Student Loan Pause Is Ending, with Consequences for Economy | Hacker News Reader

Student Loan Pause Is Ending, with Consequences for Economy

nytimes.com

12 pointspaulpauper28 comments

> Emerging research has found that in addition to freeing up cash, the repayment pause coincided with a marked improvement in borrowers’ credit scores, most likely because of cash infusions from other pandemic relief programs and the removal of student loan delinquencies from credit reports. That let people take on more debt to buy cars, homes and daily needs using credit cards — raising concerns that student debtors will now be hit by another monthly bill just when their budgets are already maxed out.

So.... We tried to address the "people have too much debt" problem, and people reacted by using that help to take on extra debt that they wouldn't have otherwise. Maybe the root problem here isn't the debt but people being shit with money?

I don't understand how it is being shit with money when the data shows college grads have way better career prospects compared to non-grads? it is rational to take on debt assuming you graduate.

I think you're confused. According to the text I quoted, it's not the case that student loans delinquencies are hidden, and so students take on even more student debt to get an even more expensive degree and presumably a shot at an even higher paying job. No, instead they go and buy more expensive cars and houses. If you take on as much debt as you can for the purpose of consumption, you're shit with money. The fact that grads make more money than non grads is irrelevant here.

That's why USA is also one of the most indebted country because people didn't spend money wisely. This is caused by the consumerism trend over the last 40 years. And consumerism is what capitalism always wanted. So the very problem is capitalism itself

> That's why USA is also one of the most indebted country

By what metric? I just looked it up[1], and by % of GDP the USA is the 44th most indebted at 96%, between Tunisia and Guine-Bissau. 96% is quite low amongst first world countries.

[1] https://en.m.wikipedia.org/wiki/List_of_countries_by_externa...

Do students not take into account the cost of there academic pursuit in relation to employment and income? It's good to be generous with a pause, but forgiveness of the loan seems to hurt everyone.

>Do students not take into account the cost of there academic pursuit in relation to employment and income?

Students can't look into the future and forsee that they will never be able to get a job in a bad economy that will cover the rising cost of their loan's interest rates, much less the principal, resulting in a debt many multiples of what they originally took out, no.

>It's good to be generous in a pause, but forgiveness of the loan seems to hurt everyone.

Yes, obviously, unlike with banks and billionaires, forgiving the debt of people for whom debt is an actual burden is simply unthinkable.

I’m honestly torn on this topic.

I disagree that this stuff can’t be predicted. Don’t blame this on the economy. MANY students are taking out massive loans for majors that have dreary job prospects. They do this because there is a culture of viewing college as an “experience”, chasing “what you love”, and also because kids are naive. You know what i love? Not being hungry. Having my own place. Money for fun activities.

It’s a failure of high school really. By the time kids graduate high school they should at least have an understanding of basics like: - is college right for me? - how to research the job prospects for major X in city/region Y? - long term risks to career X? (automation, offshoring, etc) - how long will it take to get my degree? is the total cost worth it? what’s the break even point?

Obviously i’m generalizing here, but don’t tell me my friends from college who took out $100k in loans to be a political science major picked a low risk path. Don’t even get me started on the art majors. They had a shocked pikachu face after graduation. I did not.

As a thought exercise, what if (moving forward) the government categorized majors by risk (job prospect risks). Imagine if student loans were offered with varying interest rates, based on the risk taken on by the student. For example, a student wants to take a big loan in a risky major like art? Fine - but they should pay more interest on that loan and be forced to sign a form agreeing that it’s a high risk choice. What would be the pros/cons of such a system?

To be 100% transparent - my opinion is that some people have bad luck. I feel for those people 100%. However some people don’t have teachers/friends/family in their lives to teach them how to think and make decisions. And the govt subsidizes those poor choices on a massive scale. The incentives are backwards.

Most college students seem to actually be making pragmatic choices w.r.t their colleges majors, i.e. most are business majors: https://nces.ed.gov/fastfacts/display.asp?id=37

That makes sense given that for decades finance, health, or administration etc. hire the most,

1) https://www.bls.gov/careeroutlook/2021/article/field-of-degr...

2) https://www.bls.gov/opub/ted/2000/apr/wk1/art01.htm

I think giving the example of the impractical, dreamy college graduate is akin to Reagan's (or whoever's) welfare queens example.

My personal opinion is that if government won't entirely subsidize the cost of education for most trade colleges (which I think it should, and yes I'd be willing to pay more taxes for it) then federal student loans shouldn't have interest rates at all. I don't believe education should be a capitalist market but if it must be then I definitely don't think the government's priority should be preserving that market's profitability and taking a cut.

I can agree with that. I don’t work in the trades but i have a lot of respect for those that do, and it’s low risk in terms of job prospects.

I mean, it's been a meme for several decades that those in the liberal arts won't be able to get jobs, or become baristas, both of which has seemed to have happened, hence the meme seems to come from real experiences.

Why do people here always seem to assume the only students who can't pay off their loans were the ones with liberal arts degrees?

Generally, people with STEM degrees can pay off their student loans within several years of working.

There would seem to be two possibilities. Either millions of students are simply lazy, irresponsible grifters who just took pointless degrees for the lulz and refuse to work hard enough to pay off their debts, which they could easily otherwise do, or your general case isn't as general as you assume, given externalities.

Regardless, we're talking about trillions of dollars in outstanding debt. That's going to be a drag on the economy, low and middle income families are going to suffer, it's going to affect spending, investment and the likelihood of future generations seeking an education at all. I'm just suggesting maybe the problem isn't entirely the students here.

When did I say the debtors were the problem? I'm all for free education. A third option is that students have been propagandized by parents and society that "any degree will get you a job," discounting that when their parents went to college, it was cheap and loans weren't necessary (due to the government guaranteeing all student loans and disallowing discharging in bankruptcy thereby inflating college prices and thus loan amounts), and that there was less competition from other people getting degrees such that companies did hire people with any degree and trained them on the job.

What are you talking about. Why can't they look ahead. Will a bad economy mean we need less DR's or less plumbers? Are they incapable of doing basic math. If it costs 100k to get a degree in a job where you earn 40k a year, it's a bad ROI.

Forgiving the debt from who? I mean if you borrow 50$ from me, and it gets forgiven, then well I'm out 50$. If you forgive the debt to the Fed, well then the fed is out 50$. Now the Fed has less, but they need X, so they ask me for it. Mind you they ask me while holding handcuffs, and pointing a gun. So "ask" might not be the right word.

Now. If you have a degree, you are likely making more than the average, so you're "richer". And if I didn't then I'm poorer. If you make 100k and I make 50k, but we both pay tax to cover your loan. I'm essentially paying for you to become richer, while I have less, so become poorer.

What debt forgives actually does is put the burden of paying the debt into the hands of people even less able to pay, and people who didn't get the benefit of the loan.

>What debt forgives actually does is put the burden of paying the debt into the hands of people even less able to pay, and people who didn't get the benefit of the loan.

The people most negatively affected by student loan debt are lower and middle income people. Their degrees didn't result in them all getting 100K jobs. Please stop spreading this bit of disinformation.

That logic can be applied to any loan, not just student loans. Remember when home loan interest used to be 18.45 percent.

Entrusting 18 year olds with the maturity of life-long decision making, perfect foresight, astute self-knowledge, and uniformly competent parental guidance -- what could possibly go wrong, right?

Maybe college should be delayed to 21 years old... Sarcasm

The real problem is a society that allows loans to exist where the loanee has no meaningful collateral. If an institution cannot fill its classrooms without stooping to such predatory financial structures then perhaps it just shouldn't exist in the first place. But America is still too drunk on laissez faire capitalism to muster any will for legislative action in that regard.

Most do, but then something like the Great Recession happens. Eventually it leads to generational phenomena like this, https://www.forbes.com/sites/katherinehamilton/2023/04/21/ge...

Job prospects for millennials were awful just as they were graduating from college etc., but their student loan interest didn't cease compounding.

Hey, it'll help inflation. Takes the spending money away from all the young professionals.

Tough time to be an economy I guess, hope it makes it.

this seems so wrong-headed as far as policy goes. does nothing to address the root of the problem.

The pause itself or the end of the pause? Because I could see that criticism as easily being applied to both.

The Biden Administration is planning for new Income-based repayment rules which will drastically reduce borrowers' payments.

Calculator for payments under the new plan: https://www.studentloanplanner.com/income-based-repayment-ca...

Reply on news.ycombinator.com