The Plague of Education Debt

Today, I responded to a Facebook comment that complained about the difficulty of repaying graduate school education debt. The original poster and spouse apparently left graduate school in 2001-2002 with a total of ~$70,000 in debt. After paying $500/mo for the past 23 years, they are still $60,000 in debt.

Many would argue that $500/mo is too small of a monthly payment amount, but given average salaries after graduate school completion, it could well be all the couple could afford.

The original poster asked why education debt should not be cancelled. The responses were predictable, and varied from the sympathetic to those who thought that the borrowers had erred, and must therefore suffer the consequences, to those who commented that cancelling education debt directly adds to taxpayer burden.

Why assume that taxpayers have to foot the bill?

This is clearly (given the high interest rate) a private student loan. Loan cancellation would only affect the private lender, and since the principal amount has been paid, and then almost paid again, they have been adequately compensated. No need for a treasury outlay, just cancel the loan.

I’m sure that someone will call me “communist” or “socialist,” for this view, but I know exactly how the private lending system works. Loans are offered to young people with little experience in borrowing who are hoping that their education will lead to higher lifetime earnings, as we always tell young people. The terms are often unclear, and the interest rates border on the extortionate.

These loans have variable interest rates, and all kinds of fees and penalties, and can leave borrowers in terrible situations, with virtually no way out, since private loans are almost always not discharged in bankruptcy. (see https://scholarlycommons.law.emory.edu/ebdj/vol32/iss1/11/)

I also did not borrow much money to go to college, but the fact that I did not led me to have to both work full time and to attend college at the same time, which helped to cause me to drop out in my 5th year, as a senior. There were indeed other factors involved, including my own errors, but money was a huge concern.

If I had been offered some large private loan, I surely would have taken it, as an inexperienced young person. I am only protected from that by my age, since the cost of education in compared to average salary was much lower in the 1990s.

The rising cost of education, and the flood of high-interest private education loans are a direct threat to the future of this country. We already live in a world where it is not a good financial prospect to go to medical school and become a general practitioner. (see https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4226775/)

Given that the need for education is greater each year, since there are fewer and fewer jobs that do not require a college degree, and the complexity of the world continues to rise, why do we, as a nation, feel that it is in our best interest to place the burden of education financing on the student, who is least well equipped both to understand it, and to pay it off?