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Student Loan Forgiveness

[1]

Some students in a Women’s Studies class at the University of Wisconsin, where an undergraduate degree costs approximately $110,000 for state residents, according to the university’s own website [2].

3,415 words

Student loan forgiveness has been in the headlines quite a bit lately. One of the articles is “Warren urges Biden to cancel student loan debt before midterms [3]” by CBS News. Although Pocahontas is a legislator and surely must be aware of the separation of powers doctrine, she curiously takes the position that the student loans may be erased if Resident Bidet decrees it so. (Maybe that’s because the Constitution only applies to real presidents?)

Elizabeth Warren says that it would help her party’s prospects in the next election. That much is plausible, and I’ll add that it certainly would throw a very big and juicy bone to their base. As the article describes:

Canceling student debt has been one of Warren’s main goals in recent years. She has repeatedly pushed the Biden administration to extend the student loan payment pause during the pandemic and released new data [4] this month showing that canceling $50,000 in student loans per person would erase all debt for 36 million borrowers, or 84% of those with loans. Last week, she discussed her proposal in an op-ed for The New York Times [5], where she laid out ways her party could avoid a disaster in the upcoming midterm elections.

What she doesn’t say here, and what the flurry of mainstream media articles seldom mention, is what exactly it means to cancel all these loans. Does this mean that thousands of filthy rich banksters are going to cry in their beer because the government told them to take a haircut? Of course not.

Where does the money come from?

To get the answer, we’ll have to turn from CBS News to an article by the much more obscure KOLR Springfield: “Who pays for student loan forgiveness? [6]” The Nexstar Media Wire correspondent Addy Blink has an answer, short and to the point:

If Biden were to more broadly cancel student loan debt though, who would pay?

The first and obvious answer is the federal government. [. . .]

Canceling student debt could cost anywhere from $245 billion (if Biden’s proposed $10,000 per borrower is approved) to $1.6 trillion for all federal loans to be erased, according to a report from the Committee for a Responsible Federal Budget [7].

Ah, here’s some straight talk at last! That means that all these student loans will be put on taxpayers and future taxpayers. I kinda sorta figured, but yanno. . .

Note well that things weren’t always this way. These toxic debts have been piling up for a while, amounting to massive cases of budgetary constipation. What Pocahontas doesn’t mention is that in earlier times, the politicians exempted student loans from bankruptcy except under very narrow circumstances. (That was probably unconstitutional.) Bankruptcy is a relief measure giving a second chance to someone who is hopelessly drowning in red ink. Putting it another way, it’s when an overwhelmed debtor welches in court, and the filthy rich banksters will cry in their beer because the judge tells them to take a haircut.

Anyway, that’s an awful lot of lettuce. I’m reminded of the apocryphal quote [8] by Senator Everett Dirksen: “A billion here, a billion there, and pretty soon you’re talking real money.” We soon may have to update that one to the Current Year, speaking of trillions instead of billions adding up to real money. I’m also reminded of a line from the first Fascist Decalogue: “Do not ever say ‘The Government will pay . . .’ because it is you who pay; and the Government is that which you willed to have, and for which you put on a uniform.”

[9]

You can buy Greg Hood’s Waking Up From the American Dream here. [10]

How much swag are we talking about? Nothing is written in stone yet and discussions are under way, but there are three major proposals: writing off up to $10,000 of existing loans per borrower (the original Bidet campaign promise), writing off up to $50,000 (the Pocahontas counterproposal), and writing off all outstanding student loans. Again, according to the figures discussed earlier, the least radical proposal means a $245 billion payoff, and the most radical one is a cool $1.6 trillion. The first is comparable to the inflation-adjusted cost of the Apollo Moon landing program, and the second is roughly as expensive as America’s Middle Eastern spit-in-your-eye wars. Divided per American citizen, these figures for the least costly and costliest plans are about $742 and $4,849. Whichever plan we get stuck with, since barely more than half the public pays income taxes, the average burden will nearly double if you’re one of the chumps like me who must give unto Caesar.

Did I mention that’s an awful lot of lettuce? The student loan borrowers will get a bailout, but who’s going to bail out the taxpayers? Since a big tax hike would be unpalatable, the politicians will probably fall back on the usual cop-out of adding it to the national debt. Let’s swipe that Federal Reserve credit card yet again, and our grandchildren can figure out how to deal with it, right? Alternatively, the government can print money like there’s no tomorrow, as it’s often been doing lately. That, of course, will add to the existing out-of-control inflation rate, which effectively is like an invisible tax on everybody. In economics, there’s no such thing as a free lunch.

To reduce the sheer burden, the Bidet junta is considering an income cap on the recipients. (Note that this probably isn’t Resident Bidet’s own idea, since the Commander-In-Cheat literally takes orders from the Easter Bunny [11], but rather this comes from whoever is feeding the teleprompter.) Reward the impractical and imprudent, and penalize the successful who chose profitable career paths — great idea . . . Either way, at least we can rest assured that thousands of filthy rich banksters are not going to cry in their beer because the government told them to take a haircut.

What’s the matter with this picture?

Pocahontas does have a point that large student loans are burdensome on borrowers who had to drop out due to unforeseen circumstances, or otherwise bit off more than they could chew. She’s probably right that a well-timed student loan writeoff would help her party during the midterm elections. I’ll add that this is a rare example of a benefit mainly to the country’s most neglected social class: those who are too prosperous for public assistance but not rich enough to get anything out of corporate welfare. Still, not all thoughts on the matter are positive.

Understandably, there are going to be over 100 million taxpayers who won’t benefit from this, and therefore will lack enthusiasm about socializing the debt burden for other people’s mistakes. Even liberals will get sticker shock when they find out how much they’re going to get pickpocketed for because of unprofitable degree plans for people they don’t know. If the proposal goes through, then there will be resentment by multitudes who — like I did– worked hard to pay off their own student loans, yet will be forced via taxation to give a free ride to today’s debtors who found out the hard way that there’s no money in Underwater Basket-Weaving. Those who didn’t go to college themselves, in some cases because they couldn’t afford it, will likewise be unenthusiastic. If the payoff comes to pass, future students will be less motivated to repay their loans; the precedent will make them want to welch until the government passes the buck to taxpayers yet again.

If this inaugurates a tradition, and cycles of politically-timed payoffs are just going to be the way things go from now on, then one might as well make higher education free. There are certain countries that do this and make it work, such as Britain. However, there’s the risk that socializing the university system might turn it into one of those massive government programs that function badly in the United States, no matter how well they might work elsewhere. Students would woefully call themselves victims of fascism if they weren’t admitted to whatever degree plan they wanted, regardless of their qualifications (or lack thereof) and demand in the job market. Also, upon news of any such plans, the administrators would immediately give themselves obscenely high pay increases above their existing lavish salaries. Finally, socializing higher education — more than it already is — would probably extinguish the ideological independence of that minority of campuses which are not yet a mile to the left of the Soviet Politburo.

This brings us to the Rightist perspective. By now, it’s unmistakable that Leftist fanatics have converged upon countless academic departments, effectively turning most colleges into indoctrination factories. The departments in which such political programming is the most pervasive often align with subjects having the least real-world market value [12]. (The worst offenders are sociology [13] and most degrees ending in “studies.”) Discouraging the trend of low-value politicized curricula, or at least refusing to enable the problem with massive bailouts, would be helpful for several reasons.

Normally I feel some sympathy for people who get scammed, as have many youths who are inexperienced in personal finances. This only goes so far, however. It doesn’t extend to Social Justice Warriors who were expecting to get rich from doctorate degrees in Lesbian Ninja Studies and who now don’t feel like paying the bill. Squidlings like that hate their own people, yet want the taxpayers to bail them out. Maybe a hard economics lesson is exactly what they need, or better yet, a personal epiphany that they’d been gypped while their soft heads were being filled with nonsense. Let them deal with their own mistakes, and may it all leave a bitter taste, as it should.

Finally, there’s the typical Boomer perspective: “Why can’t you kids just pull yourselves up by the bootstraps? I got summer jobs during college to pay my tuition, and that worked for me.” The disconnect here is that expenses have gone up tremendously. Professors used to have modest salaries, and universities got the job done operating on lean budgets. Back when the US had lots of factory work, Boomers fresh out of high school could get better summer jobs than merely flipping burgers. After those manufacturing jobs were gone, a college diploma came to be seen as a ticket to the middle class — and that’s when academia got gold fever.

The educational system is broken

There are several reasons why tuition got so crazily high. Adding to my previous analysis [14], an article about the highest-paid university presidents [15] shows that things have only gotten worse. Nine had salaries of over a million dollars annually in 2008; by 2016 there were 61. What a racket! As I pointed out earlier, half a million a year used to be considered sufficient swag for these executives to keep up with the Joneses, but even that was exorbitant.

What’s up with that? What do university presidents actually do, other than write memos, push papers, hold meetings, deliver commencement addresses, and look important? Really, a salary of a quarter million should be plenty of swag for a suitable executive, even at Harvard. If someone can explain why their labor is so valuable, rare, and unique that they deserve a cool million or more per year, please do inform me in the comments section.

Then there are some places where football is a religion and the coaches get exorbitant salaries. It’s not unheard of for some to be paid more than the college’s President! Granted, football tickets generate revenue for athletics programs that otherwise would be economically marginal or unviable, from track and field down to really obscure stuff — perhaps tiddlywinks, snail racing, and quadriplegic synchronized swimming. I’ll therefore cut the coaches a small amount of slack, although I have deep misgivings [16] about football worship [17]. Still, I don’t see how even the best coach deserves a higher salary than a doctor.

[18]

You can buy Greg Johnson’s The Year America Died here. [19]

Other than that, the number of administrators has grown by leaps and bounds. It’s become a boondoggle to provide a living for Leftist bureaucratic barnacles. Comes the Cultural Counterrevolution, I’m completely at a loss as to what could be done with all the assistant deans of diversity and similar useless eaters. Retraining them as gladiators would thin the herd quickly, but nobody wants to watch pussies swinging swords.

More seriously, colleges should be able to operate with the same infrastructure as they had in the 1980s. As for all the surplus paper-pushers, let them eat cake. Could increasing automation be driving up prices, too? If so, then they’re doing it wrong. Universities had computers back then to handle the paperwork. The ones available now are cheaper, more powerful, and easier to use. If the databases and all the rest of it aren’t making operations more efficient, which is the entire purpose of automation, then it’s time to trim the hoopla and red tape.

Rethinking college

I hate to come across as anti-intellectual, but higher education has some serious problems. Although colleges used to be a great place to get a proper classical education, things aren’t what they used to be. The university system evolved from a thousand-year-old tradition of monasticism; by the Renaissance, it was a key institution in transmitting the knowledge, culture, and values of Western civilization. Lately, however, major segments of academia are instead dedicated into destroying these things. Nearly a century ago, Leftist currents such as cultural Marxism and Boasian race denial began an entryist strategy along the Ivory Tower front. This came to fruition during the 1960s, and it’s only gotten worse since then. The situation won’t get any better in the foreseeable future, short of hordes of critical theory professors entering a very long tournament in the Thunderdome.

It used to be that college was meant to educate the brightest in society, with the top fifth qualifying for entry. During the process, about 60% of those who set out to complete a bachelor’s degree did so, the rest dropping out along the way. With about an eighth of the public receiving at least a four-year degree, this credential was a way for employers to know which of their applicants were among society’s most intelligent. They’re not so much interested in applicants with a classical education, but certain positions do require employees who are competent and can be trained to perform complicated duties.

An IQ test takes only an afternoon to administer and costs tens of thousands of dollars less than a college degree, but employers can’t use those because they’re “discriminatory.” (That is to say, the IQ test results show racial differences [20] which contradict the theory of absolute egalitarianism [21]. There’s therefore something the matter with the tests, QED.) To avoid being “racist” by screening prospective employees with IQ tests, college education will have to serve as a proxy to measure intelligence –obtained at the time and expense of the applicant, of course. All that is part of the reason why a degree came to be seen as a ticket to the middle class and there is $1.6 trillion in outstanding student debt.

The system was fairly functional until the price-gouging I described kicked into high gear. Also, there was an effort during the 1990s to get more students enrolled. The intentions may have been good, but it ran into some problems.

For one thing, if the system was initially meant to admit the top fifth of applicants, then academic standards had to be dumbed down to accommodate masses of others who wouldn’t have made it previously. That in turn reduces the relative average value of an education. Part of this dumbing down is the expansion of certain soft studies “disciplines.” Some of them are outgrowths of cultural Marxism in which good grades come from ideological conformity rather than intelligence. Putting things another way, for a healthy society to function properly, how many Gender Studies graduates does it really need?

Rethinking student loan forgiveness

How did the government get involved in the student loan business in the first place? I don’t know the precise history, but a thought experiment should do: Presumably, once upon a time, the government wasn’t involved at all. Students just applied for a loan from a bank, which assumed the risks and rewards of the deal. As usual with fractional reserve banking [22], it used part of the money from its depositors to make profitable loans at interest. Then, presumably, the government began a program to guarantee loans in order to incentivize people to get a college education. The intentions were good, but there were consequences.

This was a no-lose deal for the banks. They got to loan money that didn’t belong to them and receive interest from it as usual, but now the gummint ponied up when the borrower welched. With all the profits and none of the risks, there was no further chance that filthy rich banksters would cry in their beer because the debtors told them to take a haircut. I would imagine that soon after government loan guarantees were made available, no lender would want to write a loan without one. Do correct me if I’m wrong, but I’d imagine that asking for an unsecured college note would probably go over about as well as asking a hooker for free samples.

At the same time, government loan guarantees are a sucker deal for the taxpayers. If the borrowers welch, then the debt falls into our collective lap thanks to the politicians who made it our problem. The only difference with the loan forgiveness deal is that politicians like Pocahontas propose to put all of it on our backs at once to help them win an election. Sweet!

Possible solutions

There have been some private lending companies with bad track records of gypping their customers, exorbitantly increasing the amount of debt. They’ve done much to contribute to student loan horror stories. To address that problem, there should be a national usury law for student loans that caps the total interest at a maximum of 35% over the initial amount. Really, that’s plenty of vigorish.

Another possibility is for students who’ve been burnt with unmarketable degrees to file class action suits against the colleges for misleading them about their lack of value, or even for disseminating worthless or blatantly wrong information as academic instruction. Normally I’m not a fan of goof-up lawsuits, but this is better than hitting up the taxpayers. Colleges often have some very deep pockets. For example, I visited my university a while back and found it to be nearly unrecognizable. The fronts of many buildings had been revamped, obviously at great cost. They didn’t actually need it, and the reworking was in the style of ugly modern architecture that doesn’t fit in with the style of the rest of these stately limestone buildings. If the university had that much spare swag to blow on such a useless project, then surely it could’ve used some of that to write off the tuition for the young ladies they’ve gypped into getting Women’s Studies degrees. As I well remember, they only gained an attitude from their “education.”

Another consequence of government guaranteed student loans was that banksters got to be less picky. It’s no longer the loan officer’s problem if the students have marginal SAT scores or are planning to major in some ethnic dyspepsia program like African-American Studies. If that doesn’t result in a profitable career, the bank will get the money back one way or the other. (The government pressuring banks to write loans to anyone with a pulse, whether or not they have a realistic likelihood of repaying it — why does that sound so familiar [23]?) Maybe it’s time for the government to get its proboscis out of all that. One can say a lot of things about banksters, but usually they’re not complete idiots. Under normal circumstances, they lose money whenever someone welches and they know it. They’d get a lot pickier in a hurry if they had any real skin in the game.

A final option, or maybe simultaneous with the other alternatives, is that the government could go all the way in. The state could issue the loans directly and profit from them. That makes a lot more sense than writing guarantees to take on all the risk, which then gets passed off to the taxpayers, while receiving none of the rewards. Social credit is an idea whose time has come.

Of course, government loan officers would have to be pretty picky themselves. If a stoner with the SAT scores of a mashed turnip wants to borrow money for a degree in Lesbian Ninja Studies, the answer is no. How fascist of us, right?

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