I’m really not trying to start a debate, I just want to understand why there is a dilemma, and how exactly it would work if passed.
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It’s hard to explain to someone like they’re five. We have a backstory, a current situation, and some implications for the future. Many people borrow money to go to college. In very general terms it is encouraged by society in that it is viewed as an investment in one’s future, and increased earnings potential. It is supported by government in the form of government loans and subsidized loans. 18 year olds with no job, but a lot of hope, aren’t necessarily the best credit risks. The government has made “easy money” available both directly and indirectly to them. Many studies will point to the easy availability of money being a factor in college expenses rising faster than many other expenses, higher than inflation, over many years. On top of that, student loans interest rates aren’t tiny. A car or a house typically require down payments, proof of income, etc plus the item itself is collateral on the loan. Debt for education is different, there’s nothing to repossess or sell if the loan doesn’t get paid. So there’s interest on the loan, and it builds up. Finally, these loans can’t be discharged via bankruptcy. That’s kind of a catch supported by law. Again, what incentive do the banks have to loan money to these young adults who need tens of thousands of dollars for education? Interest, can’t discharge them through bankruptcy. Those are attractive terms for lenders.
So now we have some facts, and a lot of different perspectives and feelings. Everyone has their own story, so trying to see all the data from a given lens can be difficult.
A given “frame of mind” is to borrow the money for school, get a good job, then pay off the student loans.
Again, everyone has their own story. You can find people who
– Did not borrow money for school because they saved for it, joined the military, mom and dad paid for it, they worked through college, they got scholarships, or a combination of these
– Borrowed money for school, have substantial debt and don’t have or say they don’t have an income sufficient to pay the debt. This is true for some folks who finished school and for some who did not.
Some of this debt is to private banks, some of it is to the government.
There was a law passed after 9/11 which says that in the event of an emergency the government can make adjustments to student loans for those affected. The government has done this in various ways including after natural disasters, it has stopped interest, or delayed required payments, and some other things. If the government does not receive payments for student loans, that is money that is missing from the government budget one way or another. Therefore it becomes a direct (or indirect depending on your post of view) government expenditure. Any money the government spends (or does’t get) it has to make up for in taxes, or via immediate debt which ultimately comes back to taxes.
So now we get into a combination of feelings and perspectives.
Some who have student debt say the government should absolve/forgive/cancel some or all of the debt. The basis for their reasoning is often that education should be a free public good anyways, other supporting ideas are that the American dream is in jeopardy because of student debt, that the terms and conditions of the loans are unfair, or that the loans are predatory. The government’s justification in crafting some rather broad student loan forgiveness plans was that the COVID-19 pandemic qualified as a national emergency which affected everyone, so it meets the criteria of the law.
Some who did not borrow money for school say it is inappropriate for the government to forgive student loans. Their reasoning is often two or three fold – it would be a burden on taxpayers, it would teach people that they have no real financial obligations, that other people can carry their burdens, that their own decisions have no consequences, and that such a move broaden a socialist agenda. They may also believe that an eroding sense of personal responsibility is detrimental for society.
Some will also say that without comprehensive reform on college financing, canceling student loans won’t fix the problem.
Folks against student loan forgiveness claim that the law in place was intended for small scale surgical tweaking, especially for those immediately affected by disasters, not for a broad multi billion dollar program. Since the budget has to come from congress, they say that any such broad program cannot be implemented without specific congressional legislation.
I think that about sums it up.
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