Should Wall Street pay off student debt

[Aquapod770]

(07-01-2019, 11:02 PM)Dill Wrote: Since this thread is about debt, though, there are two prior questions: 1) why has the cost of college risen out of proportion to inflation? and 2) why have banks and others who profit from lending been able to fix high interest rates and other conditions on student loans--including their exemption from bankruptcy laws? That can't be explained by reference to student character.

I am so glad you asked this. 

1) Lets look at scenario. Lets say you build chairs for a living. Would you rather build 10 chairs and sell them for $10 a piece because that's what your customers can afford, or would you rather build one chair and sell it for $100 because the federal government lends your customers and extra $90 for chair-related expenses? It may not be the only cause for the skyrocketing cost of higher education, but federal student loans are a big reason why. 

2) The federal government holds a vast majority of student loan debt. As of 2018 student loan debt from private sources made up about 7.63% of total outstanding student loans. This helps explain why federal loans have been a driving force behind college costs. In fact, interest rates for federal student loans are quite low. Usually 4-7% range. They're often higher in the private sector because they carry higher risk. You can't reposes someones diploma if they default on their loans. 

Unfortunately there really isn't an easy solution to the problem. We have kind of backed ourselves into a corner here. The government is pretty good at creating problems in which the solution is almost always more government.