Paul L. Caron

Monday, October 29, 2018

Brooks Presents The Curious Case Of Student Debt Today At Loyola-L.A.

Brooks (John)John Brooks (Georgetown) presents The Curious Case of Student Debt at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Katie Pratt: 

Student loans have become an issue of major political, economic, legal, and personal importance. Outstanding loans now exceed $1.5 trillion per year, and grow at a rate of $100 billion a year, exceeding credit card debt and auto loans. But student loans differ from the other kinds of debt in profound ways. The federal government make 90% of all loans, and all borrowers can opt in to programs where they can pay only as a percentage of their income and have the possibility of future loan forgiveness. These and other features of student loans reveal that student loans have evolved over time to become something much more akin to a tax-funded grant program, merely masquerading as debt.

Yet the legacy legal and institutional structures of debt persist, even though they are wholly inadequate to fit the financial realities and public policy goals of the current student loan program. Student debt exists it its own category, unlike any other form of debt, yet we still attempt to use these traditional structures. Nearly all of the problems with the current student loan system derive from this misapplication of traditional legal notions of “debt.” The United States could go a long way to solving the problems with the student loan program if it removed the debt label and identified the program by its real character—a tuition grant plus an income surtax on students. This Article proposes precisely that.

Lauren Willis (Loyola-L.A.) is the commentator.

Colloquia, Scholarship, Tax | Permalink


This seems to assume a constructive reality wherein more than about 8 to 10% of student loan debtors are actually in income-based repayment programs, loan forgiveness isn't a taxable event, private loans don't exist, and the majority political party isn't trying to get rid of some IBR plans, eliminate loan forgiveness on the rest, and knock back graduate lending limits to just $28,500/year, throwing hundreds of thousands of people to the whims of those private lenders (whose wares are not eligible for IBR plans), and staying in those IBR plans isn't largely at the mercy of one's loan servicer(s).

Posted by: Unemployed Northeastern | Oct 29, 2018 2:06:20 PM

"and have a possibility of future loan forgiveness"

And therein lies the rub. So far .1% of PSLF debt forgiveness applicants have actually qualified. There will never be any real debt forgiveness an mass under any of the programs. It is all just a hall of mirrors.

Posted by: JM | Oct 29, 2018 6:04:14 PM

I've received grants but I never had to pay any of those back. Also as someone who has worked in the private sector since law school I will not qualify for loan forgiveness and even though I use an income-based repayment plan, my federal student loan payment is my second biggest bill each month, with my mortgage being the biggest. To me it feels like plain debt.

Posted by: Nick | Oct 30, 2018 5:31:40 AM