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Should The Government Forgive Student Loans?

March 16th, 2009

My friend Brad forwarded an e-mail to me in response to an online petition that’s been making its way around Facebook (and other places), asking Papa Government to forgive billions of dollars of student loans. The e-mail was addressed as a reply to another friend who (saddled with law school debt) had earlier forwarded the petition to Brad.

In the e-mail, Brad made an excellent argument which I’ll quote:

I’m 98% sure I can’t support this…

…I understand that student loans suck and I feel lucky to not have any of them. So if you and the other 90% or so of college students that have student loans get bailed out…then what about me. My parents put away a $100 a month from the day I was born for my brother and I to be able to pay for college in full. My parents came up with real money to pay for college and not loans. Shouldn’t they get bailed out too?

For background, the chart below shows the rising cost of annual room, board and tuition expenses (I do not believe they are indexed) at Public and Private schools in the United States. [link to Excel data]

Rising cost of college tuition, 1986 to 2008

CNN Money reports that the cost of higher education has far outpaced price inflation over the last 25 years or so.  What I was really looking for (but couldn’t find given limited time) was a 40- or 50-year trend, which would go back far enough to look at the price of higher education before government began subsidizing the hell out of it.  I’ve seen these data elsewhere, and it’s pretty damning.

In the interest of full disclosure, I’d be happier than a pig in shit if student loans were forgiven. But it’s not going to happen, no matter how many Facebook signatures they collect. A Student Loan obligation, like any other sort of tax or government fee, is simply one of many means by which most people, most of their lives, are kept largely enslaved by the system.

The system, for those of you not in the know, is not set up for you to get ahead. (Thanks, dad!)

If you’ll allow me to take some license with the argument Brad sets forth, above, there are plenty of people whose parents saved up and paid for their education, there are a lot of people who worked their asses off all through college and paid for their own education, and there are plenty of other people who either didn’t go to college, went to a community college, or went to a lesser school than they qualified for academically, because they couldn’t afford a 4-year degree at a better school. The “forgive student loans” petition doesn’t help these people who were arguably injured the most by the onerous cost of higher education, which is itself a consequence of the existence of the federal student loan/grant programs.

We have arrived at this problem, of unaffordable education, precisely because the government has tried to make education affordable for the masses.

If you want to criticize all the parasites in the banking industry and in the government, that conspired or otherwise caused the affordability problem in higher education, I won’t get in your way: I don’t want to give any of them one thin dime more than I can get away with. Insofar as student loan obligations are pretty much bullshit to begin with, and that everyone whose income has derived principally from these subsidies over the past 30 or 40 years has really been stealing from the nation’s productivity, I won’t object at all if you want to personally repudiate them.  But it’s pure nonsense to try and “work within the system” to remove the chains and shackles placed upon you.  On the other hand, whenever the entire system crumbles under its own weight, you won’t have to worry about all those fraudulent obligations any longer!

Understand that an awful lot of people were genuinely harmed by this program (and others like it) in ways that you or I can barely fathom.  What you’re saying is, “I want a career that allows me to be my own boss, one which is protected by a State-sanctioned monopoly, one which allows me to bill my clients upwards of $100-200/hour, for the rest of my life. I want all of these privileges, and I don’t want to be inconvenienced in the least.”

I do not think I’m out of line to accuse this complaint of approaching the height of selfishness.

Comments

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  • Brad says on: March 16, 2009 at 4:56 pm

     

    Shawn has since told me that I missed a point in the petition in which it says "federal loans only."

    I still can't support it. A loan is a loan.

    He also said he was making fun of an article he put on FB talking about student loans. It is funny and does make sense. This might just be a case of Shawn using his lawyering skills.

    I told him to vote for a guy that was going to eliminate income taxes all together next time so he could have money to pay for the loans. He said I am living in a fantasy world.

    Also, to show its patriotism, the American flag recently got a tattoo of Chuck Norris.

  • nothirdsolution says on: March 16, 2009 at 6:02 pm

     

    A loan is a loan, except when it's not… That's the problem with fiat money…

    To Shawn's point, they're all "federal" loans in the sense that they're all denominated in fiat money, and backed by the government insofar as they are essentially non-dischargeable under any circumstances.

    I heard that Dixie whistles "Chuck Norris".

  • Zach S. says on: March 16, 2009 at 11:36 pm

     

    I just keep hoping they give us military guys more education breaks by forgiving my loans :).

    But other than that selfish reasoning, I concur that forgiving student loans would be quite unfair as evidenced by your case.

    This does make me think, however, to stimulate the economy, why not forgive student loans. There is a rather small amount of initial cash impact and the amount of money that would flow into the economy due to this reason alone would be quite significant. If i had more time, I think I could make a "lesser of two evils" arguement stick.

    • nothirdsolution says on: March 17, 2009 at 4:17 am

       

      I think the strongest argument (other than the "fuck the banking monopoly argument) for forgiving student loans is the "lesser of two evils" argument.

  • Zach S. says on: March 16, 2009 at 11:37 pm

     

    Ignore my grammar mistakes…I'm beat.

  • Brad says on: March 16, 2009 at 11:56 pm

     

    Zach – Or just eliminate taxes and everybody has more money to spend. Even the people with no debt.

    Chuck Norris once go t 100% on a calculus exam by writing Violence for every question. Chuck Norris solves all problems with violence.

  • Zach S. says on: March 17, 2009 at 2:28 am

     

    Brad- You don't have to convince me about no taxes. I'm with you…

  • nothirdsolution says on: March 17, 2009 at 4:18 am

     

    you guys should use the "post reply" option – that's why I installed it!

    • Zach S. says on: March 17, 2009 at 1:03 pm

       

      Good point. I suppose I should take advantage of this new fangled technology.

      To be honest, I didn't even see it as I am currently a corporate zombie. !

  • John says on: March 19, 2009 at 10:48 pm

     

    David,

    I don't have any student loans, so I'm not entirely familiar with how they work. You and Brad mentioned "federal" loans vs., I guess, private loans. Are they all "backed" by the federal government in some way? The same way Fannie Mae's mortgages were guaranteed by the government?

    So, is the reason that college costs more today the increased demand and accessibility that was permitted by the availability of all these federal (and/or private) loans? Kind of how the reason that housing prices went up so much was the increased demand for housing due to low interest rates and sub-prime lending standards?

    I guess what I want to know is: what exactly is the federal government's role in the increased demand for, cost of, and matriculation in American colleges?

  • nothirdsolution says on: March 20, 2009 at 12:41 am

     

    John – they're all backed by the Federal Government unless you've literally taken out a private loan (e.g., your grandpa loaned you money, &c.) because they come through the banking system in one manner or the other…

    Back in the 1960s, the government endeavored to make education "affordable" by offering public loans, grants, etc. This of course just gave universities a greater degree of freedom in price discriminating, etc.

    I could find more information if you're looking for something specific?

  • John says on: March 23, 2009 at 3:09 am

     

    David, I am looking for something a little more specific. I understand that the State's monopoly on coinage is the "all-pervasive system" that we talk about, to borrow a term from Simone de Beauvoir. But the way I think about things is extremely left-brained, which means I think in series and not in parallel, so I like seeing how A caused B caused C, etc. I am often unsatisfied by the explanation: All-Pervasive System X caused A, B, and C all together.

    I will say it's pretty obvious how the artificially increased availability of college funds makes the prices go up. One, because demand goes up so the price does too; and, two, if the government is directly providing the money, it can just print/steal more of it if need be, so there's no check on how much money gets spent on college. Is the government directly providing the money, though? I thought students went to (nominally) private loan agencies. Are those debts guaranteed by the federal government, just as Fannie and Freddie's risky loans were guaranteed by the government?

    How about this for a lead-in to a more detailed answer: We know inflation of a currency causes the price of everything to increase in terms of that currency. Why has the cost of college increased so much more than the general rate of inflation? Everything else in our economy is priced in dollars that come through the banking system in one manner or the other. What is specific about the college-loan industry that has inflated its prices so much more than, say, automobiles?

  • nothirdsolution says on: March 23, 2009 at 7:00 pm

     

    Good questions, John! I'm afraid I don't have satisfactory answers for you, at least for the time-being…

    A few quick thoughts, though: we could look at the costs of other long-term financing (e.g., home mortgages) which experienced a huge run-up in the last few years/decades, until just recently. Like mortgages, during the 1990s, many student loans could be had and/or consolidated for less than 3% interest. Also worth considering: something like 90%+ of students are eligible for Federal student aid, and, the debts incurred thereby are non-dischargeable, which unlike mortgages, would possible prevent any correction in prices (downwards).

    But, these are admittedly shots "from the hip". YMMV.

  • John says on: March 26, 2009 at 3:54 am

     

    I just wanted to let you know I came back and saw your reply, and I guess I do basically get it. But I also wanted to inform you that in the most recent interview of Peter Schiff by Lew Rockwell, he says, at about the 11:30 mark, that college is so expensive because the federal government guarantees the student loans and colleges can keep raising tuition because they know that whatever they charge, the students will be able to get the loan from the federal government. The student-university relationship exists entirely outside of the free market, so colleges have few incentives to keep prices low and students have few incentives to be stingy. That's basically the understanding I had arrived at.
    http://www.lewrockwell.com/podcast/?p=episode&amp

    • nothirdsolution says on: March 26, 2009 at 4:00 am

       

      sounds like a good summarization, I'll have to check that podcast out if I get a few minutes, thanks for the link.

  • Marty says on: September 25, 2009 at 4:57 am

     

    How about people white men especially (me) who went to college only to find out later the education was worthless due to Companies who had to hire minorities to fill positions?
    I was unable to find work in my field due to the above reason, I also had child support being take out of my pay, during this time I was not able to pay my loans 4 in all, 4 loans that before I was able to have them consolidated doubled due to thousands of dollars paid to collection agency's that charged for there failed attempts to get me to pay. It wasn't till I refused to pay any more money to collection agency's and I contacted Florida education and complained that I finally had all my loans consolidated. I have been paying them off for years now and when I look at the balance its not much less than what my original loans were. I have already paid back the loan its the interest and collection agency charges I haven't paid. That's my opinion but you get what I am saying.
    Now here I am 15 years later unemployed again and and my education is useless in Florida.
    I did not invent reverse discrimination my government did so if they would be so kind and finish off my student loans I would be grateful. I don't expect that I deserve it but I sure would appreciate it because its the only loan I have that has me by the balls.

    • nothirdsolution says on: September 25, 2009 at 12:33 pm

       

      Hi Marty – I agree in spirit that they probably should be forgiven, I just don't believe it's going to happen, especially not going to happen by working within the system. They're total BS, they've got us working our arses off, paying for an education we were all promised would be the key to happiness and wealth, only to find out years later that it's neither. Extra icing on the cake: I've read recently that the cost of a 4-year degree is no longer (on average) offset by higher lifetime earnings…

  • gojets says on: September 26, 2009 at 6:51 am

     

    I graduated in 1991 from a small college school. I was young and my parents did not have any money to contribute towrds my education. YES. It must be nice NOT to have any student loans because your parents put away a hundred dollars a week since you were born, but that kind of money helped my parents put food on our table and pay the morgage. I know what you are thinking. "They didn't have an education or were brought up with parents who thought that they should go to college" My father was in the Navy for several years and my mom came over from Scotland. :Not every parent can put away a hundred dollars for their children to go to college. SO, please do not thinkj that everyone can do the same as your mother and father. My mom and dad did the best they could.
    I borrowed 25,000 dollars in 1986.. Now I owe over 70,000 dollars. Since I got married I have paid every monthly payment of 599,00 every month for the past 9 years. Now the govt. is saying that my husband and I made too much money and we now owe them another 6,000 dollars. We live in AZ and make about 80,000 between the both of us. We have not missed a payment. What do they want from us.

  • Marty says on: September 30, 2009 at 10:44 pm

     

    I hope if they do decide to help people who owe student loans they pick the ones that really need help.
    I recently asked for a forbearance on my loan and it appears they want me to go month by month. I thought they would give me an unlimited type forbearance but the way it looks I have to request it ever single month if I forget they will also add on a late charge.

    To the guy who had his parents pay for his education. I hope that if they decide to help those of who had to scrape beg and borrow to pay for our education, that they will pay our student loans off before they pay off the rich kids who went to school on Dads dime.

no third solution

Blogging about liberty, anarchy, economics and politics