Education / Schools, Money, Student Loans

Student Loan Bailout: Are Loan Forgiveness Programs In Danger?

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While the vanguard of the student loan bailout movement pushes on (vanguard = me and this guy), the bailout army is in danger of being outflanked. The New York Times has been reporting that student loan forgiveness programs may not be on solid ground, especially at the state level:

If you want to become a public defender, Georgetown University can be a great place to get your legal education. So Heather Gatnarek expects to take on well over $100,000 of debt to get her law degree there and hopes to graduate in three years.
Here’s the problem, though. She’s relying on a new federal program that forgives part of the student loan debt for graduates who enter public service fields. And she was scared out of her mind when she read a New York Times article on Wednesday on problems in Kentucky, where significant cuts in one of its loan forgiveness programs have put thousands of indebted public school teachers and nurses in a painful financial squeeze.

This must be how Roman generals felt when Hannibal was teaching them about double envelopment.
In fairness, we all know 1Ls who come in with humble dreams of working for the public good. Usually, money talks while commitment to public service walks. But given the retrenchment of the Biglaw market, absent strong loan forgiveness programs, many students will be looking at some tough options:

“I would be completely up a creek” without a loan forgiveness program, Ms. Gatnarek said. “I don’t know what I would do. Marry someone rich, I guess. People say that I could just do corporate law for a few years, but I wouldn’t last two days.”

Is this just a problem in a few states? After the jump, the NYT tries to find out.


The New York Times tried to take student loan forgiveness organizations to task:

The problem is that many of those running the programs also admit that there are no guarantees that financing for the loan forgiveness programs will survive the next state legislative session (or that the economy will improve enough for them to find other ways of financing the forgiveness). We found this so disturbing that we decided to call up every single entity, state or federal, that we could find that offered loan forgiveness programs. Then, we asked them point-blank if they would like to offer an absolute promise to borrowers or potential borrowers that the loan forgiveness programs would not go away while the borrowers were still using them.
Some states ignored us or didn’t call back in time. Some were stumped entirely and said the question actually raised Constitutional issues, which left us a bit befuddled (and there was a trained lawyer in our posse). A few insisted that theirs was not a Kentucky situation, so scared were they of being tarred with that state’s taint.

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Translation: you need to have your loan forgiveness backed up by Wu Tang Financial.
But should the instability in the loan market discourage people from going into debt for higher education?

We know, we know. How irresponsible of mere teachers to take on that much debt in the first place, right? Many of the online commenters on the article in Wednesday’s paper certainly felt this way.
But if education is a fundamental right, then it’s hard to argue against public policies that try to make sure there are enough teachers to provide that education. And if loan forgiveness is what it takes to get teachers to head to rural schoolhouses or poor urban schools, then that would certainly seem to serve the national interest.
So loan forgiveness programs are not some sinister form of social engineering. Nor do they encourage overindebtedness, per se. Education costs what it costs, and if you need to borrow to attend and intend to eat while doing so, then borrow you must. In fact, borrowing to prepare for a career in nursing or law enforcement makes perfect sense if governmental entities are promoting loan forgiveness programs.

“Education costs what it costs.” I don’t accept that premise. When are we going to turn our pointy pitchforks on law school tuition?
Unfortunately, tuition isn’t likely to come down as long as so many people are eager to go to law school in the first place. Nobody expects the Spanish Inquisition, and nobody expects “overindebtedness” to happen to them.
Students Relying on Loans Wonder Whether Forgiveness Will Last [New York Times]
Earlier: Student Loan Bailout. We Are So Going to Make This Happen
Student Loan Bailout. Just Do It.

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