The sales pitch: "President Biden on Wednesday announced a plan to erase thousands of dollars in student loans for borrowers, aiming to help more than 40 million Americans who owe a combined $1.7 trillion in debt."
The reality: this cost is being passed from people who assumed debt voluntarily to people who did not consent. The debt is not going away. The process of quiet inflation and taxation is a scheme to buy votes from people who only see the loud sales pitch. We also can't ignore the fact that an election is only a few months away, and this smacks of posturing and pandering rather than serving the "public interest," whatever that may be.
Further on in the article linked above, the author writes, "Student debt has soared in recent decades as rising higher education costs have far outpaced inflation. And loan programs haven't kept up, with the Biden administration noting that Pell Grants once covered almost 80% of the cost of a public four-year college, but today only provides enough support to pay for one-third." Nowhere do they ask why government is in the business of moneylending, why these costs have outpaced inflation so dramatically, or whether easy credit and government subsidies might be the root cause.
Reporters and analysts also ignore the deeper implications and consequences of this policy. What economic signal does this send to future borrowers and lenders? Will this encourage people to be more fiscally responsible, or will it reward poor decisions on the part of both universities and students? Many degrees are literally worthless, and others have been over-promoted to the point of flooding the market.
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My generation was told the path to success was through a diploma, and now the same people who mock Millennials for being the "participation trophy generation" want to reward some for the failure they thrust upon us. "Hey, we sold you a bill of goods, but see? We're wiping off some of that for ya." Where is the recognition that we were told half-truths about the benefits of these degrees? If a degree won't pay for itself, some acknowledgement of falsehood is in order.
This also clearly benefits a specific class of people: college students. What about people who did not choose the debt because they saw more benefit in immediate earnings in the trades? Take auto mechanics, for example. If this were a Snap-On loan forgiveness program, it would be a more blatant handout to specific borrowers and lenders. It would also be a more obvious political move to buy blue-collar support while handing money to corporate interests. It is much more subtle, but no less real, under the new Biden policy.
There is no denying we face real problems in the American education system, but this kind of political grandstanding does not address any of the real root problems or encourage the necessary changes we need in a modern world. The solution to degree inflation is the same as money supply inflation: stop the presses and stop increasing debt.
Let the consumers see real prices without manipulation and obfuscation so they can make rational economic calculations with better information. Education doesn't even need to come from accredited institutions for most careers. It has never been easier to learn, and it is time to stop subsidizing legacy models with easy credit and taxpayer funding. If you want to pursue engineering, medicine, or law, a university degree will likely continue to be the best process. Gender studies, history, and business degrees are less useful in the real world, and seem primarily to serve the interests of bureaucracy rather than the market. The only way to reveal these realities is to stop covering them up with subsidies and bailouts, just like what should have occurred with corporate boondoggles in previous recessions.
Remember, everything the government has is stolen, and everything they give must be taken from someone productive, either through taxation or inflation. Every promise made in politics is a lie.
The state—or, to make the matter more concrete, the government—consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can’t get, and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time it is made good by looting A to satisfy B. In other words, government is a broker in pillage, and every election is a sort of advance auction sale of stolen goods.
—H.L. Mencken, “Sham Battle,” published in the Baltimore Evening Sun, October 26, 1936
They could have changed the law back to allow for student loans to be discharged in bankruptcy. This way, people who really need the forgiveness can get it.
But, ultimately, this is something Congress has to pass. It's unlikely the scheme would survive a court challenge.
The trouble with student loans, beyond the demand pressure they add to boosting education prices, is that there is nothing to repossess. Default on a home or car loan? Your home or car goes to the creditor. Refuse to pay school bills? They can't make you un-learn. It should be a high-risk loan. Lenders should suffer some risk, but instead, government stepped in to assume that debt. The loans aren't stopping. The structure that allowed this mess still exists. There is no real systemic change, because people still assume we need degrees, and college is the best way to learn.
The very idea of it disgusts me !
I wish there was a way to stop it from happening.
They'll have to steal the money from other places to do this. Not surprising since they have long been robbing things like Medicare and Social Security and other programs they should have kept their fingers out of.
I would take it a step further and say these programs are just a few of innumerable examples where government blatantly oversteps its enumerated authority in the Constitution. Government is not a moneylender. Government is not an insurance system. Government is not a retirement program.
Even if I put on my minarchist dunce cap and pretend there are any legitimate reasons for a territorial monopoly in violence, the vast majority of government agencies and institutions have nothing whatsoever to do with security, adjudication, or just law theory.
The state—or, to make the matter more concrete, the government—consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can’t get, and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time it is made good by looting A to satisfy B. In other words, government is a broker in pillage, and every election is a sort of advance auction sale of stolen goods.
—H.L. Mencken, “Sham Battle,” published in the Baltimore Evening Sun, October 26, 1936....... This statement is so true, and to think that something written in 1936 still stands true today.
Mencken wrote some racist stuff, and he had a peculiar idea that wars were good for societal strength, but his observations on politics were generally spot-on.
I'm pretty disgusted about it. Between working, going ROTC, and the whole gambit, all three kids went four years to private Universities. Did without paying it off. Isn't that what you are supposed to do?
So don't mind me if I am a tad ticked off at those getting to take the easy way out.
I have been pissed about it all day. The government should not be in the business of picking winners and losers. What about those that worked a second job to avoid taking on the debt. Then there are those that signed on for four years of military service to earn their way through school. What it does is incentivize those that perhaps took the less prudent path. Our government is expert at bailing out... ie the airlines and the autos circa 2007-8. All the time there was discussion about moral hazard...well here is Uncle Sam in essence bailing out some and screwing the rest.
Funny I was just telling my son, exactly as you said, government prints money but doesn't make money, but they love to take money!
"Money is different from all other commodities: other things being equal, more shoes, or more discoveries of oil or copper benefit society, since they help alleviate natural scarcity. But once a commodity is established as a money on the market, no more money at all is needed. Since the only use of money is for exchange and reckoning, more dollars or pounds or marks in circulation cannot confer a social benefit: they will simply dilute the exchange value of every existing dollar or pound or mark."
Murray Rothbard, Making Economic Sense, p. 274
Indeed, government inflates the money supply and confiscates the wealth created in the productive economy, but it produces nothing people are willing to buy, or at best, monopolizes services people desire in order to justify the rest of its rapaciousness.
Ah the student loans system. Thins went right downhill here when they introduced them some twenty years ago. I was lucky only to have a couple
I have no student debt. I worked summers to pay for my community college degree in drafting and design. I'm glad I didn't take on debt for a proper college degree in architecture, because I would have been graduating with a Master's and debt just in time for the '07/'08 recession to hit.
I did both, I worked like a trooper in a car park all year round and drank like a maniac on the weekends. When loans came out I snapped up two years of well and blew it all on nonsense.
Thankfully something prevented me from taking out the max and I managed to pay them off somewhat later when I was a tad more restrained.
Does this loan forgiveness only apply to federal loans (in which case I’d assume the debt goes away poof) or also to private lending (then no poof since the burden passes to taxpayers)?
I suspect the details remain to be seen, but regardless, poof is unlikely. It'll probably be months, after the election, before facts emerge. Government is in the business of redistributing debt and wealth, not making debt vanish. If they cared about making debt go away, they'd end income tax and forgive tax debt.
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STOPThis kind of thing reeks of desperation. Buying votes is like trying to incentivize addicts to quit by government sponsoring the drugs - at the end of the day, the average citizen pays for that and they are relying on students being either too ignorant or too self serving to ask the right questions.
It sounds to me like he has forgotten where he is again and thinks he's Oprah..."You get a free student loan, and you get a free student loan", but it's setting a very dangerous precedent because there is then going to be increased pressure next time on the President (whoever that may be) to uphold the same and that is a very slippery slope.
It's also been proven time and time again that if you can get something for free, you are far less inclined to work hard for it - so it may even mean that more students drop out or don't even bother trying because they (or their guardians) don't have any of the financial responsibility to repay the loan. Not a good move in my opinion.
The saddest part is the government always wants taxpayers to bail out its own debts in the end, and despite the mythology of democracy, none of us consented to any of it. But the illusion of a benevolent ruling class must be maintained, especially when we are in a recession, whether they are ready to admit it or not.
T.H.E.Y. must print money at all costs.
Doesn't matter what for, any excuse will do.
But they need to print money. More money than they have printed before (in total)
They also need to print more money than all the new mortgages that should have been, but weren't because of housing supply and interest rate increases.
Any excuse will do... if they fail, no more money.
(in this case, "money" actually means currency - FRNs Federal Reserve Notes)
And the fact-checkers say the money printing memes are fake news because most of it is just on digital ledgers, not even actually printed as paper.