Posted on 03/14/2015 6:33:43 PM PDT by RightGeek
With global moral hazard having long ago become institutionalized, and codified as "monetary policy", catering almost exclusively to the TBTF entities in the financial sector, we were surprised it took as long as it did for Obama to announce (as he did last week), that the administration is now studying "new bankruptcy options" for student loan borrowers: code word for an across the board student debt moratorium, or forgiveness.
To wit from "Student Aid Bill of Rights: Taking Action to Ensure Strong Consumer Protections for Student Loan Borrowers":
The President is directing his Cabinet and White House advisers, working with the Consumer Financial Protection Bureau, to study whether consumer protections recently applied to mortgages and credit cards, such as notice and grace periods after loans are transferred among lenders and a requirement that lenders confirm balances to allow borrowers to pay off the loan, should also be afforded to student loan borrowers and improve the quality of servicing for all types of student loans. The agencies will develop recommendations for regulatory and legislative changes for all student loan borrowers, including possible changes to the treatment of loans in bankruptcy proceedings and when they were borrowed under fraudulent circumstances.
The President is directing his Cabinet and White House advisers, working with the Consumer Financial Protection Bureau, to study whether consumer protections recently applied to mortgages and credit cards, such as notice and grace periods after loans are transferred among lenders and a requirement that lenders confirm balances to allow borrowers to pay off the loan, should also be afforded to student loan borrowers and improve the quality of servicing for all types of student loans. The agencies will develop recommendations for regulatory and legislative changes for all student loan borrowers, including possible changes to the treatment of loans in bankruptcy proceedings and when they were borrowed under fraudulent circumstances.
Well, it didn't take long for virtually every leftist group: from the Daily Kos, to Democracy for America, to Campaign for America's Future and many more, to jump on this bandwagon, and demand - you guessed it - that the administration "cancel all student debt."
Sure, why not: leaving aside the very touchy topic of personal responsibility and accountability, in a world in which record debt is merely "replaced" by even more debt, and in which profits are privatized but losses are always socialized with taxpayers and future generations bearing the brunt in the form of a record $18.2 trillion in public debt (and some $7 trillion more if one adds the government-backed GSEs which one should), why not go ahead and "cancel" the debt. And don't bother trying to explain the simple math that debt is never cancelled, as every liability is someone's asset, and that asset holder will demand to be made whole in the form of more debt elsewhere or else, like Hank Paulson in 2008, it will scream mutual assured destruction and threaten to blow up the world unless bailed out.
In short, what all the concerned entities listed above are saying is not "cancel all student debt", which is impossible, but share the burden of the 43.2 million "student debtors" shown in the chart below, with everyone.
After all, "it's only fair."
Finally, since nobody, anywhere is harboring any doubt that any of the record debt the world is burdened with will ever be repaid, and instead will eventually be hyperinflated away even it means paradropping bags of cash, this proposal actually has a good chance of passing (sorry future generations not only in the US but around the globe).
Once it does, and once colleges know they can charge anything for tuition, room and board - because the debt funding it will be socialized and ultimately "forgiven" - prepare for the green line below, already exponential, to go... vertical.
I’m with you. My daughter and son-in-law paid off $60,000 in student debt in two years. They lived bare-bones for those two years but have since bought a house and are doing really well.
They will be really pi$$ed if other just get to walk away.
They are both conservative voters, too.
Instead of canceling, why not deduct it from their social security?
Neil Cavuto (FNC) wondered about the rights of taxpayers who will have to pick up the tab.
epic fail.
She’s lost my vote. But it’s not like I ever had any consideration for her.
Cruz or lose
Hell, why not forgive all our debts.
I want in. Everyone’s home(s), vehicles, college debt, credit cards, lets just forgive it all.
Problem? What problem?
Oui...
And their transcripts erased. No pay? No degree, no credits, nothing. Busted back to a high school diploma.
When will Americans start demanding that comrade dictator obama start making reparations to them for that portion of their lives and freedoms he steals from them every day.
“colleges know they can charge anything for tuition, room and board - because the debt funding it will be socialized and ultimately “forgiven””
I think it is likely to be the opposite. This will devastate colleges and universities, because unless tuition is directly funded by the government, nobody will be able to pay - and they will not be able to sustain their administrator-heavy business models secured by debt-enslavement of their graduates. Just like hospitals can’t survive in their present form on medicare/medicaid reimbursements alone.
Universities that successfully navigate this, should it occur, will drastically (and proactively) reduce their overhead. Some, probably most, will be unable to do so and will become insolvent. What emerges from the other side of this insolvency is impossible to predict.
In the end, the cost of an education will be forced to adjust to the free-cash flow of the parents of prospective students. This is not an optimistic view from a universities perspective.
I recently made my last payment (full-boat) for my youngest childs university. The arrogance presented by this particular university when ANY fee was questioned is astounding. While the education was excellent, it cost a lot more than it should have at a state school. They deserve to be devastated and their ivory-towers destroyed as they have incurred cost for opulence and excess in organization and in service delivery.
Future education after an event like “debt forgiveness” will be austere and probably impart more knowledge to the student, though there will be far fewer students attending.
We shall see.
“It’s not right for the taxpayer, schools and landlords of these “students” to bear the burden for benefits enjoyed using the student loan.”
Yet the bulk of student loans will not be repaid. It’s the nature of bankruptcy. A large number of these loans are worthless. There are no assets to reclaim. The punishment will be a mark on their credit. That’s it.
“One person’s debt is another person’s asset”
True, but how much is a “promise to pay” from someone who has no job and no other assets? It’s mostly unsecured debt - and as a result has little value.
“And their transcripts erased. No pay? No degree, no credits, nothing. Busted back to a high school diploma. “
There will be nobody left at most colleges/universities to verify degrees. They will be out of business if this happens.
I am 72 and still owe 98,000 on the VA loans for my two kids. It is forgiven at my death.
I have been paying $650.00 / per month for the last 12 years. Don’t think I
Will get it paid off. Served 1966/68. Don’t feel guilty at all.
When the government took over the student loan program, they made the loans not subject to forgiveness by bankruptcy.
“When the government took over the student loan program, they made the loans not subject to forgiveness by bankruptcy.”
Yes, and this article is about returning to underwriting sanity and allowing bankruptcy to include student loans, among other things.
Look, I’m not happy about kids defaulting on loans - having paid full-boat for 2 kids, but if you want to talk about “personal responsibility” one must include the lenders in the equation.
Did the lenders really think you could saddle an 18 year old kid with debt and it be risk-free?
Well guess what? Even though presently you cannot discharge student loan debt in bankruptcy, it’s still not going to get paid back in a large number of cases.
It’s the definition of bankruptcy - whether one chooses to recognize it from a legal standpoint or not.
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