Question:
If student loans were to be “forgiven” by the government, and the banks were to issuing institutions, why would any taxpayer approve of future loan guarantees by government, since, it will be a one way street and the loser is always the taxpayer.
Question:
If banks are the lending institutions for those student loans, and students are then forgiven those loans, why would any bank ever again make any loans to students?
Question:
Why would any business ever want to hire any graduate who started out his professional career wanting and getting his student loans erased from “personal responsibility”?
Long term, I think we have to get the government completely out of the student loan business and encourage colleges to set up their own sets of private lenders.
Hillsdale College in Michigan does exactly that. They don't even allow their students to take out government loans.
There are a handful of other conservative colleges working on similar arrangements. In Hillsdale's case, their lenders actually offer better rates than government loans in some cases because their kids actually graduate with useful, marketable skills and the default rate is very low.
Still, there will be many headaches in liquidating the government loans. Some can be sold on the open market.
Others would have to be written off. As a condition for the write-offs, some of the students should be able to fill public service jobs which are otherwise hard to fill such as medical services in an rural or inner city area.
The colleges who made such loans should also be compelled to eat a portion of them. Many of them have rich endowments which could be assessed to help pay them back. Signing up students to give you an income stream and not providing an education which has a reasonable chance of allowing them pay it back should not be cost free.
They need to be cleaned off the books one way or the other. For many kids (and their parents), the debt is simply not sustainable.