What's different about Bernie Sanders' student loan plan? It would help more rich people

The party of the wealthy…

So he doesn’t propose paying all student
debt - just certain kinds?

No, the plan includes paying all student debt. The article is pointing out that the people that would benefit most are the people, like doctors and lawyers, or those who went to elite schools, who borrowed the most, but also who have the highest income potential. The student who graduated for Harvard Business School gets all his loans forgiven, which will be much larger that the student who went to a state school or community college.

Oh, I understand the point that is being made now. Thanks. That would require a lot of money to pay it all off!

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One of the likely causes of large student loan debt and rising cost of college stems from the government getting into the business of backing the loans to begin with. There is no incentive to keep costs down for a school if they know the government is good for the money being loaned to afford the tuition. Jack it up as much as you want, relative to your direct competitors. This idea seems to be fraught with similar short-term focus and long-term myopia.

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When I had student loan debt, I borrowed it from FAFSA and I repaid it to Sallie Mae. The gov’t.

Student loan debt exploded when the gov’t decided more kids needed to go to college, so they increased the amounts that could be borrowed. And so what did tuition do? It went up. Now, all these kids were getting more funds and could afford more expensive tuition!

I went to a private university for undergrad. It ran about $18k/year, including room and board and fees and semester hours, not including books. At the same time, the state schools were charging about $10k/year. It was twice as much, but it was offering what I wanted to study…

Fast-forward to today, and that same year at my school is now $42k/year. 2 1/3 x as much. The state schools that were running at $10k/year are now running $29k/year for an in-state student.

If the government wants to rein in student loan debt, they need to stop giving out so much in student loans. The universities will scramble to adjust to the market, and it will hurt for a bit. Those of us who are already through and have paid off our debt will play our tiny violins.

But to lump it all on Wall Street, when the FSA in FAFSA stands for “Federal Student Aid”… they need to look a little more closely and put the blame where it should go. Whether someone interprets that to mean Reagan or Obama, of course they won’t.

A year ago [2010], the president signed legislation ending subsidies for private banks giving federally guaranteed student loans—making the federal government, not banks, the lender of choice for most students. You can still get private bank loans for your college education, but since they no longer are backed by the U.S. government, private loans aren’t as good a deal anymore; most are variable rate loans that require a co-signer and are difficult to qualify for. So it doesn’t take a rocket scientist to see why most kids take out federal student loans from the Department of Education now, and leave the bank loans as a last resort.

Back in the mid-1980s when I went to college, there was a $2,500 limit on the amount of federal student loans you could take out in a year. I graduated with $10,000 of debt and worked three jobs to pay it off. That’s all changed. The limit on federal loans for most students is now $31,000 for four years. These days, the average college senior who had loans graduates with $25,250 in student debt, a new record, with some high-tuition colleges averaging double that, at over $55,000 per student. Unemployment has hit a new high among young people, and their median incomes are falling. Many of them are having trouble finding a job and making their loan payments. A whole generation of middle-class students is being crushed by student debt.

It all goes back to two well-intentioned federal goals: first, that a college education should be within the reach of every American, and second, that if students borrow money from the federal government, they should repay it. Most of us would agree that both are noble goals. But the consequences of both have been stunning.

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I know a guy who went to a junior college only and is now worth about $75 million. I know lawyers who don’t make much.

But regardless, it almost seems Sanders is advocating for spoiling the nation’s young people with largess extracted from others. Why should I pay for some kid to attend Washington U at $53,000/year tuition when he could go to Missouri Southern for $5500/year or College of the Ozarks for free?

Why should it be free for anyone at all? If I work hard to put my grandchildren through college, what compelling reason is there that I should be forced to put some other person’s kid through college with that money instead?

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How about the fact that there is a term called “freedom of contract” which allows two or more parties to enter into a contract based on mutual agreement and free choice? Therefore, contracts can’t be hampered by external control such as governmental interference.

I know that the Constitution is not popular among most people, and those few who feel it should be followed are considered as extremists, however, the law is the law and for the government to violate those student loan contracts would be unconstitutional.

One of my concerns with the government suddenly making it free for everyone, would be whether they would also be involved in deciding who goes where? For example, I live in Missouri, my daughter attends Ole Miss and we pay out of state tuition. Hypothetically speaking, would the free part be the state rate, or include the out of state portion? Will the government then be telling kids they have to go to in-state schools? More details need to be made available about this plan before I can either support or not support it. How will this impact private schools like Washington University in St. Louis, and Saint Louis University? The institutions usually charge much more in tuition that private state schools (although not always).

Additionally, my daughter graduates next may with some loans though we will have paid for 3 semesters out of pocket by that time. How will these plans handle those who have paid as they went by scrimping and saving, vs taking out loans?

Will better FA planning be available to kids and their parents when they are making the decision as to where to go to college?

Just an aside, debt forgiveness is actually counted and treated as income, no?

Another point is that lower-income students get more aid than do those from higher-income families. Thus those from higher-income families end up with more debt.

In addition, some students get loans for what might be called lifestyle–they live a high life on loans while students. This is the reason some graduates have such high debt.

Yes. As far as I know, a debt which is forgiven is counted as income to the borrower. It is as if someone had given them money to pay off the debt. So the amount forgiven is taxable as income in the year it was written off.

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The best thing that the government could do about student loans is to stop making them or guaranteeing them. The taxpayers, as guarantors, become liable to pay for student loan defaults. Students are encouraged to make poor choices, and schools raise tuition rates because they are guaranteed a supply of customers. Just get rid of them.

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When I was a student, school loans were miniscule because school costs were pretty low. The costs have exploded over the last few decades, and a great deal of the money (to all appearances) has gone into gold-plating campuses.

Over the years, it does appear the easy availability of ever-increasing student loans has led to the gold plating and ever-increasing costs designed to absorb the increased loan funds.

I do sometimes think getting rid of the guaranteed loans entirely would be a good thing. Yes, there would be people who would never go to college, but could have if they had the money. And, yes, in other countries, it’s free or nearly so. All the same, the U.S. college graduation rate is only exceeded by that of Canada.

But people in a lot of those countries seem unable to afford families and the countries themselves can’t afford the cost of self-defense.

One way or another, people pay. I really am inclined to think that burden should be borne by those who get the benefit, and by nobody else.

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I have a question. Is the proposal that loans will be forgiven upon graduation or is it that college will be free? The reason I ask is there are many people that have had to stop college for various reasons (grades, family obligations, illness) and they would benefit more than many of the ones that graduate and go on to work in their field of study.

I definitely agree with this part. Why should someone that bypassed college for whatever reason have to pay for someone else to go to college?

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Here’s a link to Sanders’s Senate Page which has details:

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This is a good point.

Sometimes I wonder, like the other poster, if we should come out and pay for four years of college for everyone, at the college of their choice, like France.

But, because the loan forgiveness would relate to people who took out these loans in the past, when Bernie wasn’t President and college wasn’t free, the person who became a tradesperson, who didn’t go to college at all, might resent paying off loans for the person who went to college on student loans (who might have been better off financially than the person who didn’t go at all).

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I couldn’t afford college and neither could my parents. My choices at the end of high school were the navy or getting a scholarship. I got the latter, but was entirely willing to do the former, and see what opportunities life presented as I went along. When I graduated college, it was either the Air Force or scholarship to graduate school. I got the latter, but was entirely willing to do the former.

I have a problem with someone who is NOT willing to take his/her alternatives in life and expects me or my children to pay for his/her preferences.

I say let everybody make his/her own way. I think we would see college costs go down in a hurry if the demand was reduced to, say, that of Germans in Germany.

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I remember you mentioning this in the past

I don’t know why more people don’t do this. All I can think of is impatience.

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