Is Student Loan Debt Forgiveness A Good Idea?

Tyler Durden's picture

The short answer, despite the pleadings of an over-stuffed body of ex-students facing inexorable debt loads, is "no". However, as Professor Daniel Lin notes in this brief clip, debt forgiveness does not resolve the underlying causes of rising student debt, and therefore cannot prevent future debt problems. Instead of debt forgiveness, he suggests making student loans like other types of loans: dischargeable in bankruptcy. This places the burden on lenders to ensure that students are not taking on more debt than they can handle. While it would lead to a reduction in the amount of loan dollars awarded and theoretically increase interest rates (as 'risk' is priced in from the current no collateral, no underwriting, no credit check idiocy currently), these are good things - naturally incentivizing borrowers to be more careful right now, and in the future, which puts pressure on colleges and universities to control their costs.



Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ParkAveFlasher's picture

Bankruptcy is not forgiveness.  Up with bankruptcy.

Divided States of America's picture

Well someones gotta take the hit, no?

Oh yeah, its me and you (taxpayers)

flacon's picture

John Kerry walks in to a bar. The bartender asks: "Why the long face?"

NotApplicable's picture

That's almost as good as Tyler's joke about holding lenders accountable.

kaiserhoff's picture

The best argument for discharge is quite simple.

Every day the courts wipe out millions of dollars in debt for back taxes, real estate loans, and medical expenses directly or indirectly picked up by the taxpayers.

Why should former college students, in a radically different economy than anyone expected, be uniquely sentenced to debt slavery for life?

bobola's picture

There are alternatives to an expensive college education;

College work programs. Small schools such as Berea College (Kentucky) and Deep Springs College (California). At Berea, students work campus jobs to cover all of their tuition expenses, which end up adding up to $100,000 for all four years.

University of the People. Founded in 2009, this is the world's first tuition-free online academic institution. UoPeople offers Associate and Bachelor degree programs in Business Administration and Computer Science. They have already partnered with leading companies (such as HP) and schools (such as Yale). As of today, students from more than 130 countries have been accepted.

UnCollege. This company was founded in 2010 by Dale Stephens, who is a Thiel Fellow and elementary school dropout. UnCollege provides resources that assist students with designing their own educational paths and feature forums, workshops and more.

I took a different path as well. Right after high school I enrolled in a technical college owned and funded by a large mid-western city.  Paid no tuition because I was less that 21 years old.  Paid for books, meals and my transport there.  Studied computer electronics.  Years later I decided to get a Microsoft MCSE certification.  Quickly discovered that Barnes & Noble and Borders have the very expensive study books on their shelves, and didn't mind that I 'borrowed' them for the duration.  Eventually passed the series of MCSE tests and spent very little.  The cert has paid off in spades.

There are just have to seek them creative.... 

Half_A_Billion_Hollow_Points's picture

David Collum has a market-driven proposal that's truly interesting.  Collages could package the loans and sell to investors.  The loans would be bound by something like 10% or so of the student's income in say, 7 years.  While everyone would be buying Stanford Computer Science grads, the univ of memphis phds in comparative 17th century lesbian belgium literature would be entirely out of the loop.


Market-driven, no bailouts, no handouts, no central planning and no "final solution" from gov't.  

Perseid.Rocks's picture

Oh come on where's the incentive even going to college if you can't make out like a bandit? We're going to lose our world competitive edge, our rockstar graduates, the  top sellers and global imperialist rapists, if we don't reward them. :)


All Risk No Reward's picture

Professor Lin, money **is** debt.

The money lender cartel is running everything through the natural progression of Debt Money Tyranny

See linked PDF for a graphic display of how Debt Money Tyranny systematically asset strips society and benefits what Eisenhower called "the power of money" and said was "gravely to be regarded."  Indeed.

How about you teach people about the fraud trhat is debt money?  How about exposing the con artists running this fraud on society?

When the bankster version of "widgets" are loans and the banksters have seized control of the government, of course every solution is going to be more bankster "widgets," aka loans.

Remember what Napoleon understood, the hand that gives is greater than the hand that receives, therefore, the banksters are superior to the government operatives the banksters finance and promote into office.

We need to go to the root of the problem - and that's debt based money and the criminal international banking cartel that runs it almost worldwide (they have to bomb a few more Muslim countries into submission and they will have the whole world).

Also, please share "How to be aCrook" with your students and your Youtube audience:

How To Be A Crook

Speaking of crooks, how about exposing the Federal Reserve's 30 year criminal campaign to break Section 2A of the Federal Reserve Act?

Weapons of Mass Debt

Yes, the student loan situation needs to be fixed, but the banksters won't allow themselves to be damaged so long as they are the Grand Chessmaster and governments are simply another piece on their Grand Chess Board.

"If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in
circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."
~Robert Hemphill
Credit Manager of Federal Reserve Bank, Atlanta, Ga.
Source: In the foreword to a book by Irving Fisher, entitled 100% Money (1935)

"The youth who can solve the [Debt Money Tyranny] money question will do more for the world than all the professional soldiers of history."
~Henry Ford, Sr.


BlueCheeseBandit's picture

Yes, those freeloading college grads shouldn't have their debt forgiven. That would be using government to solve their problems. They should have done the responsible thing and use a free government training program.

It's not freeloading if government pays on the front end instead of the back end.

EscapingProgress's picture

If a bailout is good enough for Jamie Dimon and Lloyd Blankfein then a bailout is good enough for me too. Uncle Sam should issue $1 trillion in new bonds to pay off all student debt tomorrow because deficits don't matter (see #NYTimeskrugman), and then all Bernanke has to do is type a few more 0s into the Fed system.

q99x2's picture

State taxes maybe but Federal Taxes are combined by Central Banksters around the world with all nations wherein their tentacles reach. Federal Taxes are global taxes and not related directly to any perticular nation. That is one main reason the globalists are called globalists. So it is not correct to say that student loan debt forgiveness is related to Federal Taxes. It is more related to central planner's objectives. The financial system does not work like people are led to believe it does.

Darkdoc's picture

Funny thing about debt foregiveness, is that only one side gets forgiven, but one side still has to pay.  Or has already paid.

If I loan you money, and the court forgives the debt, then I am the one who has to pay.  Debt is always paid, no matter what any court says, or any sad faced student with a worthless degree pleads.  Payment forgiveness is another BIG LIE, and I see you've bought it all.  Idiot.

The best game in town is how to get the taxpayers and populace as a whole to pay.  Tell your kids, and grandkids, all about how their taxes and lifestyles will be impacted by the debt shifted to them.

zerozulu's picture

What Jesus would do?

1.Get maximum loan

2. Use half of it for good education

3. buy Gold with half of the loan

4. In  two years time sell the gold and pay off all student loan.

q99x2's picture

Oh boy I get an "A" in christianity.

Pure Evil's picture

It's a shame you can't demand your money back, especially after you graduate and can't find a job in the corporate promised land.

With this economy, the best you can do is become a professional student.

Lore's picture

You make a good point. There are three paradigms here that need to be broken:

1. That debt is necessary for schooling

2. That schooling is prerequisite for career success

3. "No fail" courses and degrees

Suggestion 1.  Never mind student debt. Say no to debt. Instead, target achievers with scholarships at high school graduation. 

Suggestion 2.  Work for a few years after high school. Raise some money and get a clear idea of what you want in life BEFORE you go to school.

Suggestion 3.  Incentivise teaching. right now, professors grade too generously because they want to maintain steady enrollment. (A hard grading prof means fewer students taking courses.) Turn that around with a Pay for Performance program that rewards the best teachers.

Suggestion 4. Shut down a lot of departments and even whole campuses that are really nothing more than a mill for loans and grants.

It would be a start...

nufio's picture

if student loans can be discharged in bankruptcy, and the govt stops guaranteeing them then immediately these loans will cease to exist as lenders arent stupid. Once the opportunity to get a lifelong debt slave is lost the banks will stop making these loans. This will result in universities shuttering 90 % of their departments which offer degrees in basket weaving. 

TempFlashback's picture

And tuition will drop overnight.

jerry_theking_lawler's picture

yes, to a value which is equal to the 'true' value of the said education....

Prison Justice's picture

Alternate:  John Kerry walks in to a bar.  The bartender says: "Get the fuck out of here."

flacon's picture

Bartender says: "Everyone needs beer goggles", and orders infinite rounds for all the customers who can't stand his cocky long face."

Leto II's picture


How do you get a baby into a bowl?

A blender.

How do you get it out?


Hughing's picture

Hey reds, what's the problem? Not gluten free?

Id fight Gandhi's picture

Of course tax payers back them. No bank is stupid enough to do that.

There should be an underwriting process and risk assessment prior lending a teen 6 figures of debt. But there won't be. Education is priceless. Lol.

I do think bankruptcy should be allowed. That way right out of school when these people can't find any work they can flush out that debt and start new.

Hey nowadays you get a mortgage and car loan a couple years after filing.

Matt's picture

I think you would need both loan forgiveness for current students, plus bankruptcy eligibility for future loans, plus some sort of transition as post-secondary institutions adapt to changes in tuition levels that would result from enabling bankruptcy dischargability of student loans.

If you just suddenly made student loans dischargable in bankruptcy, the government would just have to bail out the bankers. Might as well bail out the current indebted students directly through forgiveness (i.e. the government borrowing the money and paying off the loans for students) then having the students all have destroyed credit, and then the government borrowing the money anyways to bail out the bankers.

You can talk all you want about what is right or ideal, but in reality, there is no way they can allow a sudden massive default on $1 trillion plus of loans.

epwpixieq-1's picture

when in foreclosure they reposes the house ( that actually is not yours. but theirs ).

When in standard bankruptcy, they take whatever they can.

When in student loan bankruptcy, what are they going to take the (worthless) diploma?

Maybe they should ( it is another question what the lenders will do with it), and the students will be left with the gained "knowledge" equally worthless ( in the real world ), in most cases.

Matt's picture

Actually, the knowledge without the diploma is still useful; there are some very successful people who stopped taking courses and started auditing them instead, to gain the knowledge without the piece of paper. I think Bill Gates and Mark Zuckerberg both did, for example. Maybe Einstein, too.


EDIT: the diploma is what you get if you want to be an employee. The knowledge without the paperwork is fine if you want to run your own show.

shovelhead's picture

Good Idea!

Take the diplomas, chop into tranches and sell them to the Chinese.

They'll buy anything.

machineh's picture

Usgov: the world's harshest kneecapping usurer.

Once Usgov took over, student loans became just like debt to the IRS -- bankruptcy won't help you.

Work till you die, or they'll garnish your Social Security. Nice guys, huh ...

ParkAveFlasher's picture

It's slavery, by any other name, ironically (and cruelly) disguised as "the way up" in life.

LFMayor's picture

Anything that causes pain to the Ivory Towers is Fuckin A in my book. 

Starve those worthless do nothings, suffocate them in their own goddamn echo chambers.

Lost My Shorts's picture

The ivory towers will be fine.  It's Phoenix and Kaplan whose gravy train is threatened.

ParkAveFlasher's picture

Actually, the Ivory Towers should welcome it.  Universities attended by freely (free as in non-indentured) financed scholars build society from within, they do not simply occupy deskspace according to a centrally planned scheme.  They are not tube-shaped conduits channeling the manifold, synchronized flows of debt-laundry (or Tyler's "Fed effluence").  They are living, thinking things.

I know, it's a lot to ask.

maskone909's picture

fuck yeah i owe 50K still.  where the fuck is MY BAILOUT?  with the money they have given to these bastards....   every citizen could have paid down all debts, bought a house, and still have leftovers.

Aegelis's picture

I'm in the same boat, 60k here and it's been over ten years.  Got my 'dream job' but found out it pays half as much as they advertised in high school.

Major Major Major's picture

Paid mine off the first year out of uni.  Guess I shoudn't have... or maybe it's time to take out some new ones in pursuit of an MBA, law degree or even a PHD.

Kirk2NCC1701's picture

I am sorry that you owe 50k.  But I do NOT pity you for your debt and others like you, and I'll tell you why:

You are trolling on this site without even understanding fiat-currency and FRB, and then have the gall to bitch about their "debt".

If you understood anything about fiat-currency and FRB, you'd realize that it costs the bank nothing to create your loan out of thin air (well, except for the time to handle your file and hit CTRL-P on their PC). It's a "debt" note like ANY other, and should be treated as any other debt:  subject to default.  If the banks don't like the odds of their 'client' (victim) not living up to their full debt potential ("full pumptitude", as Arnold might say), then that's their problem.  If a student did not have to pay this paper burden, they could spend more of their net income (once they have a job) on things that require material + labor as inputs to get outputs called 'things'.  Instead of lining Jamie Dimon's pocket.

But you, and other mental midgets and serfs like you, seem to begrudge those who didn't so much as "get the better" of the banksters, but managed to not let the banksters get "all" of them.  You -- you servile & over-programmed twit -- would rather turn your anger on your cohorts, rather than at the game masters.  In classic Stockholm Syndrome fashion.  For all these reasons, I do not pity you and others like you: Prisoners by choice!

BTW, I paid off my student loan debt years ago, but do NOT begrudge anyone who was devious enough to outwit the FRB vampires.  'Good for them', is all I can say.

Case closed.

Confused's picture

Come down off your soap box. Some people weren't born all knowing. They need to learn through experience.

maskone909's picture

you come off as an arrogant prick who is too spoiled to see that you live in a bubble. prob born with silverspoon in mouth. would love to meet ya in a dark ally.

Kirk2NCC1701's picture

There's a clever response!  Do you actually have an informed and intellectual point to make, are you emotionally too worked up, and need to swing your Neanderthal club?

Whatever gave anyone the idea that I was born 'privileged'?  I'm an average guy who made something of himself -- because I had a brain, vision and drive, and the courage to see the world.  On my nickel, not on daddy's or the DOD's (taxpayers') nickel.

And in the time that you wrote your response, you could have Googled and learned about FRB.  Fume, vent or threaten all you want, but if you don't know even that, then you either don't belong on ZH, or you need to shut your uninformed trap until you do. 

Sorry to be so crass, but you asked for it. Welcome to the Fight Club.  BTW, what's your dan?

de3de8's picture

I say screw anyone who was too stupid to do the feasibility/analysis up front. Now you want out easy just like everyone else and on the backs of those who play by the rules. You say f--k the rules, I say f-- k you.

YC2's picture

Who are you imagining that you are passing judgement on? You don't know him, and judging an entire generation as if you did makes you a hypocrite and moron

Ballin D's picture

You are acting just as emotional as that guy. Yes there are a lot of kids in student debt that should have never gone to school. Yes, many have worthless degrees. Yes, looking backwards that probably wasnt the smartest idea. I was in the last graduating class in June 2012 and when I applied for schools we hadn't even entered 'the crisis' yet. Nobody knew what was around the corner. The problem is that not even the best and brightest (outside of a few individuals who were viewed as crazies) saw this happening ahead of time but now everybody thinks it was obvious. Hindsight bias is a bitch.

Even today, if a highschooler asks an adult for advice, theyll say 'go to university'. The people you look up to and go to for advice all push it on you and tell you that you will fail at life if you dont get that sheet of paper.

Im not saying that we should automatically bail everyone out but you should know that the job market for recent grads is way more fucked than the news makes it sound. There are many kids who worked harder than you and didnt make stupid decisions who are probably going to be left behind. If we interfere we create moral hazard that will likely exacerbate the problem, if we don't, kids get fucked because their parents' and grandparents' poor decisions.

You talk like you broke the barrier a few decades ago in a debt fueled economy and havent taken the time to examine the problem closely because it doesnt affect you anymore. Your generation isnt any better or worse than the one before it and the one after it. Take the time to look around you instead of making a bullshit excuse so you dont have to think about things for yourself.

de3de8's picture

Glad you think you know so much about me when you know f--k I said, made your own bed, sleep in it.

de3de8's picture

Glad you think you know so much about me when you know f--k I said, made your own bed, sleep in it.

myptofvu's picture

And who did you vote for? Students bitched about not being able to find a job out of college and a lot of them had to go back to school just to delay loan repay, but when given a choice between the SuperBowl MVP of job creation and the Godzilla of job destruction they chose the later. Hard to find sympathy for them.

Ballin D's picture

You think this is a question of who is president? Protip: even if one had the knowledge and experience to actually help, his policy probably would have been near-identical to the other's. They're keeping the sheep busy with the bipartisan noise and youre falling for it.

Since it matters so much to you, I supported the same guy you do. I saved time by agreeing not to vote with someone who was voting a straight ticket the other way for the same effect without having to wait in line. This also gave third party candidates a one vote leg up. Not that any of this made a difference.

By the way, I found a job and I dont have student debt.

akarc's picture

You think this is a question of who is president? Protip: even if one had the knowledge and experience to actually help, his policy probably would have been near-identical to the other's. They're keeping the sheep busy with the bipartisan noise and youre falling for it.


My apologies for any down votes you may get for my agreement.

goBackToSleep's picture

Extracted their dollars with a degree in a high demand field, bucking the 50% placement rate and used their fiat to get silver while only being charged a 6% rate on margin. Does this mean I did good with the business portion of my degree? Total of 70k for my bachelors and Masters. I'll let my PM's beat the interest down and some of the principle too! And why does that make one EVIL for using their tools of mass enslavement against them? You can't climb the ladder without knowing at least a little bit about finance boys and girls.