Should Student Loans be Forgiven?

The issue of student loan forgiveness has recently been a contentious issue in modern politics, and is a issue we face often at HESAA, New Jersey's Student Loan department, Historically, student loans were issued primarily by private banks, and even then primarily to the children of the reasonably well-off, and so concerns about loan forgiveness and default were minimal, especially when college graduates seemed to be guaranteed high-paying jobs. However, the modern employment market demands bachelor's degrees for most entry-level jobs, and rising tuition costs mean that more people must borrow their way to an education than ever before. This, combined with recent scandals involving for-profit universities, has led many to clamor for more lenient policies regarding loan forgiveness.

Originally, the thinking behind making student loans so hard to forgive was a fear by private banks that new graduates would simply declare bankruptcy as a matter of course. Before the 1980s, most college students had no credit to speak of and there was a general opinion among bankers and regulators that students would not see bankruptcy as much of a penalty, since they would leave college with low income and low savings anyway, and could simply enter the job market with a bad credit rating and build it up over time. As such, banks argued that student loans should only be forgiven in the event of death or total and permanent disability. Basically, if the student was still able to function on some level, they should be forced to repay the loan, since the bank had no security other than the potential employment of the student.

The opinion on this began to change rapidly after the 2008 financial crisis, where an increased focus on lending regulations in general revealed numerous hardship cases where persons had either been deceived about the likelihood they would be employed or were simply unable to pay due to massive job losses in their industry. Additionally, there was increasing concern that the current system forced students to only choose high-paying jobs, as they would need to pay off large loans prompted by ever-increasing tuition prices.

In response, in 2010, Barack Obama signed a bill that would mandate that federal government agencies such as HESAA manage all student loans, and that they would offer new programs to enable graduates to have their loans forgiven. These programs are there to help students who give back, but also come with certain requirements to qualify. You can see a list of programs available for New Jersey students and their eligibility requirements by visiting this link on HESAA.org.