For years, entrepreneur and billionaire investor Mark Cuban has warned of a “student loan bubble” created by skyrocketing tuition and fuelled by an endless supply of student loans.
A radical solution to the student loan problem would be to forgive all student debt, as a viral essay by Robert Applebaum proposed six years ago.
However, Cuban thinks massive student loan forgiveness would just make the bubble keep expanding.
“Forgiving the debt is the worst thing you can do, because all it does is bail out the universities,” Cuban said.
Loan forgiveness would just show students that “Uncle Sam” will forgive their debts, according to Cuban. That would encourage students to keep taking out big loans to pay hefty tuition.
If students’ debt is forgiven, he said, “you still have easy money for universities to inflate their tuition,” which would cause the price of an education to increase dramatically.
On Tuesday, President Obama unveiled a new set of initiatives to help people manage their federal student loans. The plan includes stronger consumer protections, as well as a website for student complaints.
“Anything that causes lenders and service companies to act fairly is a good thing,” Cuban said in a statement to Business Insider about Obama’s plan. “The challenge is that you can’t subsidise or forgive existing debt without very strict rules. Otherwise it allows schools to tell future students not to worry. They too will get some portion forgiven. Which in turn gives the school more leeway to raise tuition.”
Skyrocketing student debt has become a big talking point for Cuban. A few years ago, he even bought the domain “collegedebt.com,” which publishes a live update of how much college loan debt is held by students. The total is just over $US1.3 trillion.
This debt ultimately will outweigh most of the potential benefit you’re getting from the college education, Cuban said.
“What you thought you were going to get in quality of life by going to that college,” Cuban said, “you’ve just undermined with the amount of debt you’re taking on.”
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