No, student loans are not like mortgages

Americans owed student loans over the past two years. At the beginning of the epidemic, the legislators agreed that the debt payment should be stopped. This termination measure has been extended six times. However, the current resumption date is scheduled for late August experts already suspect that politicians will want to wait after the by-elections.

Ultimately, however, policymakers need to figure out what to do about $ 1.6 trillion in student debt. Massachusetts Sen. Elizabeth Warren was one of the most popular voices calling for direct cancellation. Along with Senator Chuck Schumer, Warren called on the president to write off a student loan of up to $ 50,000 per borrower, arguing that it would help repay the loan. the gap of racial wealth. (Studies: have shown that black borrowers are more likely to incur student debt, more likely to accumulate more student debt, more likely not to repay those loans, regardless of whether they graduate from college or not šŸ™‚

Debt relief, however, has no shortage of critics. There are people who claim that it will be a gift from the rich, a slap in the face to those who have repaid their loans, or a condemnation of those who did not attend college in the first place. On Tuesday, I spoke with Warren about such criticism of why he thinks student debt should be written off, how to prevent a recurrence of such a debt situation. Our conversation has been edited for length and simplicity.

Adam Harris. Over the past month, there has been some criticism of the wider student-loan-debt repayment conversation. First, some argue that students take on this debt the way people take out a mortgage, that student debt should be treated the same as other investments. Why should student debt be treated differently than some of these other debts?

Elizabeth Warren. The debt of education is not like any other debt owed by Americans. It is mainly taken by people who are not even 20 years old. It’s getting an education, and what most parents, teachers, aunts, and neighbors have been hitting on these kids for years is that education is a ticket to America’s middle class. These are not people who run to the mall, buy expensive sneakers, charge stereos. These are people who have tried to do what they were told was the right way to build a secure future.

Look at it from the perspective of 40-50 year olds who have returned to school trying to get a diploma or perhaps an additional certificate, such as a master’s degree, so that they can compete better. to work or find a job after being fired. Dealing with people in debt in the same way they try to get an education for any consumer goods does not mean that education is not only for the benefit of the recipient but also for the benefit of the recipient. for our whole country.

You know, I’ll just support you here for a minute. When the returning GI is returned [after World War II], huge generous benefits have been given so that they can receive post-school education. Now there was a huge racial element in it, և many black soldiers և sailors were deceived by their advantages. But for those who were able to receive the benefits, it not only pushed their families forward. Further data show that it has benefited the whole economy. The boom of the ’50s and’ 60s, even before the ’70s, was the direct result of having a better educated workforce.

There was a time in this country when it was possible to get post-school education without borrowing. I went to a four-year college and got a diploma for $ 50 a semester. It was the University of Houston. And it does not exist anymore, because American taxpayers do not make the first investment in those schools. I could have handled student loan debt very differently if everyone in this country had access to post-graduate technical education, two-year college or four-year college at a price one could pay for a part-time waitress. work, but since that is not the reality, then the nation has to deal with the huge debt burden we have placed on an entire generation.

Harris. Speaking of who bears the burden of that debt, another criticism is that debt cancellation is inferior to the rich. Why not repay the $ 50,000 debt, as you suggested, a transfer of wealth to lawyers, doctors, and people who can afford to repay their loans?

Warren. Who first borrows money to go to college? People whose families can not get a ticket to send to school.

Yes, most of the student debt goes to those with higher incomes, which applies to many people who have never been to college at all. But these are people who did everything right. Those who argue that cancellation is regressive get that result only when they look at income, not wealth. But wealth is even more important when we think about student debt. Low-income students who take out college loans may have higher incomes, but they have lower wealth. Low wealth is what keeps them from buying a home or starting a business or creating long-term financial stability.

When looking at wealth, let me emphasize that most loans are to those with zero household wealth. The average federal student loan debt for the lowest wealth quintile borrowers is twice as high as the average federal student loan debt for the highest wealth quintile borrowers. Only 4 percent of the richest 10 percent have student loan debt, compared to almost 20 percent of the wealthy three quintiles. So it is not regressive.

In fact, do you know how much Harvard students owe? [federal] money to go to school.

Harris. It must be less than 5%.

Warren. It is 2%. How many students at the University of Delaware borrow money to go to school? Fifty-five percent. And how many Grambled students borrow money to go to school?

Harris. I will say 80%.

Warren. Ninety percent. Now put those three together, tell me how repaying student loan debt is regressive.

Harris. Well, that brings us to another question. If you cancel student debt, how do you prevent this type of huge debt burden from re-accumulating, assuming the system stays the same?

Warren. Oh yes, we have to do two things: deal with the student loan debt that is currently crushing people, and find a reasonable way to pay for college. The second part is the education department, which is income-based repayment plans.

Now, the current version of the income-based repayment plan is, frankly, a mess. It operates in a way that looks very much like a subprime mortgage scam. But it should not be done that way. And now the Ministry of Education, as we speak, is revising that program so that when a person accumulates debt to go to school, when he goes out, he gets a manageable payment. And at the end of the repayment period, what is left is written off, so there are no accumulations at the other end.

Harris. One of the last things I wanted to ask was the legal basis for Joe Biden’s debt write-off. Some argue that the logic is flawed, suggesting that there could be litigation if the Department of Education finally cancels that debt. How do you react to the critics who say that the president’s program may not be satisfied in court?

Warren. I’m pretty sure the President of the United States can write off student loan debt because Barack Obama did it, Donald Trump did it, Joe Biden did it for tens of billions of dollars. The original permissive language that created the program so that the federal government could give people money to go to school contains a very broad language about it. Ability to rewrite and negotiate the terms of those loans.

And think about it for a minute. it makes perfect sense. When you take money from the bank, you go back to the bank and say, “I want to pay early,” or “I can not pay it all,” or “My toes are on the verge of bankruptcy.” – The bank, your creditor, always has the power to say: “Well, this is what I am ready to do. Can I change the interest rate there? I can forgive the director. ” The creditor has the power to forgive the debt in the relationship between each debtor and the creditor. I mean, that’s how they were created. It is a statutory issue. You know, I have taught the debtor-creditor right for 25 years, this is the most basic part of it.

Second, who exactly will sue? There must be an injured party. And I’m not sure who thinks they should sue because they do not like politics. It does not allow you to stand trial. So I’ve just heard it before, I do not know why they have not sued yet if they think they have filed such a good lawsuit there. They had many opportunities.

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