Saturday, April 28, 2012



Yesterday, we learned that both the Republicans and Democrats want to stop the scheduled doubling of the interest rate on one of the largest government student loan programs from 3.4% to 6.8%. Even the higher rate doesn’t approximate market. Would you loan money, unsecured, to a borrower with no job and, at the time the loan was made, few or no job skills, and who will not begin repaying you for at least for years? The only disagreement between the GOP and the Dems on this issue is how to pay for it, and “paying for it” has never kept our pols from spending any of your money that they had the faintest desire to spend.

We also learned yesterday that Congress is considering making private student loans (i.e., loans made by privates sector entities rather than by the government and not backed by the government) dischargeable in bankruptcy, reversing a 2005 law that made student loans not subject to the bankruptcy laws. The obvious problem with this latest effort on the part of government to help us is that it will discourage private lenders from making student loans and will force those that choose to keep doing so to tighten the terms and increase the cost of those loans. So this effort will turn out to be yet another example of the government’s efforts to address a perceived problem making that problem both real and more acute.

The larger, and perhaps less obvious, problem with both keeping interest rates low on government student loans and making private student loans dischargeable is that these “initiative” are, given the typical pol’s enthusiasm for handing out your money to just about anyone capable of concocting a sob story and/or writing a campaign check, just steps on the roads to forgiving student debt. So those parents who saved and sacrificed to send their kids to school with no, or as little as possible, student debt, those students who worked full or part time to finance their educations, and both students and parents who chose financially sensible schools and marketable majors rather than studying Public Advocacy or Modern Hip-Hop at the “the school of my dreams” will be made to be chumps. Why, parents, did you bother forsaking the nicer cars, home, or vacations in order to put money aside to fulfill one of your responsibilities as parents by financing, or helping to finance, your kids’ education? Why, students, did you bust your hindquarters working at McDonald’s or Starbuck’s 20 or 40 hours a week while carrying an 18 hour class load in, say, Engineering or even a solid liberal arts course of study that would have taught you to write and think and fulfill your role as a responsible, self-governing citizen when you could have been drinking yourself stupid at the bars or hanging out in your dorm room or at the coffee shop (perhaps the coffee shop at which you work) contemplating your navel and cursing the injustices of the capitalist system while pursuing a major in, say, Modern Grievance Nurturing? The federal government will show responsible parents the error of their ways by forgiving the debts of those who would not help their kids with college because, after all, those parents could not bear the ignominy of living in, say, Naperville or Oak Lawn, driving a Ford or Chevy, or having to tell their neighbors in Hinsdale or Kenilworth that little Ogelthorpe goes to the U of I, ISU, or the local community college for a few years when those neighbors’ children go to the highly exclusive Snuffy SnotNose U. You students who worked both inside and outside the classroom to graduate with a meaningful degree will also be shown how silly you were when the government rewards those students who chose having a good time over working; why bother earning money when you can just borrow it cheaply and discharge it altogether due to “inability to pay” (while paying for the expensive apartment and the BMW, of course)?

I can hear the objections already: “Why, not everybody who takes out student loans so that he can use his fungible (probably too big a word for those who would make such an argument, but I digress) funds to buy a Lexus and a place on the lake while sending his kids to UpScale U. Some of these families really need the loans to send their kids to reasonably priced schools.” I agree. Not every borrower is using student loans as yet another means to finance a lifestyle he or she could otherwise not afford. Surely, those who will argue for debt forgiveness will trot out the most pitiable cases when making their pleas for “economic justice.” But I would wager that a very large proportion of those who do take out student loans would not have to do so if their parents would make even the smallest sacrifice, they and their parents chose a lower priced college or university, and/or the student borrower put enough value on his or her education to work at least part time to finance that education. I would further, and perhaps more wholeheartedly, wager that college wouldn’t be as expensive, and therefore, in some cases, inaccessible as it is if student loan money were not so readily available, artificially driving up demand for what we sometimes laughingly call “college education.” And if we want to help those who genuinely cannot afford college (any college) and would benefit from a college education, we could more effectively employ mechanisms such as Pell Grants.

Perhaps a larger point needs to be made: When did we decide that everyone has to go to college and that it is the government’s duty to make sure everyone, equipped, motivated, or neither equipped nor motivated, goes to college? What’s wrong with a good job in the trades? We could use more skilled tradespeople who can actually employ a little sound reasoning and do a little math; we have enough performing arts graduates who can’t.

As it is, though, we are headed toward insuring everyone gets a “college education,” and the inflated expectations that come with it, and forgiving the loans of those parents and students who decided to borrow, and perhaps bet on some kind of forgiveness scheme, rather than make the sacrifices necessary to finance their educations on their own dimes. And we will slap those who financed their, or their kids’, educations in the face by, ultimately, forcing them to pick up the tab not only for their own educations but for those of their neighbors who, in many cases, live better than they do. This is how we treat those who work hard, sacrifice, and save in this country. And then we wonder why we get so little hard work, sacrifice, and, especially, saving in this country.

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