Celebrating 10 years! 2007-2017

The New York Times article about student loan debt today

Good article in the opinion section today about the rapid in nycatt08/26/18
The author only seems to understand a small part of the prob guyingorillasuit08/26/18
This may not be the only workable response, but it is the mo soupcansham08/26/18
Only workable response is loan forgiveness to stimulate cons esquirewalletsmatter08/27/18
Imagine that the same college grad stays home, commutes to s jeffm08/27/18
Credited. wearyattorney08/27/18
If anyone ever doubted jeffm was a boomer... therewillbeblood08/27/18
Haha, as soon as I got to "Imagine that the same college gra wutwutwut08/27/18
Indeed a classic response. TBF, I think JeffM was trying to dupednontraditional08/27/18
Most Boomers... would have just said: "Jack yerself up by wutwutwut08/27/18
Well... Why not? I worked part-time for $10/hr, roughly 20 jeffm08/27/18
I don't know if it's outlandish advice to live at home while wutwutwut08/27/18
Yeah, I did preface it all with, "If it's an option for the jeffm08/27/18
Dayum, 20X. P.S. Wait, so, assuming you went to UGrad rig wutwutwut08/27/18
He's a genx kid. Read his blog. I wouldn't call him out of t ohboy08/27/18
Yeah, but everyone likes to call me Boomer, so I go with it. jeffm08/27/18
Haha, get it. Also, if I'd reco to anyone else my path wutwutwut08/27/18
Where is his "blog"? Do you mean the "JeffM guide to"? wutwutwut08/27/18
what if that same college grad is an orphan with no mom and johnsmith08/27/18
Though I'm a big fan of loan forgiveness, I think forgiving thirdtierlaw08/27/18
"The key to rolling back the student debt crisis is to forgi uknownvalue08/27/18
Still, low interest caps are where things "should" be. 3% i dupednontraditional08/27/18
My fix - if the default rate at a school hits above 5% (or n nycatt08/26/18
This is, ultimately, a plausible long-term solution, but be guyingorillasuit08/26/18
You don't really solve student loan problems by enabling the jeffm08/27/18
I agree the forgiveness can be seen as enabling. It needs to thirdtierlaw08/27/18
Yeah, there's no way you can social engineer with student lo onehell08/27/18
Make student loans dependent on your SATs/LSATs and grades. themapmaster08/27/18
Spread your notion out to the schools themselves, maybe? wutwutwut08/27/18
I am liberal, and I agree something like that is needed. I nycatt08/27/18
The problem with this view is that it is skewed by your law onehell08/28/18
federal interest free student loans. no interest, pay back w johnsmith08/27/18
Or at least at an interest rate representing the actual cost wutwutwut08/27/18
A couple responses: 1) To the poster who said that there guyingorillasuit08/27/18
I lived at home for a few years, got a leg up on my student acerimmer08/27/18
There should be a $30,000 a year cap on student loans for la acerimmer08/27/18
Student debt is basically a "stupid tax" (a la cigarette tax professionalloser08/28/18
The Europeans tend to also do better at trade school. Honest therewillbeblood08/28/18
I wouldnt call sportsball scholarships deserving it but for mtbislife08/28/18
The student loan racket will collapse and soon. trickydick08/28/18
It won't. You will never get any sort of bipartisan reform. david6198308/29/18
The portion of student loans that goes to tuition should be pisces21308/28/18

nycatt (Aug 26, 2018 - 6:39 pm)

Good article in the opinion section today about the rapid increase in the rate of defaulters. I hope the attention this is getting is the beginning of a trend.

Title: "The Student Debt Problem Is Worse Than We Imagined"

https://www.nytimes.com/interactive/2018/08/25/opinion/sunday/student-debt-loan-default-college.html?action=click&module=Opinion&pgtype=Homepage

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guyingorillasuit (Aug 26, 2018 - 7:04 pm)

The author only seems to understand a small part of the problem: the original debt incurred for tuition and fees (services rendered), which he conflates with the actual "student debt" problem, which in turn consists of original debt morphed by rapidly compounding interest into a farcical imitation of what it was at initiation.

A typical well-meaning college grad from a middle-class family exits with, let's say, $22,000 in debt. He defers his payments for 3 years and goes on IBR. It takes a decade to build his life to a point where he transitions from living hand-to-mouth to having a "career", which means starting a 401(k) with a negligible balance, having 3 months of savings somewhere, and affording a small car payment. By that time, the debt has doubled. Faced with a salary of $50,000 per year, with most of that having to go to expenses, and the prospect of having to feed a child or two, the student stays on IBR. At this point, you have a debt slave for life. In another 10 or 15 years, he may make it to the upper-middle class, but he will never get off IBR. The power of compounding interest is deployed fully against this guy, crushing him. Now imagine this same guy with not $22,000 in debt, but $80,000.

The key to rolling back the student debt crisis is to forgive the interest. This will encourage people to repay, and stop society from kicking the can down the road, until the can becomes a crisis that cannot be solved.

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soupcansham (Aug 26, 2018 - 8:55 pm)

This may not be the only workable response, but it is the most highly credited given political reality.

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esquirewalletsmatter (Aug 27, 2018 - 6:53 am)

Only workable response is loan forgiveness to stimulate consumer spending such that the economy can perform Bigly.

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jeffm (Aug 27, 2018 - 12:02 am)

Imagine that the same college grad stays home, commutes to school and takes on at least "somewhat" less debt. Imagine if after he graduates, he stays at home with mom and dad for 2 - 3 more years to pay it off. That would be where the "smart money" is. Not that everyone has that option, but it's what I'd recommend to anyone to seriously consider if it *was* an option.

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wearyattorney (Aug 27, 2018 - 2:39 am)

Credited.

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therewillbeblood (Aug 27, 2018 - 9:40 am)

If anyone ever doubted jeffm was a boomer...

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wutwutwut (Aug 27, 2018 - 11:06 am)

Haha, as soon as I got to "Imagine that the same college grad stays home, commutes to school..."



I KNEW there would be a "Boomer!" response.

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dupednontraditional (Aug 27, 2018 - 4:53 pm)

Indeed a classic response. TBF, I think JeffM was trying to say “well maybe this this and this, then maybe, in some universe...”

Most Boomers who don’t know anything about law would have just said “damn kids get off my lawn, get a job.”

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wutwutwut (Aug 27, 2018 - 5:26 pm)

Most Boomers... would have just said:

"Jack yerself up by your bootstraps and work 35 hours a week to pay your way through college and law school, just like I did."

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jeffm (Aug 27, 2018 - 5:38 pm)

Well... Why not? I worked part-time for $10/hr, roughly 20-25 hours per week. It might not foot all the bill, but it can foot a chunk.

Really, I don't know what is outlandish about saying it would be a good choice to live at home while going to college and to continue to do so for a while after graduating. Upon hearing advice like that, in what rational universe is the valid response, "Boomers! Just Boomers!?"

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wutwutwut (Aug 27, 2018 - 6:19 pm)

I don't know if it's outlandish advice to live at home while going to college.

I just don't know how many people it applies to, though. You want to study nursing, or engineering, or whatever it is you want to study, you need to have a college close enough to home that offers nursing or engineering or whatever it is you want to study, to make the commute work out.

If the person is just getting a general libarts type degree (English, lit, history, maybe bio) then I think many people likely have a lot more options close to home.

As for "$10/hr, roughly 20-25 hours per week. It might not foot all the bill, but it can foot a chunk", I think many would answer you that the problem is, $10/hr is still (today) the going rate but that the general cost of attendance has quintupled since you went to school. But I agree there's nothing wrong with working part time in college to offset whatever costs you can and/or to make food money etc.

I say this as a guy who did work about "35 hours a week to pay [my] way through college and law school" (although I'm not a boomer).

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jeffm (Aug 27, 2018 - 6:32 pm)

Yeah, I did preface it all with, "If it's an option for the student..."

Tuition has more than quintupled since I went. A semester of full-time tuition at U of H undergrad was around $400 in the late '80's.

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wutwutwut (Aug 27, 2018 - 6:39 pm)

Dayum, 20X.

P.S. Wait, so, assuming you went to UGrad right out of HS, you're not actually a boomer?

At least, I've got it in my head that most boomers would have been done with UG in the late `70s or early `80s, latest.

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ohboy (Aug 27, 2018 - 7:32 pm)

He's a genx kid. Read his blog. I wouldn't call him out of touch.

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jeffm (Aug 27, 2018 - 7:49 pm)

Yeah, but everyone likes to call me Boomer, so I go with it. lol

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wutwutwut (Aug 27, 2018 - 8:27 pm)

Haha, get it.


Also, if I'd reco to anyone else my path of 35 hpw during UG and LS (even if I pointed out I went to very cheap schools), I'd probably be branded a "boomah", too.

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wutwutwut (Aug 27, 2018 - 8:26 pm)

Where is his "blog"? Do you mean the "JeffM guide to"?

If so, I read that years ago and it makes Hella sense to me, although I also have to admit it does not apply to me just yet.

Thanks.

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johnsmith (Aug 27, 2018 - 2:04 pm)

what if that same college grad is an orphan with no mom and dad to live with? What if mom and dad are abusive crackheads? What if mom and dad are poor and have no room for an adult child to live with them? There are tons of people for whom your little idea wont work. Get out of your middle class boomer bubble and look at the real world. Oh, everyone has loving middle class parents they can just stay with, sounds peachy.

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thirdtierlaw (Aug 27, 2018 - 7:49 am)

Though I'm a big fan of loan forgiveness, I think forgiving the interest or at least capping it at 1-2% would make a world of difference and be a great boon to the economy.

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uknownvalue (Aug 27, 2018 - 12:14 pm)

"The key to rolling back the student debt crisis is to forgive the interest. This will encourage people to repay, and stop society from kicking the can down the road, until the can becomes a crisis that cannot be solve"

Congress is unlikely to formulate any retrospective 'solution' because Student Loan Debt does not pose the same systemic threat to the economy like other bubbles (e.g., tech, housing, stock, currency). High rates of SL default and soft defaults are not a systemic threat because (1) the institutions that issue and service student loans are indemnified by tax payers and (2) generally speaking, a borrowers SL balance and rate of default are inversely correlated.

Under current conditions, the crisis is limited to the student borrower.

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dupednontraditional (Aug 27, 2018 - 2:39 pm)

Still, low interest caps are where things "should" be. 3% is plenty, since there is a strong public policy argument for having an educated populace, or so I'm told by liberal law professors. Since the risk of default is low due to law of large numbers and indemnification, there is zero reason to charge 7% on loans.

Except to make money, of course. And gub'mint isn't a for-profit enterprise, right? Right...?

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nycatt (Aug 26, 2018 - 10:17 pm)

My fix - if the default rate at a school hits above 5% (or near there), no more federal loan money goes to that school's students. The worst schools wills close, the students who shouldn't be going to school will not be able to go, and there will useless degrees and more job prospects. Similar to Europe, where "undergrad" is free at the best schools, but there are limited spots, and it is very competitive to get a spot.

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guyingorillasuit (Aug 26, 2018 - 11:16 pm)

This is, ultimately, a plausible long-term solution, but be careful: the term "default rate" is fungible. IBR is a soft default, but probably won't count against the "default rate". If I owe you a million dollars, but we come to a handshake agreement where I pay you $20, and we re-address the issue one year later, did I just default? Schools will be incentivized to stay below the radar.

There are multiple competent solution to the debt crisis, including 1) making the school the guarantor of the loan; 2) hard-limiting the loan amount per lifetime; 3) issuing loans in exchange for a commitment to public service (similar to IBR, but there would be limits - we will only lend you $10k per year, and we will scrutinize what you try to pass off as "public service" by forcing you to re-certify every year.

Law schools are among the worst offenders, but they are not the only offenders. Eventually, we are going to have to certify all higher-education institutions for loan eligibility, including whether or not they are able to follow certain frugality criteria. We can still provide quality education for people who want one, but we don't have to subsidize climbing gyms and sabbaticals.

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jeffm (Aug 27, 2018 - 8:52 am)

You don't really solve student loan problems by enabling them. Ultimately, forgiveness (whether via IBR or otherwise) sends a message to students to borrow more than might make sense from a purely personal financial perspective. However, I also understand the need to bail out people who either made bad choices or had bad luck.

For market-based policy proponents, if you limit loans to whatever the career market will financially support, you stifle access to education choices. "We'll loan $40k for engineering, $28,500 for accounting, etc." is like Big Brother, on steroids, engaging in micro-engineering our society. The market doesn't bear a lot for historians and archaeologists, for example, but they are still valuable to our culture and collective knowledge.

There doesn't seem to be any option that doesn't have negative trade-offs. Not too many people question the value of public education; this is just a matter of whether it should continue beyond 12th grade via the student loan program.

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thirdtierlaw (Aug 27, 2018 - 9:56 am)

I agree the forgiveness can be seen as enabling. It needs to come with a complete overhaul of the whole system. Limiting the total being loaned is a great start.

I'd also worry about basing the amount upon what the market needs. Look at coding for example, there was a shortage of coders less than 5 years ago. Everyone on here looking to switch careers was talking about coding bootcamps, C.S. degrees, etc. Now the market for coders is oversauterated. Or another example is nursing. It is a constant pendulum of surplus and shortage. People hear that there is a shortage, everyone runs to get a nursing degree. Word gets out there are too many nurses, enrollment rates plummet, then rinse and repeat.

There is no chance that the government will be agile enough to predict what the market will need 4 years later.

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onehell (Aug 27, 2018 - 12:26 pm)

Yeah, there's no way you can social engineer with student loans. You'd have to adjust constantly as supply and demand ebbs and flows and it wouldn't be just major, it would also be school prestige. A Harvard grad is presumed by many employers to be smart enough to learn whatever you need him to learn so you can major in whatever you want.

And, demand for degrees is market like everything else, it's not like it's ordained by God that STEM is useful and liberal arts is not. Who knows, after a decade of paying only for STEM that could be glutted and companies need English majors for stuff like technical writing of user manuals and whatnot. Plus, schools would lobby hard to be on the "good" list.

Also, forgiveness, like IBR itself, is something of a moral hazard. If you go in knowing you don't have to pay it back, it's an incentive to borrow more. That is already happening at many law schools, like GTown which famously uses LRAP to cover IBR payments. Since tuition also funds the school's internal LRAP, that amounts to a kickback.

I think the solution is to make private student loans fully dischargeable in bk and cap federal loans across the board at an amount that is periodically adjusted not for what the schools want, but only for inflation. Some schools that can't learn to live within the limits of government lending would probably close as there simply aren't enough rich kids to go around.

We should also have free community college, which wouldn't be too big a lift considering that CCs are already very low cost.

*EDIT: Here's some interesting history. Looks like we tried this already. Early student loans (1958) were spurred by cold-war desire to compete with USSR and were only available for people studying mathematics, science, engineering, and foreign language, or those who wanted to be teachers. But the system as we know it today with FAFSA and direct loans for anything and all that didn't really begin until 1992 and 1993.

https://lendedu.com/blog/history-of-student-loans

So I think we should take median private school tuition as it was in 1993, adjust it for inflation and set the cap accordingly. According to National Center for College statistics that would be around 12k including room and board, which adjusted for inflation is about 20k/yr. Makes good public policy sense, as you are merely correcting the distortion that blank-check loans artificially insulated from bankruptcy (and with default statistics masked by IBR) wrought upon price.

Oh, and I might add, Stafford loans are of course already capped. It's really even more recent reforms that really accelerated this problem. Bankruptcy-proofing for private lenders was 2005, IBR was 2009, and so forth.

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themapmaster (Aug 27, 2018 - 2:32 pm)

Make student loans dependent on your SATs/LSATs and grades. The lower your score, the less money the government will be willing to loan you. If you score a 150 on the LSAT, the government will not loan you $100,000 to attend a law school.

This proposal makes perfect sense but the libs wouldn’t like it because of concerns regarding a disparate impact on minorities.

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wutwutwut (Aug 27, 2018 - 4:23 pm)

Spread your notion out to the schools themselves, maybe?

Especially for LS.

If your 25/50/75 is 143/146/150, your students can borrow (e.g.) 35% of what students can borrow at a school with 161/165/168.


There is no rational reason why a TJSL should be charging nearly the same as a Boston U SOL.

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nycatt (Aug 27, 2018 - 10:20 pm)

I am liberal, and I agree something like that is needed. I like Europe's model - school is inexpensive if you get the right scores, but there are limited spots. Thus, they don't have the problem of 4 million useless English majors a year because the spots are limited. They don't have a few hundred for profit diploma mills, dragging down the value of a degree for free government backed profit.

By the way, wherever you get your ideas of what you think liberals will and won't do, it sounds like it is coming from conservative talking heads (or worse, writers from slate or some other crappy liberal click bate farm) rather than from actual liberals.

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onehell (Aug 28, 2018 - 4:56 pm)

The problem with this view is that it is skewed by your law school experience. Most occupations are not nearly so obsessed with prestige and decisions aren't made based solely or even primarily on test scores or class rank etc. In most of the "normal" world, for example, it would be positively ludicrous for prospective employers to look at your transcripts or for an admissions committee to just take your test scores and throw the rest of your application in the trash.

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johnsmith (Aug 27, 2018 - 5:18 pm)

federal interest free student loans. no interest, pay back what you borrowed. The government doesn't need to make a profit off your education. that fixes a large part of the problem without forgiving anything. Everyone is still responsible and pays back what they borrowed.

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wutwutwut (Aug 27, 2018 - 5:29 pm)

Or at least at an interest rate representing the actual cost of the loan (an interest "free" loan to a borrower not generally being "free" to the one loaning the money).

Has anyone seen a stated rationale for the ~ 7% loan rate? Defaults are low and the loan is protected against bankruptcy. What's the basis for charging 6.8 or 7.2%?

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guyingorillasuit (Aug 27, 2018 - 6:49 pm)

A couple responses:

1) To the poster who said that there is no need for a solution because student loans are not a systemic risk: a) 70% of high-school grads go to college; b) according to CNBC, 70% of them graduate with a "significant" amount of loans (the word significant is, of course, ambiguous); c) also according to CNBC, over 44 million Americans hold $1.5 trillion of student debt. This number has been rising logarithmically, and will soon double, triple, and quadruple; d) a large percentage of Americans are already indebted to student loans, and much of this will not be paid. If you crush a few thousand people, no one will notice. If you crush a few million, you are looking at clouds on the horizon. If you start to get into the tens of millions, you have systemic collapse.

2) To Jeff: yes, living with mom and dad during school and after school is a good way to save money. Some of my classmates did that. They were lucky enough to have parents who lived within commuting distance of their law school. Not everyone does. We have lots of law schools (too many), but I would venture to say that most American households are not within an hour's commute from a law school.

Moving back in with Mom and Dad after law school is also an option, especially if you're unemployed, and again, some of my classmates did that. They were lucky enough to have parents who lived in large legal markets. Not everyone does. Most legal jobs are concentrated in big cities. You are also assuming that everyone has a mom and dad who wants them in the house. Lots of people come from dysfunctional homes, which are not conducive to studying, job searching, or having a normal life.

We need to stop the debt train by capping how much we give to schools. Until the spigot stops flowing, they will take all of us for every penny we've got. Your own generation was educated a lot cheaper than ours, and I daresay you all came out fine. There is nothing about law school that requires $60,000 per year in tuition.

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acerimmer (Aug 27, 2018 - 7:47 pm)

I lived at home for a few years, got a leg up on my student loans. My legal career didn't work out, but I got tolerable jobs in construction. Tons of overtime. $$$$ for student loans. Now I'm debt-free, although I've never practiced law, which does bother me a bit.

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acerimmer (Aug 27, 2018 - 7:48 pm)

There should be a $30,000 a year cap on student loans for law school... make up the difference with savings, work, financial aid, or a cheaper school. Require a 148 LSAT to get a student loan at all.

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professionalloser (Aug 28, 2018 - 10:42 am)

Student debt is basically a "stupid tax" (a la cigarette taxes, lottery tickets, etc.).

While everyone raves about how college is "free" in the utopian socialist lands of Europe, they tend to neglect how difficult the admissions process is for most European universities. They don't take anyone who can fog a mirror like we do here. In short, if you cannot get a full ride (full tuition, if not a room/board stipend) and your parents/rich old uncle/sugar daddy can't help you, you probably shouldn't be going to college or law school in the first place.

The European model makes college free by only admitting the best students. US universities are also free for the students who deserve it. The ones paying full sticker shouldn't be in college in the first place.

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therewillbeblood (Aug 28, 2018 - 11:56 am)

The Europeans tend to also do better at trade school. Honestly, a lot of college students would (a) be more successful in trade school, (b) make more money when they graduate, and (c) enjoy themselves a lot more.

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mtbislife (Aug 28, 2018 - 5:49 pm)

I wouldnt call sportsball scholarships deserving it but for grades and test scores yeah. Also, your education may be free or close to it but the job market looks even worse than here in many Euro countries.

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trickydick (Aug 28, 2018 - 4:40 pm)

The student loan racket will collapse and soon.

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david61983 (Aug 29, 2018 - 8:12 am)

It won't. You will never get any sort of bipartisan reform. Dems created this mess and are in bed with the fat cat lib professors and administrators and will never go along witb any sort of reduction in lending. They want pure forgiveness. Pubs will never go along with any forgiveness that doesn't completely overhaul the system otherwise we'll just be in the same mess again 10-15 years from now.

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pisces213 (Aug 28, 2018 - 9:45 pm)

The portion of student loans that goes to tuition should be underwritten by the schools. They can then probably take some sort of insurance policy to reduce the cost, and perhaps negotiate a better interest rate for students with their bargaining power.

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