Quote

But the report also points to another factor that would seem to have a lot of explanatory power, especially when it comes to those with the highest debts: the still-growing popularity of "income-based repayment" (IBR) and similar programs, which were overhauled and dramatically expanded during the Obama years. Under these programs, students can make small payments for a decade or two, often not even covering the interest on their loans, and have the entire debt forgiven at the end.

This is not necessarily a bad idea in principle, but — as Jason Delisle has noted previously in this space — the programs were structured in a way that encouraged their abuse by people with incredibly high debt levels, especially from graduate studies rather than two- or four-year degrees. As Delisle wrote,

Under current law, anyone who takes out a federal student loan today can enroll in IBR and have his payments fixed at 10 percent of his income, less an exemption of $18,700 (which increases with household size). . . . Then, after 20 years of payments (or only ten years for those working in any government or non-profit job), all of the remaining balance is forgiven, no matter how high it is.

He further points out, that, using the Department of Education's own debt calculator, someone with $80,000 in debt and an income of $60,000 could receive $62,000 in debt forgiveness if he works for the government. Someone with $150,000 in debt and a $75,000 salary could pay for 20 years and still receive $82,000, more than half the initial balance. Meanwhile, as noted in the Moody's report, the median amount borrowed is just about $17–18,000.

The Moody's report further demonstrates that income-based programs are, indeed, highly attractive to people with big debts: "Only 5% of the total balances of borrowers who owe less than $5,000 are covered by [income-driven repayment programs]. Meanwhile, 53% of the balances of borrowers who owe more than $200,000 are in IDR programs." And unsurprisingly, heavy borrowers have a disproportionate impact on student loans in general: Folks who borrow $20,000 or less represent 55 percent of borrowers but only 14 percent of the overall debt.

https://www.nationalreview.com/2020/01/student-loan-repayment-programs-obama-era-reforms-have-unintended-consequences-for-taxpayers/

https://www.cnbc.com/2019/11/01/wiping-out-student-debt-would-be-small-boost-to-economy-moodys-says.html

They've made some nice changes to this with the FUTURES Act. The only tweak I'd make is to make it so that large debt holders have to at least pay the amount borrowed (government and non-profits exempt).

For ex.

A person with $200K in debt, that gets a job that pays $100K a year, would pay $81K - $162K based on the current program.

They should pay back the full $200K.

Caveat Emptor

Sorry, they took the risk, they got ripped off by the Marxists.
Either these so called schools eat it, or the student that was stupid enough to go into debt over a degree no one needs and industry lauds.

Quote from: Solar on January 23, 2020, 06:46:16 AM
Caveat Emptor

Sorry, they took the risk, they got ripped off by the Marxists.
Either these so called schools eat it, or the student that was stupid enough to go into debt over a degree no one needs and industry lauds.

Most colege education is bogus anyway. How is that "Lesbian Dance Theory" working out?