Barely Legally

Confessions of a Moot Court Bailiff

To Forgive is Divine

An opinion piece by “The Editors” at Bloomberg View thinks the government is getting ripped off in the student loan game:

It makes sense for the government to encourage young people to go to college, and it’s right to deal compassionately with cases of genuine hardship. But a better deal for taxpayers can be struck.

First, instead of offering affordable income-based repayment as an option, make it automatic, as Republican Senator Marco Rubio of Florida proposed last year. That way, small initial payments from graduates not making much money would be balanced by larger initial payments from graduates making more.

Second, stop forgiving loans after 20 years. For those on low-to-moderate incomes, capping payments in relation to pay is a generous concession in its own right. And the federal government already offers some loan forgiveness to graduates who enter any one of dozens of public-service professions. Adding the promise of forgiveness at a fixed point in time, regardless of the borrower’s financial circumstances, is an incentive to overborrow and a disincentive to early repayment. A system that forgave debt in cases of hardship would be defensible, as would allowing student loans to be discharged in bankruptcy (which amounts to the same thing). Automatic forgiveness has no such rationale.

The Bloomberg View: offering forgiveness at a fixed point in time is an incentive to overborrow and a disincentive to early repayment. The very next sentence: ‘hey, also we could just let student loans be discharged in bankruptcy.’

Are you kidding me? If student loans could be discharged in bankruptcy, I’d go to law school again, borrow the entire $200,000 cost and declare bankruptcy as I moonwalked across the damn stage. There’s an argument to be made for sensible reforms to the student loan regime in this country, but this isn’t it.