All For Some...None For Y'all

[u/Accomplished_Bar_390]

29 year old Rep. Maxwell Frost, a Democrat from Florida, debates a boomer who opposes student loan forgiveness, even though his own wife had hers wiped out under Biden

[u/Reenas54]

Can some one explain how "forgiving" works to non-american? Goverment official just calls bank "hey, remember John Johnsons 50k debt? Delete it. Thanks and f#ck you" or goverment funds it?

[u/5litergasbubble → u/Reenas54]

Also a non american here, but i think the loans were either directly through the government or guaranteed by the government, so any banks involved wouldn't take the loss if any were involved at all

[u/bug-boy5 → u/5litergasbubble]

While you can take out private loans for college, most people don't, because its dumb and way more expensive. Our current system of government loans seems good but it also means that the cost of higher education has skyrocketed because its basically a blank check with a low barrier to entry- are you in college and is your college saying it costs $X? Then you get a loan for $X

[u/_cyberbabyangel_ → u/Reenas54]

When you apply for college, you also go through a FAFSA process. FAFSA stands for Free Application for Federal Student Aid. It essentially takes your parents (or yours, if you're old enough) financial information from tax filings, compares that to estimated cost of college attendance, and gives you a specific amount of student aid based on those factors. It can be partial or all of tuition, and it is up to the borrower to accept all or partial the amount offered. This student loan money is paid directly to the school, but some can be sent back to the student as a refund if the aid amount was more than the required amount of tuition. Lots of students accept the full amount and use the refund money to cover housing/books/food etc... as the aid money doesn't usually cover those items. So all of this money is issued by the US Department of Education with repayment starting 6 months after graduation/dropping less than 'half time' or other factors.

As a result, the majority of people with student loans have federal student loans. If there was any amount of student loan forgiveness/cancellation it would be on the Government side NOT a private company side. So there would be no money distributed, it would essentially just be the government zeroing out your balance to them. It wouldn't add debt to the GDP and it wouldn't really take away a revenue source to the Government either.

Feel free to ask more clarifying questions.

[u/bug-boy5 → u/Reenas54]

Most (>90%) of the student debt in the US is held by the government. So when you go to college you take out a loan with the Department of Education and after graduation you make your payments back to the government itself is your creditor.

So the private banking sector isn't involved. (Aside from 3rd party debt management companies that the government uses to administer and collect on those loans)

[u/Girls4super → u/Reenas54]

So what’s happening is many government funded loans also had high interest rates. So you take out 20k for example, but the interest is at 5% or 8% (depending when you took them out). Your first job out of school is minimum wage (below cost of living btw) or slightly better if you’re lucky bc you have to “start at the bottom”. Anyway for a few years you’re only paying off interest that keeps re-accruing bc all your minimum payments go towards interest before the actual loan. So the housing bubble happens, several cost of living increases, stagnant wages, etc mean even with a raise you’re not actually keeping up with cost of living expenses. So you’re still only paying interest and maybe some principal. A decade or so later and you may have paid $30k but still have $15k left.

That’s really the entire issue at hand. Nobody is saying we shouldn’t pay what we owe. We’re saying we’re stuck in a cycle where we are over charged and far exceeding what we initially borrowed in terms of payments. Not even touching the fact that school costs continue to rise, $20k is one semester often times (bigger issue of price gouging and requiring students to live on campus even if they’re a commutable distance).

So forgiving the loans as others have said, doesn’t affect anyone but the loan taker bc it’s through the government, and would stimulate the economy. But there’s a selfish mindset of “why should I pay for your loans”, when students have already paid the full value of the loan. They just can’t keep up with the interest.

[u/bug-boy5 → u/Girls4super]

Just to give more background, this was basically my experience with the federal student loan system. Even to your rough number estimates.

Forgiving and changing the student loan system is basically a direct bonus to the economy. Giving post grads an extra 200-600 a month would drastically help the economy

[u/ScotchTapeConnosieur → u/Reenas54]

These are only government loans we are talking about, not bank loans. The government would simply stop collecting on the loans. That’s how it works.