Counter-Currents
Lenders Should Lose:
Why Biden’s Student-Loan Forgiveness Is a Bad Idea
Greg Johnson
1,327 words
Author’s Note: On the August 28th, 2022 Counter-Currents Radio livestream, Gaddius Maximus and Sutton asked me to share my thoughts on Joe Biden’s student debt forgiveness plan. Hyacinth Bouquet transcribed my answer, and I have edited it. I wish to thank all of them for their help.
I still have student loan debts. Of course, I will take blanket forgiveness of a certain chunk of my student loans. Who wouldn’t? I’d be a fool not to. That means more money I can spend on nationalism. However, the Brandon administration’s plan to forgive $10,000 to $20,000 of student debt is a bad policy. It’s no way to run a country.
In my article “Thoughts on Debt Repudiation,” I argue that debt repudiation is sometimes a useful thing, because sometimes people, for whatever reason, go into debt, and they simply can’t repay it. To ask them to repay it is incompatible with them leading decent lives. The purpose of having an economy is to make it possible for people to lead decent lives; sometimes economic contracts get in the way of that; thus we need a way of wriggling out of them. That’s why we have bankruptcy.
If debt repudiation is something that every sensible, sane society should have, does it mean that Biden’s proposal to offer debt relief to everybody in a certain class is a good idea? No.
The reason student debt repudiation is an agenda item for the Left is that it primarily benefits Leftists. They are not talking about credit card debt relief for people in rural counties, because that does not benefit Leftists. They are not talking about mortgage debt relief for families in the suburbs, because that does not benefit Leftists, either.
You can buy Greg Johnson’s The Year America Died here.
The primary goal of college education today is to produce Leftists, with spectacular success.
In fact, Leftists have become so overproduced that the cushy scribal jobs they hunger for are now out of reach for many of them. Many Leftists are pining away as baristas, clerks, and stockers.
Leftist overproduction is also one of the driving forces of wokism. Leftists who actually find jobs in their field use wokism as a tool of upward mobility. They seek to destroy the careers of their superiors to move on up the corporate hierarchy.
Even though I would benefit from student loan debt repudiation, there are a thousand baristas with gender studies degrees who would benefit as well. I would actually prefer to keep paying off my debts, just to know that these bastards are suffering. I’d be willing to have a little less money to spend on nationalism, knowing that a thousand of my enemies will have less money to spend on anti-white, anti-nationalist politics.
I know that’s ignoble, perhaps, but that’s how I see it. Biden is simply helping his friends and harming his enemies. I want to help my friends and harm my enemies, too. As long as we live in a world where there are enemies, that is the only rational way of going about things.
What would be the proper way of handling unbearable student loan debt? First of all, we’ve created moral hazards in our society by making it possible for people to get student loans on the assumption that every degree is worth something. That’s simply not true. There are some degrees that are not worth anything, and that are in fact likely to be a burden rather than a boon, economically speaking. Shouldn’t we discriminate against those degrees? Shouldn’t we refuse loans, or give loans at higher interest rates, or give smaller loans, for degrees like underwater basket weaving or black studies — useless degrees for useless people?
It is an economic decision to grant a loan to somebody. It’s based on the assumption that once a person gets a degree, he will be able to pay it back. Certain economic considerations must go into this, and yet that’s not allowed. A degree is a degree is a degree. That creates a moral hazard right there. It creates an incentive towards recklessness.
Why is this recklessness incentivized? Well, ultimately the government is behind it. Guaranteed student loans are guaranteed, ultimately, by the government, which means the taxpayer.
I would first make it more difficult for people to get student loans. That would, for one thing, cause universities to charge less, because one factor that causes university education to spiral in cost, ahead of all inflation, is the ease of getting loans.
What should you do if you actually, in good faith, go out and get a student loan and for some reason you can’t pay it back? You should be able to discharge this debt in bankruptcy court, like any other debt.
It is possible to discharge student loan debt in bankruptcy court; however, interestingly enough, Republicans in the Congress, and the lenders behind them, made this much more difficult. This was during the George W. Bush administration.
Lenders, of course, don’t want to make it easy for you to go bankrupt; and if you find it very difficult to go bankrupt, that’s a moral hazard again. Lenders are going to say, “Open the spigots! The suckers can’t wriggle out of this easily. They’ll be stuck paying; and if they can’t pay, then eventually the government — the taxpayer — will end up paying.”
Lenders don’t lose, whereas if bankruptcy is allowed, lenders lose when they make bad loans. And that’s who should lose, primarily; the lenders should lose. I love the idea of lenders losing. They richly deserve it in many cases. Lenders should lose; and the way they lose is through bankruptcy.
But don’t bankruptcies cause higher interest for all of us? No, because banks already price in a certain number of bankruptcies. You’re already paying for them, in other words. It would be truer to say that higher interest rates cause more bankruptcies, rather than bankruptcies cause higher interest rates.
Do bankrupts lose? They shrug off debt, but they have credit problems. It’s still worth it to them.
Biden’s voters love the idea of blanket forgiveness of student debts. But lenders love it, too, because they can’t lose! I don’t like legislation that is premised on the assumption that lenders should never lose.
There’s a furious debate about student loan forgiveness between the liberal Left and the cuck Right. But on one thing, they are united. They are absolutely united in the assumption that lenders shouldn’t lose. The people on the cucked Right want you to pay those lenders back. “It’s a loan; pay it back!” You’ve seen the memes. The people on the Left are absolutely bound and determined that lenders should never lose, either; otherwise, they would not have the government provide debt relief.
Lenders have a great deal of power in America today, unfortunately, so they are dictating the parameters of this debate: The lenders can never lose. I think we need to change the frame of the debate.
We should not be debating whether or not the government should cancel a portion of everybody’s student debt. That’s just a bad idea across the board, and Republicans are right to oppose that.
They’re just being their old, dumb selves. They are not being populists; they’re being “fiscally conservative” all of a sudden, when it suits them. It never suits them when it comes to giving away money to foreign powers; we’ve noted that. But when it comes to social welfare giveaways, they suddenly discover that they’re fiscal conservatives. The entire country is drowning in a sea of debt, and they decide to be fiscal conservatives about something like this. It seems mean and cheap; but frankly, it’s closer to the right policy.
Once we discard the premise that lenders should never lose, however, the solution to the student debt crisis is easy. Student debt is not an across-the-board problem. It’s a problem with certain people. These people should be allowed to bankrupt their way out of this debt, and lenders should lose.
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7 comments
I too have some residual student loans, which would be nice to see obliterated. I agree more or less with the discussion above, but I frame it differently. Certainly debt forgiveness is against good conservative principles, but we have to contextualize it in the reality of modern US political situation:
A) the gubment is going to waste the money, either on wars in the Middle East which benefit no one or into the pockets of crooked politicians. At least with debt relief the money goes to people in your community and it stands a chance of redistributing to local economies. With many of the receivers, I imagine it goes directly to Bovarian motor works, lol. This was sort of my logic in supporting Obama over bushwack.
B) it’s wrong to entirely blame the lenders bc in this case, the gubment is forcing them to make the loans to some extent. The lenders should not be incentivized to squeeze engineers and say health care professionals over other “useless” degrees bc Stem subjects are hard and many fail out, left with no ability to service intractable debt burden. These are the people I am concerned about. I was very nearly in that boat!
C) I agree with student debt relief bc the situation targets young people who often don’t understand the situation they are putting themselves in, so it’s more insidious than other loans. Targets the vulnerable. But if there is student debt relief, the root cause needs to be reformed. The schools are to blame for inflating the tuitions in response to the available funds and saddling the students with unmanageable debt. The schools are responsible for creating absurd unmarketable majors like “bipoc lesbian glass blowing studies.” Therefore, there needs also to be some sort of tuition capping for schools which receive gubment funds. The schools need to be garnished or fined in order service the debt relief. Selective criminal proceedings must also play a role. That’s what a serious society would do.
And another thread is that this all goes back to disparate impact, the 1971 Supreme Court decision that you couldn’t use iq or aptitude tests in hiring bc they supposedly discriminate against certain groups, (remarkably always by the very same number 1.1 standard deviations), only earned degrees, so suddenly everyone needed a college degree to enter the work force. My theory is that all the major problems in our society devolve to issues of race/identity politics. Most of the loans come from quasi governmental institutions too, so the student loan situation is very similar to the subprime crisis in its outlines, where blame is sort of shared and difficult to pin on any one person or entity.
This is an issue pushed more by young leftists. It seems a canny Democratic strategy to solidify a young base who will be loyal for decade to come as they age. The right needs to keep on its toes to show its appeal to youngsters before they realize, in middle age, where they should have been all along
I’m in the same boat as you. I personally benefit from the student loan forgiveness (which I don’t even really need) but like you, I too see it as pretty terrible on a political level. I think some WN commentators have missed the point on this by chastising the right for opposing the first thing the state has done to help middle-class White people. It is certainly nice that they didn’t explicitly exclude us or something. But it is nonetheless clear that this benefits young PMCs, hopefuls, and also-rans at the expense (taxes, inflation, whatever else) of older people and yeoman types. In aggregate, Brandon is nakedly stealing from his political enemies to give to his political friends. That you and I happen to accidentally benefit is a bittersweet consolation prize.
With all of that said, I find the bottom half excessively uncharitable. I understand that people are temped to stick it to the jewish lenders or whatever. But I think this is extremely short-sighted. This question actually goes far beyond looking out for lenders and even economics generally. It is absolutely fundamental that people be able to enter into contracts with the expectation that their terms will be upheld, obviously barring a court determining on an individual basis that the contract was invalid. Without that basic expectation, there is no economy and there is no social order possible. Maybe student loans (or whatever economic arrangement) is unconscionable. I’m more than happy to have that discussion but it needs to be about what kinds of contracts we’re going to allow in the future. It’s absolutely imperative that these laws not apply in retrospect.
As for ending student debt, I’d argue that that primary value of college to an American adolescent has nothing to do with training and everything to do with conferring prestige and ranking them relative to their peers. The state can simply step in and put an end to this arms race by accrediting schools such that each school only has so many of each kind of degree and each in major to award. No more than, say, 10% of people in a given birth year will be allowed to have a bachelors. Then many of these slots could be converted to a “civil service academy” or “civilian rotc,” by which I mean a selective full ride scholarship that comes with both the right and obligation to take some civilian govt job in your field for x years after graduation. For everybody else, you simply allow employers to give subject matter or even intelligence tests to job applicants without it being made de facto illegal by disparate impact civil rights law. Goodbye ridiculous student debt.
Will any reform take place after all of this? Will universities still issue useless degrees for a high cost? Will universities still have to many administrators and useless programs that waste money? When America’s factories and other jobs left, they took a lot of white collar positions, that require a degree with them. Perhaps we should communicate to young people not to waste your time getting useless degrees, but instead a STEM degree or some type of job skill. And yes, we should take into account that some will drop out of STEM programs and other programs as well and prepare for that. Corporations lobby for immigrants to come to the U.S. and work in STEM fields for lower wages and this undermines our work force. Finally, one of the things that causes a university education to cost so much is its sports programs.
Definitely agree. If they’d repeal the law that exempts student loans from bankruptcy court, then the problem would fix itself without making taxpayers subsidize other people’s unwise choices. Then lenders would have to take a big haircut, and the painful lesson might get them to think twice before underwriting doctorate degrees in gender studies and all that. It also would be nice, if possible, to stick it to the universities and make them tap into their huge endowments to eat the cost for the students they cheated.
My preferred solution would be for the universities themselves to provide loans for their students. This would make them much more cautious about financing degrees that are likely to be of dubious value. In the long run, under this scenario I would expect to see much more creative and efficient financing schemes. But why bother when you can get the U.S. taxpayer on the hook?
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