans. These loans are predatory and designed to put the student into default with increasing interest rates.
The next bubble to burst will be student loan debt as it climbs to nearly 1 trillion. However; 3 states now provide education and are allowing state funds to go towards illegal immigrants ie the Dream Act. So we are going to educate those that are illegal in the USA but punish Americans born and raised here? I support Occupy Wall Street... and I am almost 60 years old. This is a wake up call to democrats and republicans that the people who VOTE, WE The People are tired of empty promises and special interests and payoffs.
College students graduating today have bleak prospects for finding jobs. Of the few that do find jobs, most of their income goes to pay back on student loans. These loans are predatory and designed to put the student into default with increasing interest rates. Please see the defaultmovie.com which is a quick documentary on the current student loan situation.
The next bubble to burst will be student loan debt as it climbs to nearly 1 trillion. However; 3 states now provide education and are allowing state funds to go towards illegal immigrants ie the Dream Act. So we are going to educate those that are illegal in the USA but punish Americans born and raised here? I support Occupy Wall Street... and I am almost 60 years old. This is a wake up call to democrats and republicans that the people who VOTE, WE The People are tired of empty promises and special interests and payoffs.
Here's an idea, maybe people shouldn't spend $50,000 a year on college when it's for the chance at a job that pays $20,000 a year, or they don't take it seriously and get straight C's so they can't take that high paying job.
And for the people who go to the top level schools, and the best paying salaries, just wait your time. You made the right decision, and while it might not seem like it now, once you have your debt paid off, you'll be reaping the rewards.
the assertions of the article are tangential at best... the fact remains that tuition has increased substantially (3 CPI), while wages have remained stagnant over the last 30 years. Now days working hard just means it will take longer for you to drown in debt.
Even though I am a recent graduate with a mountain of student loans, I still believe Mr. Wolfers is completely right. Yes, college college costs are rising, the need for higher education in this growing world is as well. Not only that, but knowledge is becoming more complex, creating fields and careers that weren't even imaginable 40, 30, or even 10 years ago. To meet that increased demand by students, of course costs have to rise. Additionally, the higher education system in the US is pretty much the best in the world, so that is another reason for the high prices.
Finally, he points out that it isn't moral to bail out those who have, statistically speaking, higher wage potential and unemployment than the vast majority. If the Occupy Wall Street protectors are advocating equitable solutions to eliminate inequality and forgiveness of their student loans, well, that is fundamentally hypocritical.
One has to wonder of Wolfers is under stealth employ of the banking industry or some other entity in the status-quo. Wolfers is from Australia, and in fact did his undergrad studies there. There, the government much more heavily subsidizes higher education, so students never walk out of it with the sort of students U.S. students can possibly even have to take on just to prepare themselves to contribute to society. Apparently, his Harvard graduate school was something he was personally rich enough to cover on his own, unlike the majority of other U.S. students. In Australia, where Wolfer is from, student loan payback is *interest free* and paid back through the tax withholding system with payment calculated at an amount *based on the person's earnings* and the consumer price index( CPI). Unlike in the U.S., if you are unemployed or face some misfortune, your entire future cannot be permanently destroyed (read the post here by the physician who took out a HEAL loan) as it is in the U.S., leaving you for all intents and purposes a refugee in your own land.
I wonder if Wolpers would dismiss student loan reform as glibly as he dismisses student loan forgiveness. As Marketplace seems to know, student loan debt is punishing the younger segment of working class America. In Australia, not the case, because student loan payback is interest free and automatically adjusted to the person's income, and deducted from pay like a tax withholding, according to Wikipedia. What about something reasonable like that? Instead we have predatory lenders allowed to pile excessive fees, interest and penalties atop already dangerously high balances, with no possible relief in bankruptcy. One person posting on Forgive Student Loan Debt mentioned that he had a 26% interest rate compounding daily. This is why these comments are so angry - the same people who are so poor that they could use a $1,000 stimulus check and spend it instantly on needed commodities are us! Student loan debtors!
The United States is the only industrialized nation that expects young people to pay such a huge cost for a college-education. Is it any wonder we're falling behind in a global market? To reverse that, there is no other option but to free the people from their indentured servitude so they become entrepreneurs, buy homes and other goods, and lay aside for their own children and retirement. For those who decry this is not fair, you need to mature from your kindergarten conception of fairness (everyone gets three cookies). Fairness is not giving everyone the same. It's giving everyone what they need. Read some stories of indentured students at http://forgivestudentloandebt.com/content/share-your-student-loan-stories and ask yourself this question: How can the U.S. win in the global economy when so many cannot even run? As for the future, education at a State institution must become fully covered for without the means.
After my $100,000 HEAL ballooned to $550000 over the ensuing thirteen years, I was unceremoniously kicked-out of Medicare and Medicaid, leaving me still reeling, now 12 years later. I am not "on average richer than most", I am, in fact, poorer than most as I lost my practice, aborted my career and had war declared on my dignity through the default process. I ask for nothing from the government, except that they provide me with the same consumer protections available to all Americans, lest they belong to that dastardly crowd of common people seeking a college education. My ability to file bankruptcy should never had been used as fodder for the cannibalistic, usury-skirting financial conglomerates circling around to overturned wagons of us beleaguered, but worthy Americans. The fact that this �educator� would try to draw the distinction between those living in poverty and those with stifling student debt, clearly demonstrates his inflexibility of thought and the huge chasm between his thinking and reality.
Wolfers spouted this same garbage on the Freakonomics website a few weeks ago. The comments after the article as well as other articles written in response to the Freakonomics article addressed his out-of-touch reality. Commenters on many forums drove a truck through his shoddily-reasoned and sourceless conclusions.
Wolfers is a shill for the CIC (College Industrial Complex). He is more close-minded than the uneducated 18 year-olds at his college.
Just the fact that he has not bothered to address the well written articles on the subject of student loan forgiveness yet in turn as barfed yet another article with the same repetitive nonsense shows that he is a fool. Shame on you Wolfers for calling yourself an educator yet not taking the time to listen to the other side.
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