Should student debt be forgiven?


from yahoo finance officers ballots in dollars a podcast about the politics it affects your pocketbook i'm rick newman and i'm alexis christoph arrests one point four trillion dollars that is he amount of outstanding federal student loan debt in the usa has become a hot topic of debate in the primary contest among democratic presidential hopefuls an rick the twenty plus kennedy's successor sticking out their positions on whether to make college free in some form or provide some kind of relief for student loan borrowers it sounds good right on paper but you know i'm curious how would it work exactly and of course the big question who's gonna benefit end who's gonna pay some things free cost somebody something right but you're right this is catching on now i think they a number of can it's i think it's twenty four count i don't think every single candidate actually has a plan on student debt forgiveness or more affordable college but this is say a big part of bernie sanders plan elizabeth warren a has a version a bernie sanders had this plan back in twenty sixteen i mean a lot of what bernie sanders is talking about is basically his platform from twenty sixteen with a few a modest updates but warren has had something to say about this pete buddha judge has had some say about this he says he has been chasing have they are managing more than a hundred thousand dollars in student debt between that between now mostly is from his husband who is eight teacher and how to get master's degree to become a teacher a that's that's a a a bit of a catch twenty two and you do that because you have to pay for a master's degree but then teaching doesn't pay i mean so so you have to kind of think that one through but yeah i mean you mentioned one point four trillion dollars in debt and a student debt is considered a good debt when you analyze debt as a thing so you're investing in yourself out exactly right so you know financial personal finance experts say this is the kind of debt that makes sense to take on 'em if you're just careful about it because you're in you're by basically buying knowledge you're buying a credentials and capability anders day plenty of data that shows that people at the higher higher degrees college people have college degrees and a lot more people without college degrees people with masters degrees earn a lot more people without them so when it comes down you internalize over over the population right it seems like a good return on investment but then you get a lot of cases people have a lot of debt and perhaps a something changed about they feel they went into or they didn't choose a field a particularly well and they're just not able to make enough money to pay off the debt so that's where you get into this problem with people who have you know some people have well over fifty thousand dollars worth of debt for bachelors degree for a more advanced degrees you could easily have more than a hundred thousand dollars worth of debt a not gonna become a financial debilitating at a very young age when you're still trying trying to get your feet under you and be able to afford things like a home roof over your head perhaps a car forty million americans have student loan debt and there was a recent survey that showed the number one regret among graduates undergraduates is taking out too many loans you know and it's always a question and say you get into a school in elite college but you can't afford it right so you go to a lesser than college i i hate to call it that but a lesser than college for the same study the same thing same kind of degree when when it comes to that nothing i'm asking you to be a college guidance counselor now but you know how do you make that right decision you say okay this is an investment in may so i'll take out loans that's gonna take you go elite school with the hope that that degree will get me a better job perhaps a higher paying job then the lesser than college right so so this gets to they were putting aside for a moment the question of should the government in some fat i pay off this debt after you've taken it on a were going to the preliminary question of how much debt you do take on in the first place and and what kind of debt and for what exactly you know this is a family family decision 'em i mean i have one kid is graduated from college and another who is in college a and we've had to go through these decisions i mean how much is a college education work then there's a whole spectrum because some people think that it's worth paying full price of a of an education ebay private university which is the those are the ones cost sixty grand in or more a and then you know plus books and room and board and all that other stuff then you or you or is it doesn't make sense to go public university all the way down a community college where it's cheaper you could do co ops a you could look for scholarships you could work while you do it but it takes a lot longer i mean there's this whole spectrum of choices and i think the first thing is that families need to figure this out together and i think what happened in some of the some of the hardship cases i think what happens is students are a little bit on their own without a guidance or the benefit of somebody who's been through this in a kind of knows how to think about a big investment like this and they take every loan comes their way they take every loan confined unlike younger people think you know everything will be fine in five years why am i paying us back and they don't really develop a plan for well how much is gonna add up to exactly end 'em how could i get out of if things go south i mean i think a lot of people don't know that you can't there's no way out i mean you cannot really declared bank bankruptcy to get out of out of a student loans so i think it before you start talking about forgiving student debt 'em it is totally worth figuring out how to make good solid decisions about these investments and i think part of the problem is that families and students just a lot of the times are not really equipped to they're not that they're not as informed as they should be about how much is all gonna cost down the road water they options what happens and if you don't get a good job you know just see assumptions that you may you may not think too much about so that would be the sort of the best way to approach us and they're you know there are there lotteries there are resources out there for people to understand how to do this but then we get to the question of well if if it turns out that you have all this student debt anti israeli shackling you financially should the government get involved and help you out and that's where we get to programs such as bernie sanders and elizabeth warren they they sort of have a as many other issues they are sort of setting the framing the discussion here and bernie sanders would forgive all student debt and he would pay for that that's expensive a that's a that's a apparently over a trillion dollars altogether i admitted he has to raise taxes while he he was talking about healthcare when when he said when he admitted he would have to raise taxes on middle class families but i think bernie sanders favors financial transaction tax which is kind one of a kind of a catch offer some of the democrats who have programs are you gonna find it all financial transactions tax just gonna be a few bucks on every trade in wall street bridge and they won't have any don't worry just be billionaires paying it that's not exactly right elizabeth warren's is a little bit more measured she would for give a student debt a base up to certain levels of household income and it would phase out up to a then i forget the exact number but it's well over a hundred thousand dollars and you would get less relief at higher income levels but hers would also be very expensive but very important perhaps you accomplish this even more important forgiving a student debt is that this only works if then part two of your plan it is that you make college free to attend because if you just forgive student debt at one point in time and then people just start students just start taking hamill cycle right it's just horrible cycle but all you all you've done is you've done something that just a benefits one a demographic in time that i mean so what's gonna happen to all the people who come afterward you're not gonna forgive they're dead and why just favor why give this one hey out to just this one group so they these plans only makes sense and i'm not i'm not even sure they do make sense under any circumstances but they only makes sense if then colleges free or just free for you know based on some sort of affordability scale so that there would be no student dead in the future because if you give forgive all the student debt today but then we start over again accumulating student debt what i would have you accomplished exactly there are countries though that do offer students free college right right 'em the netherlands when's france different parts of europe iceland 'em and perhaps people in this country look and say well if they can do it why can't we do it i think it's very similar healthcare in this way because the reason they do it is because that's they started doing it a or at some point in the past 'em they made a decision to transition into that type of system and i think in a lot of cases is parts of some things are free but not everything is free and we have we have a different system so you have a millions of americans invested in the system as it is today 'em when there is no a student debt forgiveness 'em and you have a generation of americans which includes me i'll say i mean i i took out student loans 'em and i had a pay them off overtime in you still have no problem with that for the most part they used to be sensible thing now i think the i think the days when we had no problem with that really were days when it was when a college education which cheaper i mean college college tuition has risen a far faster than inflation for a long time so you could you could get eight decent college education much more affordable believe forty years ago and you can today so i think that suggests that there are things we should be doing but to my mind just forgiving debt for people who have already made those decisions is not the right when you're saying going forward if you wanna try to do something find a way to make tuition free going forward but those of us who may have student debt outstanding too bad a i guess i wouldn't be that harsh but the idea by the way we did have the gi hi bill all right which was which was in a way 'em free education but he was linked to something yeah which is why you should which is that you served in the military so if you served in the military you qualified for the g i bill 'em you you you had to do something plans that the democratic presidential hopefuls have do come what sort of do you have to do x in order to get why so pete buddha judge a i don't think he's as a as formalized everything about this plan yet but he said that he likes the idea of student debt forgiveness or free college in exchange for some kind of service so that could be national service program it could be military service a i'm sure there could be several categories of things that would qualify by a now you know he's a veteran he did serve in the military and he also is a little more centrist on a lot of these questions than elizabeth warren and bernie sanders who basically do represent the left there and a and a left what's the right word i wanna say leftist in a left turn lane right there on the left extreme is loaded word people trying to help you out people call them progressive i don't like the word progressive because i don't know what progressive meanwhile grass is that yeah and if you're not or you are regressive ryan so they represent a left leaning side democratic pilots say so that means more government baltimore government programs higher taxes pay for it all so elizabeth elizabeth warren's plan which again she would forgive some student debt i knew it would be for the neediest so the people with the lowest household game income would get the most debt forgiveness and in some cases that would be complete debt forgiveness 'em and then add on top of that free college that plan would cost like one point two trillion dollars over ten years or a hundred and twenty billion dollars a year where is it where taxing again right yeah i mean i understand she got it all figured out she has a plan of she likes say plan for that she would get the money from her wealth tax a that is a these certainly surtax arts and not really a star ducks it's a tax on all wealth above fifty million dollars then she let's let's take right a word and say she could fund that i still think you have a problem i think there's a giant fairness problem in a i think it would create a huge price range problem among voters right 'em so if you happen if you paid off the last of you're still if you paid off your student debt for twenty years and you major last payment last year you would get nothing but if you were simply born five years later in used in you've been paying for fifteen years and you have five years left a you you would get five years of debt repayment end if you just graduated and you have a schedule of payments it goes out twenty years a my my i mean i don't take this personally because i was quite comfortable like i thought so i got on education and i was happy i'll just paying my money i got something for this money i don't feel better about this but i think my loans took fifteen years to pay off some and that surprised me i mean sprays me to be in my thirties and still writing that jeff right there and you hit on a key part here because is this fair in order to benefit some will others get hurt and there is that terrible sweet spot but i think i'll millions of americans fall into the middle class and upper middle class where you make just too much to get any kind of real financial aid but you don't make enough to say you're a kid you know what if you get into harvard week and pay that out of pocket no problem what happens to them in this scenario i think that's i think that's a giant popular i think that's a giant problem i think that's a political problem what happens is i think they get kind of pissed off and you know the other thing that happens in these scenarios you have policy makers who say well if you're wealthy and you make a hundred and fifty thousand dollars a year but then you have families who lives let's say on the coast and they make a hundred and fifty thousand dollars a year and you got both parents working sometimes in order to make that much money and everybody feels a little bit herod and they're looking around saying i'm not rich right what do you mean i'm rich by the way we're working here in were doing where we spoke males were not asking for any airline get lost in the chorus they rarely do we actually have an analogy here a city affordable care act so what he affordable care act did is it provided subsidies to purchase healthcare in it with in one of these excuse me one of these government exchanges and those phase out a a at certain income level so for family of four makes about a hundred thousand dollars a year in household income so that's wonder if there's warner both however many years there are you don't qualify for obama care subsidies if you earn around a hundred thousand dollars and that changes over time it's indexed to inflation in there are a lot of a lot of families that are in a hundred and ten or twenty or thirty thousand dollars they don't they're not living like kings cry in fact first certain families to fall in that bracket and don't get a insurance coverage through an employer and they have to go out and buy a plan on their own those people who are just getting scrutiny a healthcare insurance market with you know easily thirty thousand dollars year just in premiums and that's because some policy makers said well the cutoff for helping a you know americans who need help is this income level there we sort of arbitrarily side is who should qualifying who shouldn't end if you're on the wrong side of the curve that does not seem like a very good policy to i wonder why in this election cycle college affordability is really front and center biggest i don't remember it being that way in twenty sixteen teen or when obama was elected the second time it just wasn't it wasn't yes it was always a great talking point because people could rally behind it but they're really seems to be pushing very early on in this primary contest to talk about it i think it's because we have to canada's now who who are getting a lot of attention for their ideas a so bernie sanders wasn't outlier in twenty sixteen but bernie sanders and elizabeth warren together are a little bit too prominent to a call outs outsiders are outliers liars and they are both 'em a talking about this and they're both getting attention in fact it looks as if elizabeth warren is going to be clips bernie sanders as he sort of torchbearer for that wing of the democratic party she's got a lot momentum she seems very energetic she's not as angry as bernie you know she somehow she seems a little more appeal but i it's also worth pointing out that 'em bernie sanders did have this idea in twenty sixteen in some people liked it bronco bama even had an idea when he was president it was not total debt forgiveness but more measured way to provide aid free or highly subsidized college education for more people using community colleges so relying on community colleges and by the way they're doing what you can steer people away from the for profit colleges that a better so problematic a very bad outcomes at most of those colleges in terms of the amount of people pavers versed on the great perk versions of graduation comma harris announcing that when she went off to yeah so the owners idea was to kind of reinvigorate community community colleges which are kind of forgotten part of higher education system and then used the federal government to maybe maybe provide some seed money but also to do things like a help community colleges connect with local employers so that those colleges are offering a courses in things that local employers actually they need so instead of you know the famous basket weaving a or some of these liberal arts things that are liberal arts major so i'm allowed to say this squishy say i don't necessarily produced skills that you couldn't explain right in the job market right since you graduated like a trade school if you will or that would larry they're all very sour a and m yeah very similar ideas but if you want it you you you know think about all the technology fields for example you could get trained as some kind of medical medical technologist or you could goes fars to get a computer science strike or some kind of training from a community college based on how ambitious you are what you think you want to do it yourself a long you wanna know the school which is also on a state by state basis there are a few states that now offer free community college tennessee in oregon are just a couple of an ashley new york state i think you're almost two years ago now started offering free public college two and four year public colleges in a number of republicans came out and said wait a minute what about the private colleges and i think that that is a valid point about the private college well i'm glad you brought this all up because a lot of things but people talk about at the federal level are actually happening at the state level a minimum wage increases is a great example right and that's a better way to do it in many cases because states kundu this based on local conditions that they know about 'em they again that's the best way to in a way get the best outcome 'cause you can connect education what the employer mean washington doesn't isn't there is no way washington can really do that effectively because it's not their job to know what some kid in oregon wants to study but employers in texas you know what i mean like how did they do that most states actually know that so this then we get into this whole question of public schools versus private schools private schools are not be those private institutions and they are not i mean they have still up a you know by by law abiding to stay charter they're not beholden you know they were not a found it under the lend lease programmer whatever abraham lincoln got started it start at all they asked schools back in the eighteen hundreds and they don't have those obligations these private institutions the sink or swim on their own and we actually have seen a few of them failing lately some small private colleges have been failing threatened with failure but yeah so yeah let's talk about the economics of higher education and this is a big factor so you know we have ace a capacity for a higher education in the us economy however many desks there are at all colleges and universities from community college up the harvard there's a there's certain capacity there's a certain demand for that capacity nf the demand goes up as with anything 'em for something that you unlimited supply what always happens is the price goes up so if you do something like say were gonna make college college free in certain sectors of this a party economy for people who meet these qualifications you're gonna have more people attending college which is good that's a good thing but you're also gonna have price increases above the norm a in parts of be industry that can do it and that is these private that's gonna be the private universities jeffey so if you have a federal program the puts more people into a higher education in colleges and universities you're gonna get price hikes that are gonna affect the people who were not getting the subsidies is exactly exactly what we saw with obama care a any cost of insurance policies for people who don't get the subsidies who make too much money for quote to qualify for the subsidies aunt who don't have the benefit of a big employer negotiating sitting on their behalf and that was about three million people which is very relatively small i think that the squeeze could be bigger if you got into a if you start doing that what we're talking about here with education and again these are this is gonna fall on middle class families please who don't feel like they're rich necessarily but who were standing there listening to other people say well you're rich so if you're so if you think this is a hardship that's nothing compared with other people i just think that's bad politics yeah i i would personally find it very refreshing shing if the candidates came out with a planet actually you know help those forgotten millions that we've just been talking about but it's early stages were gonna be hearing a lot more about their plans as these twenty odd candidates continue to come out with their plans and thoughts regarding college affordability on both sides of the aisle so we wanna thank everyone for listening to ballots and dollars from yahoo finance you could always follow us on twitter at alexis tv news enrich jay newman will be back next week with another brand new episode domitian in meantime what should they all do wreck they should what should they do you know they should go head over to apple podcasts and leave us a five i'm thinking i'm sorry i'm gonna say check out my blog on a value and it's as long as they leave us a five star rating by early

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