The Prospect Of The Student Loan Piper Going Unpaid
Letter in the WSJ from Roger Spence, B.S., M.B.A. An excerpt:
Seventeen years after graduation, I made the final payment on my student loans. So it should come as no surprise that I was outraged at the administration's latest plan to attract young voters ("You Don't Owe That," Review & Outlook, July 24). No, not by building a robust economy to create jobs. Rather, by creating new ways for student borrowers to avoid repayment of their education loans.After the administration nationalized the student-loan program, an election-year effort to support repayment avoidance is hardly surprising. Despite a lingering bad economy and poor employment prospects, the administration must hope that a few young voters would be appreciative and vote accordingly.
Those of us who played by the rules care greatly about the costs involved, but also about the message the government is sending to our younger generations. We chose responsible majors, minimized expenses, endured some hardships, borrowed carefully and repaid our debts. We did so with no expectation that anyone, especially not our government, would step in to assume our personal obligations.
From the link above (in the letter excerpt) from an editorial in the WSJ:
The new report says that Congress should consider letting borrowers discharge their private student loans through bankruptcy. This would reverse a hard lesson learned during the 1970s. After a surge in former students declaring bankruptcy to avoid repaying their loans, Congress acted to protect lenders beginning in 1977. First it limited the ability of borrowers with government loans to use bankruptcy as a bailout ramp, and later the ban was applied to all student loans (with some exceptions for hardship cases).This reform also protected future borrowers. Credit miraculously becomes more available when lenders believe they might be repaid.
Yet as with so many other policies, the Obama Administration displays little interest in learning from the mistakes of the 1970s. If there's not a great outcry over letting borrowers stiff private lenders, eventually you can expect the roll-out of a similar policy for government loans. Most people with difficulty paying back private loans are also struggling with government loans.
While we don't doubt Mr. Obama's sincere impulse to redistribute money, the timing of this effort suggests it is one more election-year pander to the young voters who showed up for Mr. Obama in 2008 but may be less enthusiastic this time. Unemployment among Americans age 20-24 hit 13.7% in June, up from 13.3% in January. So first the President made a big deal over cutting student loan interest-rates to save a few bucks, and now he's telling young voters he's making it easier for them to avoid repaying at all.
Young voters may appreciate Mr. Obama's latest efforts to help them weather the Obama economy. But wouldn't it be easier merely to encourage job creation rather than try to anticipate and make taxpayers pay for every consequence of joblessness?
Indeed, pay it all back -- and Obama may well be pandering -- but I certainly wouldn't be writing a letter to the WSJ boasting about the fact that I'd spent the last 17 years paying back a loan just to get a "B.S., M.B.A."
Wouldn't a "master of business" not entered into a nearly two-decade loan in the first place? Christ, I'm no master of business, but I figured out by the time I was 22 that it was better to be paid for what I was doing rather than pay someone else to teach me the theory. Paying someone thousands of dollars to teach you "business" seems as stupid as expecting someone to forgive you the loan in the first place.
Kevin at July 28, 2012 11:33 PM
Big Mac 1 & 2.
Crid [CridComment at gmail] at July 28, 2012 11:45 PM
We have a big problem with higher education in this country. The whole philosophy that I got fed was study what you are passionate for no matter the cost. Getting a PhD in philosophy, studying acting at Harvard and going to college to become a writer and going into debt was all ok as long as you went to college. If you didn't go to college you were going to be an eternal loser so it's ok to go massively into debt. I got this fed everyday at school. It's all ok because college students ARE GUARANTEED jobs right right? I mean if you went to college society owes you a job for the simple fact you have a piece of paper.
Nope sorry, life doesn't work that way. Prove that you have skills that are needed. Just because you studied to be a writer doesn't mean you are one and deserves to be paid for it. Study some real shit then we' talk.
Purplepen at July 29, 2012 2:28 AM
The education bubble is the same as the housing bubble: Lenders pumping money into a sector of the economy without due diligence, massively raising prices and making what was once affordable unaffordable, with buyers ending up with crushing debt. In the case of housing, they'd give money to anyone who could fog a mirror, because they knew they could resell the loan. In the case of education, they'll give money to anyone who can fog a mirror, regardless of talent or major, because they know the poor sucker will be legally on the hook no matter what. In both cases, the product is widely promoted as "The American Dream!" and anyone who says maybe it's not for everyone is a just a mean old so-and-so. In both cases, buyers who act responsibly during the bubble but aren't smart enough to stay out of the market altogether end up getting screwed. They don't want to see a reversion to a normal trendline, because it devalues their investment. Having played by the rules, and dutifully paid bubble prices, they want to see the bubble continue. Since the best way out of a bubble is to recognize losses as quickly as possible this is one of those cases where it is good public policy to ignore your most conscientious voices. Failure to allow default is failure to recognize reality. Reality will assert itself anyway, and the longer you bar the door, the more explosive its entry into your home will be.
Jason at July 29, 2012 6:50 AM
I have run into so many people that have received a college degree and say that they have never used it. I also have lost count of the number that are still paying student loans and haven't graduated.
The problem, as usual, is that the government into the market for student loans and distorted it to a ridiculous degree.
Jim P. at July 29, 2012 9:00 AM
Tax payers will pay off my student loans?
Over. My. Dead. Body.
Feebie at July 29, 2012 9:11 AM
Spence's argument really boils down to "but it's not faiiirrrr!" So what. I care more about what's best for the economy than I do about what's "fair." I don't know enough to say whether forgiving student loans is best for the economy, but I'm not going to dismiss the idea outright just because Spence paid off his. Not to mention that if he graduated 17+ years ago, the cost of college was radically cheaper so he's comparing apples and oranges here.
What's REALLY unfair is indoctrinating America's youth with the mindset that everyone MUST go to college no matter what; that a degree in poetry or interpretive dance from a random liberal arts school is equal to an engineering degree from MIT; and then setting up a system in which the only way to get the degree is to take on thousands in student loans. It's one thing to hold adults responsible for their poor financial decisions but when the ones signing themselves into a virtual debtors prison are 16-18 years old it really seems reprehensible.
PS I graduated this past spring with no debt or student loans. So no skin in the game as far as that is concerned.
Shannon at July 29, 2012 10:17 AM
My son graduated with a science degree from MIT. It still took 8 months to find a good job. He'll have his school loans paid off by the end of this year and I am so relieved that he is doing well. I may have to live with him after DH dies.
nonegiven at July 29, 2012 10:50 AM
Streams, rivers and swamps of government revenue.
Crid [CridComment at gmail] at July 29, 2012 11:23 AM
If you want it to be fairer. Let's remove the banks and gov't from the equation.
The colleges are selling a product (education) to their customers (students / parents). No need for banks or gov't to be involved.
The colleges give the loans, and allow loans to be defaulted on. Hey if colleges sold them a worthless education than colleges pay the price.
Should have the added benifits of actually lowering tuition. Modernizing and making classes relevant.
Considering the average endowment of US universities is on the order of 90 to 100 million. They could afford to make the loans.
Joe J at July 30, 2012 9:58 AM
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