Posted on 08/15/2019 10:47:55 AM PDT by grundle
Sen. Elizabeth Warren wants to cancel student loan debt for 95% of debtors. Fellow 2020 hopeful Sen. Bernie Sanders wants to cancel all of it. What they and every other statist and socialist eager to default on trillions owed to taxpayers forget that President Barack Obama nationalizing student loans brought us to this catastrophe in the first place.
Lost in the kerfuffle and fuming of the Affordable Care Act's passage in 2010 was the Health Care and Education Reconciliation Act, signed into law just seven days after Obamacare. Half of the act consisted of small and otherwise innocuous amendments to the ill-fated Affordable Care Act, but the other half, Title II, radically overhauled the country's student loan industry, replacing federally backed bank loans with direct government lending.
The private student loan industry was already dysfunctional and never truly private. The largest private student loan lender, Sallie Mae, originated as a government-sponsored lender, and the government-subsidized market only emerged out of a small but much older federal student loan market. But Title II replaced a mess with a nightmare.
Universities took advantage of the new, easier loan requirements to raise tuition rates still further. From 1995 to 2012, the average tuition at a 4-year private college had risen by 30%. In the following four years alone, it spiked by another than 12%. Researchers at the New York Federal Reserve Bank famously found in 2015 that the pass-through effect of subsidized federal student loans on tuition raised rates by 60 cents for every dollar of loans spent. Although lefty politicians love to hate on fraudulent for-profit schools and blame them for the problem, only 9% of all college students in the country attend for-profit institutions. More to the point, nonprofits still act like for-profits anyway.
For decades, student loan debt had remained in the low hundreds of billions, but during Obama's presidency, it exploded from $150 billion to more than $1 trillion, the overwhelming majority of which is owed to the government. As student loan debt continues to spiral upward, the federal government's revenue streams for the programs are becoming more tenuous than ever. For instance, the Department of Education has found that income-driven repayment plans, which allow lower-income borrowers to dodge payments and receive complete debt forgiveness 25 years after the loan initiation, increased by 625% alone.
Now Sanders and Warren want to erase the whole thing with a magic wand and nationalize the colleges' tuition-hiking scam.
On a moral level, canceling student debt more or less translates to defrauding taxpayers. On a practical level, it defeats whatever incentive structure we've attempted to build into the loan process. Whereas home loans are secured by houses as collateral, debtors can't exactly take your brain away when you default. To send a message both to students and colleges that loans constitute free cash will then only exacerbate the tuition crisis we face.
The federal government set the stage for this problem, exacerbated it by subsidizing and regulating private student loans, and finally sent it into a trillion dollar tailspin by nationalizing the whole mess. If the past serves as any lesson, the government's best bet is to get out of this imploding industry entirely and refocus on forcing colleges to get some skin in the game.
On purpose.
It’s the Democrats’ greatest vote buying opportunity EVER!
I would personally profit from this, but I’m not voting for anyone stupid enough to actually do it. As it stands, my outstanding debt is increasing, as the payments I’m making on what was a $100K debt don’t cover the interest. It looks like I have about 20 more years to pay, which will take me well in to my 90’s. I figure I get to work until I drop.
Add that much more debt to the national deficit, and all the preppers are likely to need their supplies and bug-out locations really desperately.
On a moral level, canceling student debt more or less translates to defrauding taxpayers.
I can't think of one thing the federal government has done that is not a fraud on some level.
And just wait til the lawsuits start coming in from those who paid back their loans and want a refund.
I’ve got mixed feelings. On the one hand, I’m against bailouts and for personal responsibility.
On the other hand:
1) banks, car companies, airlines, so-called “green” energy companies and seemingly anybody else connected to Democrats got bailed out under Obama so hell, why should I get left out?
2) onthe one hand schools have jacked up tuition ever higher vastly outpacing inflation.....while simultaneously government policies from making outsourcing ever easier to handing out H1b and other work visas to seemingly half the planet - and just refusing to defend the border or enforce immigration laws have kept wages in the US far lower than they would otherwise be and made lots of good jobs disappear. The result is Gen X and Y and now Z being squeezed on both ends.
I agree. Also notice how in all of these conversations on this topic never once do the people in charge call out the universities? I wonder why that is.
By design. Defeat the capitalist system by making money, and the morality of paying back promissory notes irrelevant. IOW make our society in the likeness of the Marxist’s manipulating the system. Liars.
College tuition at high-end colleges has gone up about ten-fold since 1975.
My first year tuition was $3,300 in 1975, which was on the low end for a private school back then.
Now my alma mater charges about $50,000/year, which is a common amount.
I have mixed feelings too. On one hand it creates moral hazard and will show up in higher tax rates or inflation to pay for it, on the other hand it will free up a lot of discretionary income for consumer spending that is otherwise eaten up for student loan payments.
Mine keeps rising too as they continually resell the dept. My loan was for under 2,000 and I’ve more than paid that off plus interest over the years.
I thought of going back to school and discovered my debt was just under 2 grand so when social security began taking a chunk of my check, i didn’t fight them on it. Next thing I knew, they resold the debt and it immediately jumped to 7grand over night.
If obamas law is still in effect, then my debt should be clear this year. Howeever, I’ve been disabled for 10 years and they shouldn’t have garnished my check, but they did. Social Services told me it was illegal for them to do thatn but I really wanted to pay off at least the principle plus some interest. But because the debt keeps getting resold, they have me by the short hairs.
The policies do have to change to something more reasonable like simple interest instead of compound.
As it is, my degree was worthless to anyone but me.
“It’s the Democrats’ greatest vote buying opportunity EVER!”
I went to college leftist.
I soon became a Republican, when I found out I couldn’t get food stamps simply because I was a student, which was the case back then.
I guess I didn’t totally waste my parents’ money.
Most graduates now turn right with their first 1040 filing. The Democrats want to prevent these right turns.
“it will free up a lot of discretionary income for consumer spending that is otherwise eaten up for student loan payments”
My timely student loan repayments probably made me more mortgage worthy.
“It looks like I have about 20 more years to pay, which will take me well in to my 90’s”
A recent Financial Times article said that nearly 40% of the over-65 federal student loan debt is in default.
They did, but right now I think there is another consumer debt crisis brewing. As it stands consumers are tapped out and appetite for consumption for millennials is blunted by their student loan debt. I’m not saying it’s right (I’m a homeowner who is and has been dilligently paying his student loans!), but I think it would be a fantastic economic stimulus.
But seriously - most of this discussion is missing the big picture.
Debt as money is an experiment, and the experiment is starting to fail. In my goldbug days, I could tell you all about the French cahiers, Dutch tulip mania, and all the rest. But, I did eventually stop throwing away my little green slips of paper on useless metals (and I still think the scenarios for buying food with Krugerrands all really imply investing in brass and lead).
That having been said - in addition to the fact that usury is sinful, and the counsel to "neither a borrower nor a lender be", we now have ample evidence that human nature combined with credit-as-money leads to widespread impoverishment, debt slavery, market distortions, and the diversion of investment capital to the creation of Pedophile Islands, hideouts on the South Island of New Zealand, and other useless things.
The "student loan crisis" is one face of the "absence of sound money crisis". When all the debt is unwound (and I don't know if that will be before or after the last capitalist is strangled with the guts of the last Dean of Admissions), a lot of debt is going to be forgiven.
It os just as necessary as it was in Bible times, because nothing ever really changes.
“radically overhauled the country’s student loan industry, replacing federally backed bank loans with direct government lending.”
So giving millions (nearly) free health insurance would appear to have been substantially paid for and the PPACA appear to be far less costly than it actually is.
Bush II screwed everything with his every person should go to college. Dummy. Obama made it worse. After carter, Obama and Bush II are the worst presidents in history .
Right now a significant chunk of the population is essentially locked out of ever becoming home buyers due to student loan debts.
It’s not as simple as saying they got useless degrees or are work shy/lack discipline in spending. The Great Recession put a lot of people in a bad position who otherwise would not have been and the Cheap Labor Express has effectively sucked a lot more money out of their pockets. This is a big reason why millennials are the first generation worse off than their parents.
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