Editor’s Note: Our resident Poet Laureate, Ian Mcleod, shares his thoughts on Student Loan Forgiveness. You can read more of our thoughts on Student Loan Forgiveness here.
Time to take a position nobody expects.
Student loan forgiveness is an economic, moral, and cultural duty.
This is not to say college should be a free entitlement. Admission standards need to rise, administrative bloat curtailed, and useless degree programs abolished, as conditions of continuing accreditation. Tennessee has a good and sustainable model for free community college and vocational education, and internet schools are damn near free. If you want the traditional four year party, then you should have to pay out the ass for it without loans except, perhaps, in STEM+Pro fields.
1) Most of the loans are fraudulent. The 18 year olds who signed their future prosperity away were induced to do so with false promises and blatant lies. The lucrative jobs were actively being outsourced overseas, to H1Bs. Furthermore, useless degrees were being offered for fields which had no discernible benefit beyond barista at Starbucks.
2) Taxpayers already own 90% of the 1.5 trillion in loans, thanks to Obama. These loans are not dischargable, which is likely unconstitutional. Many to most will never be repaid fully. The moral hazard has already occurred, so what is left is a pragmatic debate over the least bad of all options. Forgiveness and reform is that least bad option.
3) These debts have contributed significantly to delayed and nonexistent marriage and family formation, which are significant predictors of economic success as well as physical, mental, and emotional well-being. This has affected two generations already and is beginning to affect GenZ.
4) Yes, it sucks that you did the right thing. So did I. I paid cash and worked my ass off for my own tuition then dropped out to start a business because I wasn’t learning much new in college and anything I want to learn, I can on my own. Autodidacticism for the win. But since I am a taxpayer and the situation is already a massive SNAFU, there is no reason to allow ideas of “fairness” to perpetuate a sunk cost fallacy. The taxpayer money is already spent and presumed lost. Obama and the Democratic Congress did that to bail out their rich banker friends. Holding on to this debt is little different from the gambler who is about to drop his last quarter into the slots because his “losing streak can’t last forever.”
5) Bernie is only half right on this issue. See above. Higher education needs reform to prevent this from ever happening again. Making it a federal entitlement will only cost the taxpayers who don’t get or need degrees even more money. If you want a higher education, pay for it. 2 years of junior college and CLEP what you can. Or take online courses. Bring back private lending but only for economically viable degree tracks.
6) The short term economic damage will be more than offset by the hundreds of dollars a month that the poor underwater bastards will be able to spend on economically useful things. Servicing bad debt is a huge drag on real estate, the automotive industry, small business formation, and disposable income from the very people who need to drive those sectors of the economy.
7) This differs from medical and other debt in that again, there was significant fraud, students were given bad information, and this debt cannot be discharged through bankruptcy, whereas other debts can. Allowing bankruptcy discharge in future will help prevent this, but that alone is insufficient to offset the damage that this system has already caused. A fraudulent contract is not a contract.
8) If someone needs to pay for it, it just so happens that universities, who benefited greatly from this fraudulent scheme, are sitting on some 500 billion dollars in endowments, and the banks can more than afford to be made to repay taxpayers for Obama’s bailout. A new tax on stock trading, however, is not the answer.
So there ya go.
There is a big difference between allowing them to be discharged in bankruptcy, wich I favor, and forgiving them without any consequences.
They used to be. Then the doctors and lawyers, who racked up notoriously large student loans, realized they could game the system by declaring bankruptcy shortly after graduation, before they officially had a job. Being unemployed made their loans appear unpayable, at least on paper, when near-future income potential was not considered. Even though they’d expect to land lucrative jobs in short order, compared to another less profitable majors, it looked bad. Banks grew tired of getting screwed by high-potential-income people declaring bankruptcy and defaulting on their loans, then promptly taking a job paying a quarter mil a year. So the law was changed and they were made non-dischargable to prevent immoral scum from gaming the system. OK-ish in theory, but it allowed the banks and universities able to game the system and screw /everyone/, particularly the honest.
Just allowing ordinary discharge in bankruptcy restores the bad old incentives. But SOMETHING must be done. Maybe make bankruptcy turn them into principle-only repayment, interest and compounding of the debt stops. Or convert it to seven years of 10% (max) of your /individual/ after-tax income. (want to encourage marriage and child-rearing with stay-at-home moms? THERE is one way to do it; graduate, declare bankruptcy, marry and have kids, then joint the workforce with some maturity).
Longer term, eliminating usury would help, or making the college hold the loan and suffer the financial consequences of the utility (or not) of their degrees.
I originally believed as you do, but look at the average age of the people paying on these loans.
Ten years ago, restoring the bankruptcy option alone would have been ideal and more than workable. But now we’re looking at a large percentage of the population who is effectively excluded from the most important sectors of the economy during their prime earning years.
And you are absolutely wrong about forgiveness being “consequence free.” The millions of borrowers are already miserable and are already looking at loan balances that vastly exceed the principal borrowed–a $35,000 loan on which they’ve paid $20,000 and still owe $32,000. They are damn well aware of the consequences–they live it every day when they get off their underpaid job and go drive for Uber on the weekend to make ends meet. They are asking for real solutions and real help, not some bullshit “life-lesson” (i.e., lecture) from the very generation who conned them out of all this money while shipping the jobs and factories offshore and importing tens of millions of immigrants. The delayed to nonexistent family formation is making many of the otherwise most willing and able to work of my generation sick and less prosperous. The lenders and universities need to face the consequences, not the students who got scammed.
Wipe out the debt and wipe out the federal student loan program so there are no new loans.
I worked through college.
Worked to put my son thrugh college.
And now when I am saving for retirement I have to pay to cover someone else through college?
1) kill the program
2) anyone taking advantage of debt forgiveness at the hand of the taxpayer gets a lifetime 10% income tax liability surcharge in exchange.
3) how is anyone ever going to learn a lesson if we pat them on the back and say “dont worry, it wasnt your fault”?
You are already paying for them. That is the rub. Your tax money already goes to cover these loans, the vast majority of which will never be paid back. I think many folks are picturing a college campus from the 1950s or something here.
It would curl your nose hairs to know how many of these soon to default “students” are homeless, inner city, or otherwise very non-traditional students, many working online only, who get huge loans with the promise that they can earn a big paycheck at the end of the educational journey, but have absolutely no way to ever complete the course of study. They are nearly illiterate in many cases. They take out multiple thousands of dollars of loans, but will never earn enough to pay the loan back. Then you will pay for it, as mentioned above.
These loans are predatory. They are given to people who should never get them and are not intelligent enough to understand the ramifications of taking the loan out. It is basically like tricking a 5 year old and then holding the child accountable for getting tricked. There is a moral issue involved.
Now, is this ideal? Of course not. No one here is saying this all rosy and good. We are saying it is the least bad option.
As Theophrastus points out, and I stated in the original post, it is already paid for. Obama federalized the student loans during the whole bank bailout thing. The best thing to do is what I stated in Point 8. Make the universities and banks pony up. But forgive the students entirely.
They already learned the lesson. That’s what you, and people like you miss. They are suffering. They are victims of predatory lending and baldfaced lies. They got scammed. People do tend to wise up quick when they realize they were scammed. What did the government do for the victims of Bernie Madoff? Did the government keep them in indenture because “it’ll teach them a lesson”?
No. The government has returned portions of the stolen wealth to the victims. Nobody has been made completely whole. And forgiving the student loans won’t make anyone completely whole, either–they’ll never get the years they have been paying only interest while underemployed back, after all. But no, you think they should be ground to dust for the rest of their lives because they were lied to by their parents, by their teachers, by the government, and by the lenders and institutions.
It is readily apparent that in your world, nobody should try to make anyone whole at all. Because you’re not thinking any of this through. The 1.5 trillion in student loan debt — that will never be fully repaid — is a major drag on the economy and will inevitably cause more severe recessions and potentially another depression. The people under that crushing debt will NEVER have retirement savings.
That means trillions of dollars in more taxpayer-funded entitlement programs over the next 50 years or more. If this problem is solved now, and in this way, it will save your children and their children from having to pay for the after-effects of your shortsighted egotistical desire for “consequences.” The students who borrowed are already well aware of the consequences, they live them every day–I’ve outlined them in the original post and in my response to tz above.
Theo and Ian, read my point #2 again. A 10% surcharge is not an unreasonable concession to help make the taxpayer whole. But the program MUST be killed.