Education Department Forgives $415M of For-Profit College Debt

https://www.wsj.com/articles/education-department-forgives-415-million-in-debt-for-for-profit-college-students-11645050691

by lxm • 4 years ago

71 171 4 years ago

wsj.com

KindOne• 4 years ago

https://archive.is/20N5L

blakesterz• 4 years ago

The article says this is part of the $16 billion in loan discharges for around 680,000 borrowers since Mr. Biden took office, around $2 billion of which came through the borrower defense program.

These numbers surprised me, I guess I haven't been paying very close attention:

"There are around 43 million Americans with student debt.... All told, Americans owe around $1.6 trillion in federal student loans and more than $130 billion in private student loans, according to the data company MeasureOne. About 5.2 million federal borrowers are in default."

pureliquidhw• 4 years ago

Approximately 12.1% in default. I wonder what percentage of the $1.73 Trillion in debt that 12% makes up?

Forgiving loans will continue to increase demand (and prices) for housing and other assets, right?

tempnow9872• 4 years ago

The federal funding giveaway for crazy degrees is amazing.

If you pay $250,000 to become a chef/cook - that is insane. That is ONLY possible with federal funding, no private lender would fund that.

I think similar issues exist with a fair number social science / ethnic studies / minor language degrees (greek etc). If you go through to a Master or PhD in ethnomusicology, while very cool (yes, I took a class along these lines I very much liked) -> the market isn't there currently in academia and the private market is to some degrees worse.

throwaway0a5e• 4 years ago

you pay $250,000 to become a chef/cook - that is insane.

Seems like those sorts of situations are well into the territory of "if you owe the bank $1,000,000,000 then the bank has a problem"

andrewvc• 4 years ago

Nope, guaranteed by the government and not dischargable in bankruptcy!

alex_young• 4 years ago

That is ONLY possible with federal funding, no private lender would fund that.

Isn't this about private loans? Seems like it according to the title and the non-paywalled portion of the article.

gruez2• 4 years ago

"for profit college" =/= "private lender"

foobarbaz33• 4 years ago

Although government is interfering with these loans by taking away much of the risk. Green lighting no bankruptcy.

250k for life long wage garnishments could be a good deal.

ajross2• 4 years ago

If you pay $250,000 to become a chef/cook - that is insane.

I'm sorry, what are you referencing here? That number doesn't appear in the linked article.

I mean, I'm sure there's an anecdote somewhere that matches, but that's hardly a representative description of the program. The debts in question are things like $40k loans for tech-related degrees from degree factory places like DeVry and ITT which are known to not have the value claimed at enrollment.

Now, there's a really good argument that, indeed, the Federal government shouldn't be subsidizing DeVry to issue junk degrees! But that's not well argued by talking about hypothetical sous chefs with quarter million dollar balances.

tempnow9872• 4 years ago

CIA is 24K++ per semester. 12-18 credits.

I would expect 8-9 semesters needed to get the 129 credits needed.

9 * 24K = $216K.

So that's $200K+ for a culinary arts degree.

If you study ethnomusicology and get a PhD I could run some numbers that would make your eyes pop :)

philliphaydon3• 4 years ago

That is ONLY possible with federal funding, no private lender would fund that.

Is this not a double edge sword tho?

Prior to student loans you more or less had to fund it yourself, which people did with a part time job or summer job. When they decided they wanted education more accessible and introduced student loans, all of a sudden more people could afford school and schools increased their prices 10 fold over time.

core-utility5• 4 years ago

I don't know if I'd say that people can afford schools when the debt mounds are so high for many people who are unable to pay. Strictly a hypothesis, but I would say that while more people are going to and completing school than before, the affordability is actually worse than it was previously because schools no longer have to compete for tuition.

lmilcin• 4 years ago

Prior to student loans you more or less had to fund it yourself,

Or become a citizen of a country that is not hostile to its population.

In many countries you can get decent education for free.

As it should be. Because educated population that is drowning in debt is probably going to lead to better outcomes in the future.

You can have poor parents, not be particularly bright, work hard to get your education and start your life with no debt at all.

kesselvon• 4 years ago

This isn't really true, because up until relatively recently most university funding came from the state and not tuition. The decline in state support led to higher tuition costs; federal student loans turned it into a bonanza, but the steep price tags are more because tuition was never the main revenue driver for universities.

bko2• 4 years ago

People still get private student loans. In fact, private student loans pick off the best credit risk (Harvard MBA, Yale Law, etc) and offer rates lower than the government rate. So you could still finance your education through loans, just not any education

mempko• 4 years ago

Ok, now do all of it.

burner556• 4 years ago

I worked very hard to pay off my loans, I don’t think my tax dollars should go to bailing people out of debt they agreed to repay.

colejohnson66• 4 years ago

They agreed because they had no choice. College is basically forced on every high schooler to the point that your guidance counselors ask you which one you choose and won’t take “none” as an answer. Ask me how I know. HR departments will also pass on your application unless it has a university listed.

With the rising costs of tuition year after year, it’s becoming unreasonable. And when they’re not dischargable during bankruptcy, it’s giving a middle finger to the poor. Saying, “F you, I got mine” doesn’t solve anything. Something needs to be done about it.

downrightmike2• 4 years ago

How do you feel about golden hammers and toilets?

imilk2• 4 years ago

Just because I've paid for healthcare my entire life (including bills owed to the hospital) doesn't mean other people should have to. And just because anyone has to do something that is terrible, doesn't mean that everyone else should be required to go through that terrible experience.

Your reasoning is incredibly shortsighted and selfish.

CodeShmode• 4 years ago

"Things were awful for me and they should be awful for you too"?

AdmiralAsshat• 4 years ago

Counter: I worked very hard to minimize my student loans (I had less than 10k, and repaid them within a couple years), and I think they should be forgiven. Or at the very least, discharged with bankruptcy.

tossitaway9090• 4 years ago

I _just_ got mine paid off. I even went to one of the colleges where debt was forgiven (ITT Tech), but I didn't get one of the bullshit degrees like game design or whatever so I was able to pay mine off.

I don't yet know how I feel about this, but I can't help but think its probably best for humanity that these people can live normal lives now. On the other hand, are these people now who I'm competing with for resources (e.g. housing, etc)

All I really know is that I'm glad I finally paid mine off, at 34yrs old no less..

serioussecurity• 4 years ago

I'm very frustrated by this perspective.

I want to live in a world full of intellectually curious, creative people who build things. I think we can best do that by giving people access to education, health care, housing, food, and physical safety.

The positive externalities of an educated populace are massive.

I think the choice is between: (1) punish people because it's fair, and live an objectively worse life because everyone around us is miserable and dysfunctional (2) tune policy to support people, and live an objectively better life because everyone around us is healthy, productive and creative.

Immiserating debt destroys lives, and destroyed lives makes all of us worse off.

xracy16• 4 years ago

Huh, That's a sunk-cost fallacy if I've ever seen one.

But also, I love it when people's response to debt forgiveness is "I suffered, so other people should have to suffer too." I guess it's time to start taking people's eyes, it will save us time because we're all going to be blind sooner or later.

changoplatanero2• 4 years ago

most of the outstanding student debt is held by wealthy people like lawyers and doctors. they don't need a bailout

drewbeck• 4 years ago

this is definitely not true

conanbatt• 4 years ago

A 1.6 trillion handouts for colleges. It seems its not enough to have licensing, favored immigration laws, continual public subsidies: need to also throw piles of cash at them.

xracy16• 4 years ago

Pretty sure the colleges have already been paid. This would go to the people who can't pay off the mountain of debt they were given while they were still children.

PragmaticPulp4• 4 years ago

Effort and money needs to go into solving the problem at the source (expensive education, easy loans for low-ROI degrees). Throwing money at people who already received degrees does absolutely nothing for the next generation of students. Might even make it worse, because now they're competing with slightly older peers who were lucky enough to get their debt paid off.

Paying off people's college debt is also highly regressive. Why give $50-100K or more to people with college degrees, but nothing at all to people who didn't go to college? Doesn't make sense.

toomuchtodo• 4 years ago

What if we met in the middle? We can accept that the root cause needs to be fixed, but we could also halt interest accumulation and penalties on the outstanding balances due while payments are still made.

We can extend and pretend mortgage backed securities but not student loan debt?

justin_oaks• 4 years ago

Like health care, the increasing price of education will not be solved by giving money to the institutions that are raising their prices. They'll continue to raise prices so long as people are still giving them what they ask for.

It seems absurd to me that people think the solution to high prices is to have someone else pay part or all of it for them.

xracy16• 4 years ago

I don't think anyone has suggested this is a solution to the rising cost of education. That's a separate problem. I'd love to hear your proposal for fixing it.

This is a proposal to fix the mountain of debt that's preventing Millenials and Gen X from purchasing property and building wealth. It is only intended to fix that problem which will be a remaining symptom/problem of the increasing price of education, even if you propose a magic solution that stops education costs from increasing.

subsubzero2• 4 years ago

So you knew going into college that tuition/books/boarding was $X and said yeah I am going to do that, you did the math and figured that after school it was going to be paid off in $Y years due to a college educated profession making a certain salary. Now that college is done you now want your financial obligation cleared because you have decided that college degree was too expensive.

So whats the difference between that and someone else who buys a house and realizes that they actually don't want to pay 40-50% of their income on housing payments and demands the Government/or bank give them the house for free due to it being unfairly priced?

Where I have a problem with this line of thinking is it totally throws personal responsibility out the window. You knew the costs and you signed up anyways. Do I think college costs are criminally high? absolutely. Do I think for profit diploma mills are predatory and should be shut down? yes.

I just have a huge issue with people who paid $200k-300k for a liberal arts degree where the jobs pay $30-$70k a year and then demand the government cancel their student loan debt due to it being too high. Its a slap in the face to the millions who never could go to college because they weighed the calculations and realized it does not make financial sense or came from background where they had no support for such an endeavor.

xracy16• 4 years ago

I love this fake anecdote about someone who paid 2-300k for an underwater basketweaving degree, as if it's representative of most people who went to college.

Also, where's the responsibility to colleges for selling these degrees to people (children) who have no hopes of paying them back? That's predatory. This article covers just the righting of the harm done on the people who fell into that predatory lending trap.

303672862• 4 years ago

Bad idea. I had student loans up until 2018, and there should be no program that would forgive mine. I paid off $30k in debt because I got a $50k sign on bonus. People in my position absolutely should not have their debt forgiven at taxpayer's expense.

rubyist5eva• 4 years ago

so the lesson here is, take out a shitload of debt for a relatively worthless degree and get the American taxpayer to bail you out

Awesome

kyrra• 4 years ago

That's a problem with many federally-backed student loans out there. The government being in the job of backing student loans is inflating college costs, as there is no factor to stop price increases. They aren't available for bankruptcy. There is no risk analysis for the people being lent the money. There's no balancing between job prospects and the degrees people are earning.

FranchuFranchu• 4 years ago

I don't see the problem. A huge for-profit organization gets free money in the shape of a student loan, without spending any of it because the degree is allegedly worthless, and then the money gets taxed to pay the loan off? It cancels out.

unethical_ban• 4 years ago

The lesson is to read the article before commenting. Allow me to view source > gather the first visible paragraphs of the WSJ article.

WASHINGTON—The Education Department will discharge another $415 million in student debt held by borrowers who said they were defrauded by for-profit schools that misrepresented their graduates’ employment prospects or otherwise swindled them, federal officials said Wednesday.
The loans of nearly 16,000 former students are being forgiven under a legal provision known as borrower defense to repayment, which allows students to have their debts erased if they prove that their schools defrauded them.

This is unrelated to general federal student loan cancellation, which is still a good idea. It isn't as if the debt would be discharged without changes to the loan programs themselves.

But before we get into the discussion regarding cancellation in general it's important to acknowledge this has nothing to do with that.

mjamesaustin• 4 years ago

For reference, this amount is less than 0.03% of the total ~$1.6 trillion in student debt.

RhysU4• 4 years ago

I will pocket that 0.03% if anyone wants. That's still nontrivial clams.

zozbot2342• 4 years ago

It's highly targeted to the fraction of student debt that's actually highly problematic according to reliable scholarly research (that is, the debt that's actually 'trapping' largely non-traditional students with an unsustainable burden). Though debt incurred for professional graduate degrees (think MBA and what not) is not far behind.

baggy_trough• 4 years ago

Far too many people go to college as it is. One simple step we could take is make college loans illegal.

strikelaserclaw• 4 years ago

Or make state colleges cheaper and build more of them.

ericmcer2• 4 years ago

Are they going to at least take some preventative actions? Curbing for profit colleges? Cutting down on predatory market tactics? Screening people for unreasonable loans (i.e. 60,000/yr for art school)?

Or is the plan just to forgive the loans, throw the money on the govt. balance sheet and let the for profit college owners sail away on their yachts.

unityByFreedom• 4 years ago

PBS Frontline investigated this in 2010: https://www.pbs.org/video/frontline-college-inc/

If I recall correctly, these schools were not sufficiently held accountable for borrowers who couldn't repay loans. They only tracked students' ability to repay for something like two years. I think policies were adjusted so that such predatory lending for a poor education is no longer possible. It's probably a game of cat, mouse, businessmen and politics. I doubt anything was done 2016-2020 since that president once ran his own for-profit U, but I think some changes were made before that.

prostoalex• 4 years ago

not sufficiently held accountable for borrowers who couldn't repay loans

What is the gold standard for accountability here? Does a large state university track repayment ability for longer periods?

jonathanjaeger• 4 years ago

I'm not defending the current system, but the predatory tactics of a decade+ ago changed dramatically under Obama and there are other steps currently being taken to prevent overly aggressive marketing tactics. University of Phoenix, for example, completely changed their marketing habits (among others afraid of getting sued/losing accreditation).

jonahbenton2• 4 years ago

Yes, this is a tiny tiny fraction of outstanding student loan debt, in this case nearly all likely issued under fraudulent pretenses. Since Biden has taken over, similar specific, targeted actions have been taken on small portions of this enormous space.

HWR_14• 4 years ago

These loans are being forgiven for people who attended for profit schools being investigated for fraud, and in fact claiming you were a victim of fraud is a requirement to get the loan forgiven. It's a continuation of an Obama program that saw some for profit schools shut down.

HarryHirsch• 4 years ago

16000 borrowers who were targets of fraud benefit. A drop on the hot stone, as they say. It's not at all the change in policy that the current administration promised us.

dpark2• 4 years ago

Did they actually promise a policy change around student loans?

aesh2Xa1• 4 years ago

It’s here: https://joebiden.com/beyondhs/

eric4smith• 4 years ago

Debt forgiveness for student loans is a horrible idea.

It perpetuates choosing degrees that will in 90% of cases never have enough of a return to pay for the loan itself.

Look, I’m not against choosing whatever degree you want. But fiduciary responsibility is doing even a tiny bit of research to see the LTV of that degree.

Unless there is out and out fraud, very little of student loans should be forgiven.

jonahbenton2• 4 years ago

Nearly all of these forgiven loans were likely issued under fraudulent pretenses.

thaumasiotes6• 4 years ago

But fiduciary responsibility is doing even a tiny bit of research to see the LTV of that degree.

How are you going to measure it? Philosophy majors tend to have good life outcomes. Is that because they were trained in philosophy? Why would training as a chef be less valuable than training as a philosopher?

hellcow• 4 years ago

Presumably if the average earnings of "people who obtained a philosophy degree" is higher than those who trained as a chef, then lenders would be willing to pay more for that education. That seems like a trivial thing for lenders to track and learn over time.

ajross2• 4 years ago

It perpetuates choosing degrees that will in 90% of cases never have enough of a return to pay for the loan itself.

Alternatively, it's fairly winding down the adverse effects of government-sanctioned programs that saddled people with debt for the promise of degrees that will in 90% of cases never have enough of a return to pay for the loan itself.

No one argues that these were bad loans and bad degrees. We all agree they shouldn't have been written and that we shouldn't be doing that going forward.

But there are still a bunch of young adults out there with unsustainable debt. Isn't that a problem worth doing, well, something about?

causalmodels• 4 years ago

The article itself states that forgiveness is coming because these institutions defrauded their students

zozbot2342• 4 years ago

Student loans are a horrible idea then, because plenty of students choose degrees with very crappy earning potential anyway. Most of them manage to deal with their debt burden one way or the other, but the for-profit college population has a harder time doing that.

core-utility5• 4 years ago

Yes, you're hitting the core of the problem. Loan issuance should be based on ability to provide a career with a return that can reasonably pay the loan. No bank would issue a loan for a major with crappy earning potential, so why does the government?

azth3• 4 years ago

Loans (interest bearing ones) have been a known parasitic and immoral practice for thousands of years as they're prohibited in the three major religions (Islam Judaism, and Christianity). The sooner we get rid of for profit loans the better.

mcv• 4 years ago

Netherland used to give students a small monthly stipend instead of a loan. In the 1990s, they changed it to a loan, but now talks are that that was a bad move, and it should go back to being a stipend.

Free or cheap education seems to be a far better idea than enormous loans to pay for overpriced for-profit colleges. Education is not just about earnings potential; it's also an investment in society as a whole. A society with a well-educated population is better off than one without. Although expensive education that doesn't provide any job prospects is kinda pointless, and those definitely do exist.

bko2• 4 years ago

There's a bit of selection bias. For profit colleges often target people who are not able to go to public schools for whatever reason. Might be convenience or specialty. For instance those N month training courses to be a paralegal or whatever are pretty good on face value. The alternative isn't a 4 year college degree. I also remember looking into basic college courses around 10 years back (I already have a degree) and found literally no options that weren't in the middle of the day. Zero. This was in the entire City University of New York (CUNY) system too, not some small school. So public school courses isn't really an option if you're working full time.

canyonero3• 4 years ago

Debt forgiveness for student loans is a horrible idea.

This comment reeks of privilege. It ignores the fact that vulnerable people, poor people may have made a decision to to try to improve their future at a young age, say 17 or 18, and are forced to live in debt when their situation isn’t improved or worsens over time.

Loan forgiveness should be a tool that can be used to relieve suffering and/or stagnation in some circumstances. Hardly a horrible idea.

D13Fd9• 4 years ago

I'm pretty sure that a very high number of the people who would get general college loan forgiveness are privileged people who made poor choices.

pyuser583• 4 years ago

Student debt forgiveness would disproportionately favor the higher educated (obviously).

People with higher education tend to make more.

It’s a regressive policy. Not necessarily a bad policy. But one that favors the better off.

Clubber2• 4 years ago

Unless there is out and out fraud, very little of student loans should be forgiven.

We should only be subsidizing loans for degrees that have a decent chance on being able to pay the loan back. A lot of these degrees are fraudulent in that regard. I know higher education is supposed to be more than a trade school, but when student loans are concerned, viability in the workforce needs to be taken into consideration.

Of course, companies used to prioritize and hire people with degrees regardless of what the degree was in because it proved they were teachable. I'm not sure why that isn't the case any longer.

duffyjp• 4 years ago

I grew up in the 80's, and was told by everyone "don't worry about money, do what you love." It was ingrained by parents, educators, media.

Around 2000 when my friends and I went to school a few picked expensive private school art degrees, English lit etc. Thank goodness I'm a nerd and chose CS, because I did it with absolutely no regard to earning potential.

What I'm getting at is that with all the fallout of the loan crisis, I think there's a lot more awareness of what higher education is for the 99%. Let the uber-rich learn extinct languages and medieval cooking, the rest of us need jobs.

rayiner4• 4 years ago

I grew up in the 80's, and was told by everyone "don't worry about money, do what you love." It was ingrained by parents, educators, media.

The Boomers fucked up American culture in so many different ways.

etempleton2• 4 years ago

Very few undergrads are majoring in the liberal arts and humanities today compared to even 10 years ago in the United States. Post the Great Recession the focus on getting a well paying job has become the ultimate goal of parents and their children when entering college and so the sciences, business, and the social sciences are all in vogue.

Many colleges, to their credit, are shifting their focus more and more to outcomes and average salary potential.

core-utility5• 4 years ago

Blanket funding of education is terrible. Loans should be negotiated on an individual basis based on the degree and that degree's ability to provide a salary high enough to pay back the original loan. This government loan enables colleges to charge more because students will simply take a higher loan out with no calculation of return on investment.

xracy16• 4 years ago

Every person with a bullshit degree that I know had their parents pay their entire way in college.

There are plenty of necessary degrees that don't provide enough compensation to pay off the loans of people who take them. We don't pay money in this society for people who provide necessary services. If you think that we do, then please, by all means, explain to me why Software Engineers (a profession invented in the last 50 years), get paid more than farmers (a profession that defines how humans have come so far).

slt20216• 4 years ago

Because farmers depend heavily on software engineers to create and maintain highly complex software for their automated GPS navigated tractors.

Plus supply and demand, farm labor can come from Mexico for cheap, but firmware software engineers in agriculture aint coming for the same price

JCharante3• 4 years ago

If there was a farmer strike or the number of farmers dropped dangerously low, the profits for the field would go up and there would be more incentive for people to specialize in farming.

Are farmers really that important? We import a lot of food and heavily subsidize farmers already.

D13Fd9• 4 years ago

This is truly terrible. It penalizes people who paid off their own loans, it rewards people who made poor choices, and it drives up the cost of school for everyone.

core-utility5• 4 years ago

While I generally agree with you, this forgiveness seems to target victims of fraud rather than student loans in general. It could be argued that the government should have never allowed a loan to be taken out for a fraudulent school (if they had done due diligence)

elpatoisthebest• 4 years ago

From the article:

"The loans of nearly 16,000 former students are being forgiven under a legal provision known as borrower defense to repayment, which allows students to have their debts erased if they prove that their schools defrauded them."

I paid off my student loans for the state university I attended. How does a student who can prove they were defrauded being forgiven penalize me?

D13Fd9• 4 years ago

Lowering the risk of student loans drives more people to take them out, putting more money in the system. More money in the system increases the cost of schools for everyone. Assuming you are in the US, then you, I, and everyone else here is paying for this debt forgiveness via taxes.

canyonero3• 4 years ago

How exactly does it penalize people who paid off their loans? I'm not following that line of reasoning. If you could pay off your loans, then that's great. You should feel good about that accomplishment.

chii6• 4 years ago

How exactly does it penalize people who paid off their loans?

those who took a sacrifice to pay off their loans would not have had to make the sacrifices had their loans been forgiven like the article claims.

Not receiving a grant that is paid for by taxpayers is a form of "penalty".

Education Department Forgives $415M of For-Profit College Debt

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