How do we make repayment of student loans even possible, let alone practical, without punishing the taxpayers who didn’t go to college or already paid back loans?
First, a careful study that calculates the averages of earnings from specific degrees from specific universities. Then, help subsidize repayment (if a borrower is in good standing) from endowments given to these universities based on what they charged for the degrees and the resulting earnings. They falsely advertised their product by charging an obscene amount of tuition of which only a fraction was spent on the borrowers’ curriculum. They are way too bloated with administration, sports programs and low-yielding research. They will manage to cut what is necessary to compensate.
Next, as another subsidy, the original lenders ought to be sued for predatory lending practices. Most borrowers aren’t even 21 when they first start, and many aren’t even a legal adult. People at this age have very little sense of compound interest. And the tests used to inform the borrower before granting the loan were very easy to blow by. They have made a killing from these loans to the detriment of the borrowers and society as whole given how much they’ve added to inflation.
As for the current lenders, many have bought these loans for pennies on the dollar. They only need a fraction of payments in full to make a killing. Whichever department ends up overseeing the loans can reach some kind of agreement to lower premiums and interest (at least in the amount where reasonable payments would reduce the total amount owed as opposed to simply lowering interest).
If all these actors are held accountable and directly contribute to alleviating the debt burden they created, the borrower will become much more likely to repay their loans; they won’t receive these benefits if their payments aren’t in good standing. This is a 1.77 TRILLION DOLLAR burden that is preventing child birth, private ownership and general prosperity for society as a whole, not just the borrowers. I welcome any and all suggestions and criticism. I am not a financial nor legal expert, but I see this basic proposal as a good place to start.
All to often people are getting degrees in fields that their only career path is in the very university (or other like-minded universities) they graduated from, and then are saddled with these student loans that they have little to no chance of ever paying back.
In those cases the university should be forced to admit the program is not what it stacks up to be, and pay off the loans of students that were mislead into taking it, and then explain to the alumni and donors where the endowment money went.
If the university ends up on the hook for repaying those loans, then many of those ridiculous degree programs will be dropped.
This issue needs to be treated like a consumer-business dispute. We’ve had plenty of settlements and judgments in favor of students against the universities for various frauds already. A class-action suit would bring both lenders and universities to the negotiating table. I don’t think Congress can legislate them into being held accountable. The extent of their power is using the general tax pool to alleviate the debt, which is punishing people not involved to bail out those who are.
The biggest holder of student loan debt is the United States Government via the Department of Education, thus making them an interested party in this dispute. Some States (such as Missouri) have state-level Government lenders, and thus would also make them an interested party in the dispute.
If you look at the “student loan forgiveness” program that Biden was pushing, it was basically a write off of those Government loans (meaning we the taxpayers were going to be on the hook for them instead of the borrowers), and Missouri was the principal state that had standing to sue because of the state-run program that would have been affected as well. Fortunately, the Supreme Court blocked Biden’s giveaway.
As such, Congress can legislate the Universities into being accountable, and there are currently several bills in Congress that would make changes to the student loan programs. There are others that hold Universities responsible via their endowments. Many of these proposals come up in Congress after Congress, but don’t get the traction to get passed into law, although with the work of DOGE finding more waste, fraud and abuse, that may change.
Can Congress pass legislation to make universities retroactively responsible for prior student debt? Or can they only reform the current system to protect future students? Future student debt is obviously important but the giant elephant in the room currently is the already accrued 1.7 trillion.
Can Congress pass a law with retroactive consequences? For that I am uncertain (of course I only went to a Community College some 35 years ago, and while I did not get a degree, I walked out of there debt free). Although they might have a better chance since many former students are still saddled with the debt of their education.
Now, if it is shown that the universities previously mislead student borrowers, then there’s room for the DOJ to step in and prosecute the school, not to mention civil (potential class-action) lawsuits by the students themselves.
What about making payments to principal tax deductible and cutting endowments? You are doing your country a service by getting an education, at the expense of being in debt. The universities get no incentive other than those they graduate who are able to pay back their debt.
The issue with a tax deduction is that it forces the rest of the tax base to make up for it or have funding cut to services which may impact them. However, and I’m not sure if you meant this in your last sentence, but the idea of the universities servicing the loans could be a very interesting change. It would certainly make them directly affected by student debt and bring the loans closer to free market principles. It doesn’t solve the current debt crisis but at least could stop the bleeding.