October 26, 2011
President Obama has announced a plan to cap student loan payments at 10 percent of income, yet it’s nowhere close to what organizations like Move On.org and some in the ‘Occupy’ movement are demanding.
With Americans’ student loan debts reaching 1 trillion dollars this year, there have been a number of noisy people calling for the federal government to erase student loan debts entirely in order to create ‘stimulus’ for the economy.
Most student loans are either direct federal loans or federally backed private loans. In the case of the later, if the government were to still meet its obligations to the private lenders, then that would amount to a bailout with money that was either taxed, printed, or borrowed and thus not ‘free’. If the government were to back out of its obligations to private lenders, then private lenders would wisely stop working with the government and stop issuing student loans or tighten their standards when awarding them. That wouldn’t be bad in the sense that it would give the free market a chance to come up for air, however if those in debt– for whom there are less and less jobs available– defaulted on these loans we could be looking a brand new crisis (on top of others) much like the subprime crisis.
In the case of direct government loans, the government could forgive that debt. What would result is a temporary freeing up of cash in the economy, keeping alive a comatose patient– the victim of a failed Keynesian system– for a while longer during this election season so that those who got their debt erased could thank their leader, forget their anger, and act surprised again in a few years when the impact of that stimulus ran out and the economy started melting down once more…all because the fundamentals of it were never sound, and nothing about how the government or the industries it subsidizes does business ever changed.
But letting economic arguments go for a moment, nobody who is calling for this student loan forgiveness seems to be addressing the obvious problem with doing it– it’s not fair!
And it never can be. Not for…
1) The people who have already paid off their student loans.
Yes there are people– not just our baby boomer parents– who have done so. They have made sacrifices in this economy, ignored the “this isn’t what I went to college for” chip on their shoulders, and taken those horrible jobs getting screamed at on the phone every minute of every day in a call center, or flipping burgers until two in the morning every night. They may have lived with their parents (not exactly “cool” when you’re out of college) delaying that final step to adulthood for a few years so that they could get those debt chains off of their necks before they began worrying about rent payments. They didn’t get married right away, they were careful not to get pregnant before they were ready, and they didn’t buy a new car . The crowd that likes to throw the word ‘fair’ around when asking for the government to wipe out their debts needs to explain how this would be fair to the people who delayed their consumption because they didn’t have a crystal ball and thus lacked the ability to know that an angry mob would one day metaphorically storm the records office and burn all the books. Some may argue that not every person’s circumstances are equal, and that is true– there are no societies in which everybody is equal unless you’re talking about North Korea where most of everyone is starving to death– but when a person takes on debt that means that at some point a choice was made by them to do so, knowing what their circumstances were.
But if you want to go far enough, let’s assume that we try to make debt forgiveness fair for both those who were forgiven of their debts and those who paid them off. How do we do that? Do we refund student loan payments? Where’s that money going to come from? (Printing or borrowing…can’t tax it because that would be taking money away only to give it back.) Where do we draw the line in picking those whom we choose to refund? People under fifty? People under forty? Thirty? Maybe we could base it on specific circumstances…then who decides the circumstances and how are we going to pay for the labor of the people in the new offices that will need to be created in order to oversee this process? (Again, printing or borrowing….you know that further destroys our currency and standard of living, right?).
Such considerations quickly become a bottomless pit.
2) Those who passed up higher education out of fear of debt.
Yes there are people– whether they be cleaning toilets, decorating cakes, or in some middle management position at an office– who decided that the B.A., the M.A.,or the law degree that they considered chasing wasn’t worth the debt that would shackle them after they got it. Maybe they decided to invest in a college fund for their children instead, or perhaps they watched a few videos on You Tube and saw this crisis coming way back when the mainstream media was still laughing at people like Ron Paul. People who– lacking that crystal ball mentioned earlier–may have made different decisions if they had known that the esteemed degrees they considered getting in order to improve their resumes and their incomes (or simply to be able to pursue their dream jobs) would one day be rendered “free” by the desperate powers that be.
Is there some way that we’re going catch everyone up with their peers, who individually decided to take on the debt they’re now demanding be forgiven? Some suggest making higher education “free”, ignoring the fact that anything involving people’s labor is never “free” and has to be paid for. (Taxing, printing, or borrowing).
But if we’re going to go ahead and do that, then I want to be a lawyer.
Hey wait, so do millions of other people. We can’t have all of them become lawyers, otherwise there will be too many lawyers. The government could issue a test and just pay for those who get the best scores to become lawyers. But then who decides how this test is written (people will inevitably claim that the test is biased in some way), and what about the people below the cut off line? If they’re forced to pay for their degrees, then that will undermine the whole notion of education being “free”. The government would then have to decide how many lawyers are needed in the country and plan it so that only a certain amount of people from each generation can be lawyers and nobody else.
If you’ve read any history books, you know that’s the first step to a really bad place.
3) People currently getting their degrees.
Yes there are people– many– who are still in universities and will be facing the same debts and the same poor job market when they get out. In a future where student loan debt was erased for those who already received their degrees, the only mistake these mostly younger people will have made is not being born earlier and thus not being old enough at the right time to reach the goodie bag when the big kids ripped it apart. To those who think the stimulus from the student loan forgiveness will create jobs and improve the career prospects of future graduates (putting aside for a moment the argument of whether or it not it actually will) that doesn’t change the fact that the young people will still be stuck having to pay their debts while their older counterparts no longer have to. As well, the question will then arise “if the government did it once, why won’t it do it again?” So the logical thing for these young people to do would be to not pay their student loans, let the country be driven to the same precipice, and let the government repeat the same hasty act of surrender.
Hey then, can’t we just make higher education “free”? (See #2)
Sarcasm aside, the purpose here is not to overlook the fact that people are suffering because of their student loan debts, or to draw attention away from the fact that higher education in our country has become an expensive trap for most Americans. Not all the people defaulting on their student loans now are doing so because they are irresponsible. Some of them may have legitimately fallen on hard times and are victims of our failing economy While talking about personal decisions it has to be measured in the context that many of the people struggling now were raised in a system that assured them the center would hold and that there would be a future for them in which there would be stability. Growing up we were taught that having a reasonable amount of debt was a part of life, and that everything would be okay as long as we worked consistently in our chosen careers and made our payments each month. The lack of a crystal ball mentioned previously applies to these people too, and given the reality around them it’s unreasonable to assume that most people brought up in the indoctrination camps we call public schools (which proudly fixate on wars we won and the fact that we ended slavery but hardly mention the Federal Reserve system), while watching the corporate idiot boxes at home (before the Internet took off), and being told “everything is fine” their whole lives are going to have the wisdom of Thomas Jefferson when they’re 18-25 and being told to sign the bottom line by the pleasantly smiling people in the financial aid offices of their universities. What we face now in the big picture is the culmination of decades of manipulation by the Federal Reserve cartel and the misplaced trust of generations of people who simply sought successful lives and never had the seed planted in their minds that perhaps disaster was waiting for all of us down the road. In regard to student loan debt, we are looking at the result of big government policies blowing costs sky high. The existence of the third party payer makes taxpayer money available to universities and thus doesn’t force them to work directly with their customers and their customers’ incomes to maintain costs at reasonable levels. There is no silver bullet fix to this situation. Too much government is the problem and there is no way to undo past mistakes with more government intervention. The only reasonable thing the government could do now is admit its failure.
“But still, why not forgive student loan debt?” some might ask. “Okay, it’s not fair to all those groups mentioned above, but who said life is fair? We can’t have all of these people perpetually in debt if there’s no means for them to pay it back.”
Forgiving student loan debt with the stroke of a pen is not going to make the underlying problems of our system go away. More importantly, most people are against it. The Huffington Post recently admitted that according to a Rasmussen poll, 66% of Americans oppose forgiveness of student loans– a big chunk of the 99% that many student loan forgiveness advocates claim to represent. If you read the comments on articles discussing this idea, most of them are hostile at just the suggestion of student loan forgiveness, mainly because a lot of people fall into the categories already mentioned above While some individuals would be taken off the hook, others in the groups I’ve listed would be so wronged that no amount of patriotic rhetoric and talk about “we” would be able to rectify it. What faith can anybody have in a system without dependable rules? Questions would be asked, such as, “If Joe doesn’t have to pay his student loans and I already did, then why should I have to pay taxes?” Suddenly the people that some call “sir” or “mam” who got their student loans forgiven and are enjoying the rewards of their degrees would look to those who paid off their loans or passed up higher education over fear of debt less like fellow Americans and more like the undeserving sheep that God (or rather government– the God of socialists) unjustly favored.
It was bad enough when it was the banks. At least the so called “99 percent” were generally united in condemning that immoral fiasco.
Yet erasing student loan debt, while rewarding some, would create a division within the people that would undermine the foundation of our society. Whether quietly or out loud, those who weren’t rewarded (except with patronizing talk of how they should feel good about themselves and also be happy for the “99 percent”)– would rightly disavow their allegiance to the government of the United States (not the U.S. Constitution but the failed government that trashed it) and divorce themselves from their collectivist neighbors who say “We” but really mean “Me” when they make such demands.
Spite alone wouldn’t condemn the nation as a result of erasing student loan debt, but the loss of the last string of trust anyone had in the American system and their fellow man would. After all, when the rules go out the window, the game of civilization is essentially over. If the banker presuming over the monopoly board won’t stop cheating in favor of his friends (the bank bailouts) or those he’s trying to shut up (student loan protesters), then the next logical step for everyone else is to either quit playing or turn the board over out of anger. Translated into the real world, it’s a situation that would shatter faith and leave Americans with no reason to follow the rules except out of fear of heavy handed force– a society none of us want to live in.
If the ‘Occupy’ crowd is really concerned with the general consensus then let them know now that they don’t have it with this demand, and drop it in favor of solutions that actually make sense.