Support for consumer debt write-offs is building.
Forgiveness isn’t the only big idea out there for reducing the economy’s reliance on private debt. Another one is to pay for things like homes or education with instruments that look a bit more like equity, and less like debt.Mian and Sufi suggested a type of mortgage in which the lender shares risks if prices fall, and rewards when they rise. Some lawmakers, educators and investors are applying a similar model to college financing too.
Mitch Daniels, head of Purdue University and a former Republican governor of Indiana, is one of the champions of Income Share Agreements. They work like this: Investors fund students, and get repaid — hopefully with a return on their equity — when graduates start earning the higher wages that a degreeHudson, the historian, also says equity-financing is better. But he thinks the government should play a role.
“The fact is, debt causes instability for a society,” Hudson says. Another lesson he’s drawn from studying credit over thousands of years: “Debts that can’t be paid, won’t be paid.”
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