December 14, 2021 10:45 a.m. ET
I shudder for graduates and parents who have grieved a six-figure debt to the government that accumulates interest above the market, is difficult to repay or renegotiate, and is essentially non-dischargeable in bankruptcy (“Why Congress Won’t Tackle Student Debt ”, Front page, December 9).
In my 20 years on the bankruptcy bench, I have presided over many student loan cases of people who have borrowed tens or hundreds of thousands of dollars that they cannot pay. There is a reason why no rational commercial lender would have made these loans: There is no chance that these borrowers will earn enough to pay them off. Unfortunately, there was not much I could do for these unfortunate people.
The excessive borrowing by students and parents that the government and schools encourage is a cancer to our economy. It limits the ability of students to start their economic life while seriously questioning the ability of their parents to retire. When things go wrong, these debts become virtual prisons for debtors, from whom even bankruptcy cannot free the students. Before taking out these loans, consider whether your expensive degree will allow you to live comfortably while paying them back. If not, then don’t.
Robert E. Nugent
Mr. Nugent was an American bankruptcy judge.
Congress could take a big step in solving the student debt crisis by ensuring that parents and students get the information they need to make prudent decisions. First, prohibit universities from describing debt as part of financial aid programs. University loans are debt, not aid. Next, require college letters describing aid (grants or tuition rebates) to include a table showing the estimated monthly and cumulative cost of a 10-year college loan at various debt increments.
Finally, require a forecast of the total cost of debt if the same amount is borrowed for each of the four years of college. After comparing these estimates to expected incomes, some families may accept debt, some may seek other college or career paths, and some may require more financial assistance. Colleges, in turn, may finally feel the market pressures needed to curb tuition fee growth.
Many bureaucrats in Washington are gaining a lot of influence and power through the student loan monopoly, which was designed to produce stealth law. Even now, Congress strives to forgive as much as it can without being scrutinized by reasonable people. For years I have told my students to look to the student loan market for the next big crash as more loans go sunk, but it rather looks like the crisis is simply being monetized by the federal budget.
As with mortgages, politicians have once again found a way to bribe a reasonable system of infrastructure investment (subsidized student loans) into a beast that encourages outrageous limitless debt, ruins otherwise stable credit histories, and ruins an otherwise stable credit history. will not be mastered without each special interest having its place at the table.
Assoc. Prof Tim Michael
University of Houston-Clear Lake
No one has forced anyone to take on this debt. The debt burdens that people now complain about have been freely chosen. There are dozens of relevant personal choices: whether to attend college or not, in-state or out-of-state, public or private, live on campus or at home, work while in college, or borrow as much as possible, field of study, what job to take after graduation, etc.
I dare say that I speak for the majority of Americans who haven’t bit more than we could chew when I say I’m sick of hearing about the overeducated debt burden.
Mt. Pleasant, Wisconsin.
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Appeared in the print edition of December 15, 2021 under the title “Think twice before taking out big student loans”.