October 10, 2022 at 11:41 a.m.
The dirty little secret of student loans
The dirty little secret of student loans
After all, when truck drivers and plumbers are paying for the loans taken out by graduate-degree holders making six figures a year, there's bound to be some blowback.
What's amazing is that the tone-deaf Biden administration didn't see it coming. Just like they haven't seen a lot of things coming, such as that pumping $7 trillion of money into the economic pipeline would cause the pipeline to explode in a geyser of inflation. Or that adding $320 billion to it through student loan debt cancellation will add to that inflation.
Oh well, they are human. Sometimes the elites can't seem to see themselves in the mirror because they are mesmerized by the simper of superiority and narcissism on their faces. Our policies can't be bad, or fail, because we say so, they smirk to themselves so knowingly.
But there's nothing good about the student loan cancellation program, as we report in today's edition.
Yes, it's inflationary. According to the Wharton Budget Model, it's going to cost the U.S. Treasury $330 billion over 10 years. That more than wipes out the projected savings from the Democrats' so-called Inflation Reduction Act, which is projected to reduce the deficit by only $102 billon over 10 years. Oops.
Even Barack Obama's chairman of the Council of Economic Advisors, Jason Furman, was stunned: "Pouring roughly half a trillion dollars of gasoline on the inflationary fire that is already burning is reckless," he said.
With gas prices marching upward again, Furman used the perfect metaphor to describe the inflationary fire burning out of control, and being constantly renourished by pumping ever more gas - ever more money - into the economic tank.
Then, too, and so typical of the Democrats these days, the debt cancellation snubs the working class for the elite. About 70 percent of the relief goes to borrowers in the top 60 percent of income distribution. That's on top of the relief the more affluent already have received though paused loan payments, which has robbed us of $135 billion so far.
While the affluent pocket that money, courtesy of average Americans, those average Americans are paying an extra $635 a month, on average, just to live, thanks to inflation.
Of course, it's not just about the money. It's also about social justice. The administration wants us all to know that the debt relief program was designed to favor black Americans. If we take them at their word, then the program is not just bad economically but racially discriminatory.
But wait a minute, one might say. On the one hand, the plan favors upper-income Americans, but at the same time it is supposed to favor black Americans. How can it do both, given that blacks are disproportionately in the lower income brackets of the American economy?
Actually, this is a perfect example of Democratic Party politics these days, the ability to simultaneously serve a social justice agenda - at least in name - while continuing to cater to the elite ruling class that runs their party.
The answer is, because they are poorer, blacks make up a disproportionately larger number of student loan borrowers; as such, they will get disproportionately more of the relief. But the footnote to the story is that the vast majority of student loan debt is held by the more affluent, and so those black borrowers in line for relief are also more affluent black borrowers who hold graduate degrees.
Translated, the program both redistributes wealth upward and favors blacks, so long as it is understood that the bias is toward affluent blacks as a subset of a class of affluent borrowers - a bias toward affluent blacks over affluent whites - not a bias toward blacks within the population as a whole.
It's social justice for the wealthy. For everyone else, including poorer blacks, it's pay up so we can ease the pain of those already better off than they, including the ruling elite.
Racial discrimination is the least of the program's constitutional problems. A rash of lawsuits are asserting that, once again, Joe Biden is unconstitutionally legislating from the Oval Office. He's been busted time and again on that score, and lost every time in the courts.
He's likely to lose again. But the pattern once again exposes the administration's extreme disregard for the rule of law and the constitution of the United States.
Then, too, there is the dirty little secret about student loans: While it's unfair to make taxpayers pay for loans that the borrowers voluntarily borrowed - we are all for personal responsibility here - those borrowers are not the only ones to blame for the fiasco that now totals $1.6 trillion of debt.
The truth is, we live in a society that preaches to our children from day one that the way to get ahead in life is to go to college. For the past 20 years, the sermon has added that the way to heaven actually involves getting a graduate degree, too.
So for decades now our schools have been flooded with seekers of the Holy Grail, getting all sorts of degrees, so many that they outstrip the number of available jobs. And millions get meaningless degrees in professions that never had any jobs waiting to begin with, or any that paid a decent wage. That social justice degree just doesn't get you very far, it turns out. And so many of those degree holders end up recycling themselves through technical and trade schools so they can actually make a living.
Meanwhile the mountain of debt piles up, and even those who manage to secure those six-figure jobs encounter high payments, high interest rates, and interest capitalizations. After five years, many find that they owe more than they did at the beginning of the loan term.
And all the while, colleges and universities continue to jack up tuition costs for new students coming their way. Between 1980 and 2019, college fees skyrocketed by 169 percent, one study found, while wages for young workers aged 22 to 27 went up by 19 percent.
It's all an elaborate flimflam. Knowing that student loans are easily obtained, universities endlessly raise tuition costs for students eager for success in life, while the loan companies happily finance it all, knowing that in the worst case scenario the federal government will give them their money thanks to the American taxpayer.
And the government gives its blessing to it all. Way back when, in 1987, education secretary William Bennett, in a piece called "Our Greedy Colleges," foresaw what was coming.
"If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase," he wrote.
It was called the Bennett Hypothesis, and it was backed up in 2015 by a Federal Reserve of New York study, which found "a pass-through effect on tuition of changes in subsidized loan maximums of about 60 cents on the dollar" and 37 cents on the dollar for Pell grants. In other words, for every dollar increase in the federal subsidized loan maximum, the cost of attending college increased by 60 cents, and for every dollar increase in the Pell Grant maximum, college tuition increased by 37 cents.
So the government makes it so easy to borrow boatloads of money at relatively high interest rates, the colleges hike tuition accordingly, and then preach to America how vital it is for kids to attend their universities, so by all means go take out a huge loan to do so.
Bear in mind that tuitions increased so much that college became out of reach for millions without a student loan. So, in the end, it's not really fair that all of this is the fault of people who obtained those loans. While loans should not be forgiven, there is some relief due, logical from the interest paid.
That is not to say it is the responsibility of the taxpayer to foot whatever bill there is. The culprits are those universities who spent gobs of money telling Americans how essential a degree was and is, even as they devalued those degrees in the marketplace and piled up cash in the bank.
Perhaps it is time to make the universities pay, as Florida Gov. Ron DeSantis recently suggested.
"The people that should pay for it (are) not the American taxpayers," DeSantis said. "It should be the universities (that) should be responsible for that. If they're producing people that go deep into debt and their degree is not worth anything, and they're not able to make enough money to pay it back, then that's on them. They've had an incentive to get more and more loans taken out and then put it in their pocket."
For decades now American colleges and universities have soaked America with a fiction that attending their institutions is the key to the American dream. Along the way, they have enriched themselves, and worse, attacked academic freedom and indoctrinated students with a woke curricula.
Yes, student loan borrowers should be responsible for their loans, but not at usury rates. And it's long past time to hold universities and other higher education institutions accountable for their role in this economic shell game, not to mention their role in the consequent and designed destruction of American values and traditions.
Back in 2019, Republican Sen. Josh Harley of Missouri introduced legislation that would have made colleges and universities financially responsible for a default on student loans.
"American students and workers shouldn't have to further enrich colleges by taking on a mountain of debt or mortgage their lives in order to get a good-paying job," Hawley said. "Yet, we have a system that preferences students who want to attend a four-year college over Americans who want to learn a skill. This system protects higher education institutions that have been padding their endowments with taxpayer money while they raise tuition. ... It's time to break up the higher education monopoly."
His bill would have prevented colleges and universities from increasing the tuition to pay for that default.
Now it's time to go even further. Provide some form of relief - logically, all the capitalized interest and usury rates - but don't send the bill to the taxpayer. Send it to the colleges and universities that spend so much time trying to transform America with their radical curricula.
Make them pay, and transform them instead.
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