More on Student Debt...

This from another correspondent, in response to the morning paper's article on $1 trillion of student debt burdening 37 million young Americans:

"..., to continue another conversation, there is an article in today's Seattle Times, page A12, headlined, "$1 trillion in student debt is weighing down 37 million," which outlines the staggering nature and consequences of this situation.  It also went on to say that out of 20 million students who attend college each year, an estimated 12 million (60%!!!) will incur student debt.**

"So this gets to the point of your question to me in Sun Valley about what I thought of your idea of simply forgiving the $1 trillion and having the US Government absorb this debt.  You didn't accept my response, that while it might benefit the 37 million and perhaps much of the rest of the economy by freeing the debtors to begin saving as well as buying, that it simply was not workable and inherently unfair to those who already paid their debt, those who are able to pay their debt, and all of those(**see above) who will start building that debt up again because they are now in school or will go to school in the future.

"However, you certainly are on the right track to be raising the question and pondering solutions, and the extent you encourage others to also ponder, and ultimately to come up with solutions will be the true benefit of raising the question.  I read some of the other responses you included on your blog, mostly saying why they also thought it was a bad idea, but here are a couple of ideas I have on your question:

• What are the causes and how do we address and solve the causes?  E.g. 
• Why have college tuitions gone up faster than the rate of inflation?  
• Are students really getting an education that will help them be productive and self-sustaining members of society?  
• Why aren't we as a nation creating jobs that require those college educated people to fill?

• How did this situation get to this level?
• What role have the banks played in enabling and/or promoting student debt?  How have government policies promoted student debt?
• Why are student debt interest rates so high?  Maybe there is a partial solution here, e.g. how about setting interest rates to zero?  In all cases of bad debts, the banks are lucky/grateful to get their principal back.
• Should all educational programs be "fundable" by debt?  Should a history/art/music/etc. degree be something banks should (be allowed to) lend money to pay for?  In a business loan, a bank will evaluate whether or not a loan is likely to be repaid.  With government protections, banks don't have to worry about the first source of repayment which is the job and the salary the borrower will get upon graduation as a source of repayment.
• As with all bank and credit card debt, the less likely the loan is to be repaid, the higher the interest rates the banks charge the borrower.  If the banks could only charge zero interest on defaulted loans, they would be less likely to make them in the first place.

• Other questions:
• What effect would less educational credit have on the situation?
• Would colleges charge lower tuition or make more of their endowment funds available to fund students' tuitions if the students had no other way to pay for their educations?
• Would businesses take up more of the burden of helping to educate the work force?  
• How do immigration policies affect this situation when Indian and Chinese college graduates who may have gotten a less expensive but sufficient education can come into America and take jobs that might otherwise go to American graduates?
• Many foreign students are educated in US universities, and then remain to take up jobs here.  How are their educations paid for - by their governments?  -by scholarships?
• How do government and tax policies encourage American business to export jobs to India and China, leaving many college graduates without a job?

"I don't know the answers, Fletch, but thank you for raising the issue.  Maybe with more conversation like you are trying to promote, and people actively working on real and long term solutions to all of these issues (and even others I haven't thought of),  we can find an answer to this really, really important disaster that is bubbling to a head.

"All the best,"

DP