Saturday, July 8, 2017

Following on from yesterday's post about fiscal obscenity . . .

. . . we find this example of people who just don't get it.

Four in ten Americans believe that President Trump’s administration should forgive all federal student debt in order to help stimulate the economy, a new survey revealed Friday.

There's more at the link.

The federal government cannot 'forgive' debt.  It must be paid, one way or another.  In this case, 'debt forgiveness' simply means that the taxpayers of America as a whole will have to pay off the debt assumed by individuals.  The student loans will be transferred from their private accounts to the public account.  It's precisely the same sort of thing that was used to rescue banks after the 2007/08 financial crisis.  The Fed 'monetized' billions upon billions of dollars in bad debt by buying troubled financial instruments from the banks (both US and foreign) and other institutions that held them.  All US taxpayers now bear the responsibility for paying for those bad investments.  We were lumbered with it without so much as a 'by your leave'.

I'm sorry, but this sort of attitude is what we expect from children, not adults.  If you sign a loan agreement, you should do so with your eyes wide open, fully informed about its implications and consequences.  All that information is available to you, if you'll just read the fine print.  Sadly, many young people don't read the fine print - and are then dismayed when they find themselves trapped in its coils.  Sorry, special snowflakes.  You signed on the dotted line, so it's your responsibility - not mine.

Even worse is the plight of parents and others who stand surety for such loans.  I've heard countless horror stories of parents in their 50's and 60's - some even older - who suddenly find themselves on the hook for hundreds of dollars a month in student loan payments, because their children and grandchildren can't afford (or, in some cases, can't be bothered) to pay up themselves.  The older generation(s) complain that their retirement is ruined, that they'll have to go on working forever to pay off the loans.  My instant response is, "Why did you sign as guarantors and/or security in the first place?"  Surely everyone knows the basic rule that if you can't afford a commitment, you don't make it?

I don't know what the answer is to the crippling burden of student debt affecting so many Americans . . . but I do know that it would be grossly unfair and fiscally irresponsible to make all of us pay for the fiscal fecklessness of the few.  They should have known better.  Why should we bear the consequences, instead of them?

By the time I left home, my parents were preparing to retire, and couldn't afford to send me to university;  so I furthered my education on my own dime (with some assistance from them in earlier years, when they could afford it).  Over the course of more than a decade, I completed a Bachelors degree, a post-graduate diploma, and a Masters degree through distance education and part-time study.  It was hard work, and I had to sacrifice a lot of my social life to study in the evenings and at weekends;  but that was necessary, so I bit the bullet and did it.  I didn't go to a 'party school', or enjoy the social scene at university.  That's just the way it was.  I may have missed out on that experience . . . but I graduated entirely free of student debt, having paid my own way from start to finish.  I remain proud of that accomplishment.

Thousands of others have done (and are still doing) the same thing, mostly for the same reason - money (or the lack thereof).  Why can't young adults today be expected to do likewise, instead of spend tens of thousands of dollars they don't have, and then object to repaying it?



Dan Lane said...

I went into debt going to college, and hated every minute of being in that debt. I paid it off as fast as I could. It looked like a mountain, like there was no way to pay it off... But little by little, it shrank. Took me over a decade, but the only debt I own now is a house (and a car, recent emergency purchase, which will be paid off rather soon).

Debts are obligation and responsibility. That these... misguided and maleducated children choose to beleive the fiction that debt can be "forgiven" is an utter failure of their parents, their teachers, and themselves to learn the very basics of life. I pity them, but the sooner they wise up and realise that TANSTAAFL, they better. For us and for them.

MD said...

One of my coworkers makes fairly large payments to his student loan debt. I was shocked recently when he told me his student loans would be paid off in eight more years. Eight years! Plus the 2 years he's already been making payments.

On a related note, the cost of university education has increased a huge amount over the past decade or two. The price has increased much more rapidly than the standard cost of living. Aaron Clarey (Captain Capitalism) has discussed this inflation several times on his blog.

P. Lester said...

TANSTAAFL unless you are a well connected banker. The cost of education is totally absurd and especially so given that nearly everything they are going to teach you is probably available for free on-line and much of it will be outdated by the time you graduate. It is a rigged game and most of us know how, why, and who is responsible for that.

Mad Jack said...

If you sign a loan agreement, you should do so with your eyes wide open, fully informed about its implications and consequences. All that information is available to you, if you'll just read the fine print. Sadly, many young people don't read the fine print - and are then dismayed when they find themselves trapped in its coils. Sorry, special snowflakes. You signed on the dotted line, so it's your responsibility - not mine.

I would guess that almost all these loans are taken out by students under the influence of a guidance councilor who works for the university. Their job, so to speak, has very little to do with guiding the new college student into a rewarding career choice, but has a lot to do with credit ratings and student loans. I stopped just short of taking out a student loan, and believe me, I was being pressured into signing. When the councilor, an attractive young woman a few years older than I, finally gave up and summoned her superior, and I still wouldn't sign, the two of them washed their hands of this cretinous miscreant and sent me on my way with a condescending look and, "We've done all we could, but some people are simply too stupid to help."

Thank the Lord I kept asking the wrong questions: What if I can't get a job? What if neurosurgery doesn't work out for me? What if I get expelled? Who pays the loan if I can't?

And so on.

Coming out of high school, I was a little more worldly wise than most. I knew I had a lot to learn, and I knew that the problem was that I had no teacher. So I kept asking the wrong questions, and making myself the target of ridicule and scorn, and I only failed to pay cash for a car once - once was all it took.

I'll never forget the first time a new car salesman tried to lease me a car. I kept asking, "What do I do when the lease is over?" To which he would answer, "Well, whatever you want." About the third time I received this nonsense from him, I thought up a good response, "Okay, what I want to do is keep the car. The lease is up, and I just drive away with the car. Can I do that?"

That stopped him dead in his sales tracks, and he started to mumble. I left.

I don't think these loans should be forgiven by anyone, but I also strongly believe that if the borrowers don't understand just why that is - and it seems a few of them don't - they should be carefully instructed until they really do understand. And while I'm on the subject of instruction, while it's sort of true that the information is in the fine print, it's sort of not true also. You have to be sharp enough to see the ramifications of the clauses in the three pages of fine print, and if the interpretation of the fine print provided by the lender or vendor doesn't seem to agree with what you're reading, you have to learn to say so.

Doctor Locketopus said...

"Thousands of others have done (and are still doing) the same thing, mostly for the same reason - money (or the lack thereof). Why can't young adults today be expected to do likewise..."

Because they can't. It's not mathematically possible. The annual cost of attendance (tuition, fees, books, room and board) at a state university is in the $25,000-30,000 range. The annual income from a 40 hour a week, minimum wage job is $15,000. Before taxes.

When I first started college, umpteen years ago, the tuition portion was $240/semester for a full time load. Now the same school charges $6,000/semester. That's not the fault of the students, but rather a failure of adult supervision in allowing things to get to this stage. Blaming the students is like blaming South American peasants who have fallen into debt peonage.

Bibliotheca Servare said...

It helps that bankruptcy filing is not an option for student loan debt. There's no risk to the lender, so there's no incentive to ensure that the recipient of a loan will be able to repay it. Nice work, if you can get it. Men with guns to ensure that you get paid, regardless of the circumstances.
(I have no student loan debt, btw. It just...irritates me how all of it is so corrupt and interconnected. Schools know that students will have no trouble getting loans of five or six digits, so they have no reason to not artificially inflate the cost of tuition; lenders know that students will not be able to file for bankruptcy, so they can keep squeezing that "turnip" til blood comes out/it commits suicide (and then they know the parents -if it's private, not federal, debt- are on the hook, because the law doesn't have to make sense, it's the law.) and the lenders know that, because of inflated tuition prices, most students will have no choice but to get a loan from them! It's really kind of brilliant. Disgusting, but brilliant. I look forward to watching it come crashing down about their ears.

Bibliotheca Servare said...

This. And that's not even including the "Ivy League", unless I'm mistaken. It's unsustainable madness. Kind of like insanely inflated housing prices, maybe? I suppose it's different in that a mortgage has collateral involved, but the artificial price-hike seems similar.

Jonathan H said...

I went to a conservative Christian school well known for its low cost and graduated just over a decade ago. After 4 years in a federal job using that degree, I made as much in a year as school cost for 4 years.
Since I have graduated, costs at that school have doubled (100% increase) and the same federal job has increased pay about 25%.
Tuition costs have increased to consume the available money - supply and demand, based on artificial government subsidy. Unfortunately, the 'available money' isn't there in the market based job world.
I was very fortunate that my parents were able to pay for almost all of my education and I graduated without debt, and also that I found a good job right after graduation. I have many former classmates who owed a considerable amount and who couldn't find a well paying job for longer after graduation - they are still paying off their debt; even a 'modest' (ha!) $30,000 of debt takes a long time to pay off.

Roy said...

As others have pointed out, the tuition costs have gone up & up and now is high enough to consume any available money.

While I agree with you that these people should be on the hook for debt that they *freely* signed on for, I also blame the college & financing cartels for the situation they are now in.

Personally, I would like to see the schools and the loan sharks be placed "on the hook" for it all. Let the whole thing collapse and finally some sense might enter the picture.

A pleasant side effect might also be, being able to get a decent plumber or HVAC guy when you need one without having to take out a second mortgage and who will show up when he says he will.

Anonymous said...

My first semester in grad school, in-state tuition for 12 hours (an overload in grad-school. Full-time is 9) cost $1200. Five and a half years later, my last regular course (three hours) cost $1300. No lab fees, no room-n-board, just rump in chair in lecture hall and access to the university facilities. This was a public university. And grad school hours generally cost less (unless lab) than undergrad.

My undergrad college's tuition has more than doubled since I escap—, ahem, graduated.


Old NFO said...

Gotta agree with Bibliotheca. The lenders own your ass, and you have NO out. THAT never gets explained in a fashion the kids can understand... sigh

Michael Brazier said...

The solution is clear, then - after a certain number of years, allow student loans to be discharged in bankruptcy, like all other debt in the US. Lenders then want to make sure their loans will be paid off before bankruptcy opens an escape hatch, which caps the amount of money they're willing to lend; and that limits the amount of tuition and fees the colleges can charge their students. Lenders will also be reluctant to lend money for degrees in underwater basket weaving or aggrieved persons' studies, which prevents colleges from offering such intellectual pablum and sending students into the world without a real education.

MadMcAl said...

You (as nation) should make student loans for majors with low earning potential unenforceable (but not backdating).
Simple as that. It makes absolutely no sense at all to give a loan over $ 200,000 for a English, fine arts, history or gender studies degree where the chances of employment mostly tend to asking if somebody wants fries with the order.
Sure, all these degrees are needed somewhat (well nearly all, I can't see the use of the gender studies degree) but there are how many possible jobs?

If the loans in these majors are unenforceable, then the only ones that can get these degrees are those that have the money to burn, are that determined to somehow get the money for it or that good that they get a scholarship.
Of course the feds also have to stop giving loans for these majors.

Another thing is defining a national standard for a major what is needed to get a degree, and make a law that prohibits the universities to withhold a degree when these standards are met.
That will make it quite hard for the schools to force the student to take some crap course that s/he will never just to get students into social studies, gender studies etc. so they can justify the departments. AFAIK that is one point that drove the costs so high, as the schools squeeze more and more crap into the course load (under the pretext to give a well rounded education) that has to be paid and that ends up costing two or more additional semesters.

Anonymous said...

We're missing the big picture. Student loans should not be backed by the US government -- that is to say the tax payer -- at all. Not at all.

Examine the rise in the cost of tuition versus the backing of student loans by the government and the emphasis that everyone should go to college instead of vocational/technical schools or entering the work force. They go hand in hand.

No forgiveness. Pay the loans back period. Even thinking people knew this would be the result years ago and yet now we are expected to pay for other people's stupidity. Get the government out of the loan business.


Ryan said...

Dr L hit the nail right on the head. The cost of education relative to overall inflation and particularly to stagnant or declining entry level wages is such that working and cash flowing it for a typical high school grad is mathematically impossible. Living on those wages period is problematic, paying current tuition, fees, etc no way.

This is something many older people, who lived in a time where an entry level job would pay for most or all of their educational costs don't seem to get. The factory and mill jobs which let my father and grandfather do that don't exist anymore or pay half the wages (adjusted for inflation).

I don't believe in blanket loan forgiveness but higher education costs need to be brought under control.

Doctor Locketopus said...

"No forgiveness."

This you can enforce.

"Pay the loans back period."

This you can't. Not unless you're planning to bring back debtor's prison, bonded servitude, or the like. A debt that can't be paid back won't be paid back. All you can do is attempt to mitigate the fallout.

It's interesting how people seem to believe that debt incurred by an eighteen year old (who has been indoctrinated his whole life by parents, teachers, and every other authority figure that he MUST go to college) shouldn't be dischargeable in bankruptcy, while the debts of bankers, corporations, and (not to put too fine a point on it) Donald Trump should be. Holding a college kid to a higher standard of fiscal responsibility than the movers and shakers of our economy seems pretty ridiculous to me.

Let them file bankruptcy (and take the associated credit hit... I agree that it shouldn't be straight forgiveness).

Bibliotheca Servare said...

And consequently decrease the incentive for lenders to *offer* such insane loans in the first place! I may be missing something (it wouldn't be the first time, certainly) but I really can't see a downside. The (current crop of) debtors take a hit to their credit rating, but are relieved of a crippling burden of debt while they're endeavoring to join the workforce and become productive members of society, and the number of future debtors is decreased because lenders will know that there actually *is* a risk entailed in issuing massive loans to "gender studies" majors, so they'll be more cautious in doing so. As it stands, the government is artificially eliminating that risk, by making bankruptcy not apply to student loan debt. Now, that's not to suggest that the government should make up the shortfall from all the loans that will be discharged via bankruptcy, of course. The banks and lenders made the decision to issue those loans. The American people have no obligation to help alleviate the consequences that arise from their decision to issue debt in the (accurate, for some time, hopefully erroneous soon) belief that the government's gun would enforce repayment. They were not given guarantees, insofar as I'm aware (and if they were, whoever issued such guarantees should be tried for treason, imho), so there's no justification for insisting that the American people (in the form of "the government") must make up the difference. If I give my brother a loan, and he files for bankruptcy, I can't go to my father and expect him to make up the difference, can I? So, consequences all around. The banks for stupid/malicious lending practices, and students (their credit scores) for foolish, or unwise, debt accumulation. And the schools will subsequently have no option but to deflate their obscene tuition costs, because otherwise they'll soon be wanting for students, few of whom will be capable of paying that inflated tuition, even excluding housing, books, etc. I'm still struggling to see a downside, heh. But, like I said, I freely acknowledge that I may be missing something. Possibly spectacularly so. :-)

Anonymous said...

While, as others have pointed out here, the cost of schooling has increased tremendously over the years there is a couple of options that don't seem to be commonly considered. One is to attend a JUCO in state and knock out all of the basics. Those JUCOs typically have cheaper (and smaller) classes and are more willing to offer full or partial rides for lower ACT/SAT scores than the 4 year universities. Also, with few exceptions, where you graduated from seems to bear little influence. So Out-of-State tuition in southern schools could be cheaper then in-state-tuition in other states. Finally, my mom (who is a secondary school teacher) finds and post about scholarship opportunities. Students these days just don't want to do the work to submit the paperwork (or study for the SAT/ACT). As an aside, she was told recently of a POC student who got an offer of a full ride to Harvard/Yale/etc. with an ACT score that a white student couldn't even get accepted with even after volunteering to pay their own way. In my view, there is blame for both the parents who may not help lay out the choices where the student understands and the student for not wanting to do the work and\or consider the consequences.

Unknown said...

I know you're talking about the U.S.

IMHO why not let the free market decide? Remove the law which prohibits students from declaring bankruptcy on their student debts. All of a sudden lenders will be far more prudent with who they loan money to, for what courses and how much. After all, why should university education cost so much? A lecturer can livestream his / her / xie lecture to millions of students over the internet. Hard sciences of course have more obstacles, but the humanities? A degree in Feminism should cost about $1,000 (Bitch about how men are the reason you're not living like Kim Kardashian) and would be worth less than nothing as it'd make the student unemployable (IMHO).

I digress.

The other thing to consider is employers demanding degrees. Why do they demand degrees for jobs that don't need them?

Two examples of why they are demanding them. When the Middle East discovered they had oil they required Western know how to realise that wealth. The only way they could sort the wheat from the chaff for the lucrative positions they offered was to demand a degree.

The other example surprisingly comes from the US Military. They big wigs held dick measuring contests at the pentagon on which branch had the smartest people. How to measure intelligence? Degrees.

Then industry started demanding degrees just because.

So in summary - Let students go bankrupt (if that is their want) just like businesses do. Let go of government accreditation blocks (An online uni needs to provide gym & child care facilities etc) break up those monopolies

Javahead said...

At one time, most employers that tested at all would ask for a high school diploma and give, essentially, an IQ test or similar broad-based skills assessment. Not "are they a genius", but "can they read, write, do simple math, and show some sign of reasoning ability." Then came Griggs vs Duke Power, which found that discriminatory.

With that sort of testing forbidden, they seized on college degrees as an allowable surrogate - it helped that back in the 1970s and 1980s, when this started becoming common, that most people who had graduated college DID generally score higher in these areas. Which was as much an artifact of the smaller percentage of the population who then graduated from college as anything else - but it was allowable.

Shortly thereafter the schools started urging that *everyone* should go to college, no matter what their skills and interests. No matter whether the major chosen had any real-world relevance - after all, it was a college degree! And to help people attend, government guaranteed student loans.

This led to a couple of unintended consequences - the schools rapidly increased their tuition and fees to capture every dollar that they knew the student loans would cover. But students (including some in majors like medicine, law, etc) noticed that they could graduate, declare bankruptcy (at a time they had no money because, hey, recent college graduate!) to eliminate the loan, THEN get a well-paid job.

So - rather than eliminating the government guarantees (make it harder to get a loan if you can't prove you can repay it), or requiring the colleges to guarantee part of the loan (making them less likely to keep jacking the tuition costs or offering loans to unqualified students), or perhaps adding a brief restriction on bankruptcy (say, not for 5 years post-graduation or leaving school) - they instead kept the same loan structure and made student loan debt permanently protected.

An added fillip - if the students have parents who earn decent incomes, make sure that they're less eligible for non-loan assistance so they HAVE to get a loan unless their parents are well-off enough to pay the tuition up front. And if not, try to get their parents to act as co-signers on their loans.

We got both our daughters through their undergraduate degrees without loans (combination of merit-based scholarships and working helped). But we couldn't handle graduate school tuition - we helped with living expenses but they both needed loans (and no, we didn't co-sign).

Our older girl worked as much as she could during graduate school and still owed roughly a year's gross income when she got out (she's paying it down rapidly) but was told that she owed well below her class average.

Our younger girl finished graduate school this year - and owed about as much as her older sister. Fortunately, she's in a field much in demand and accepted an agreement to work for her local schools for 3 years in exchange for them repaying half the loan amount (or, roughly, about as much as I made per year when she was born). That helps - but all the same, even if she pays aggressively, it will be several years before she has it all paid down.

In their case, graduate school made sense: they are both in health-related fields (Pharmacy and Speech Language Pathology) that require advanced degrees and licensing to enter. And they are both frugal, and graduated with far less student-loan debt than most of their classmates. But that's still a *lot* of money.

By way of comparison: adjusted for inflation, tuition to attend Harvard Law School in 1970 was ~$13,000/year ($2100 in 1970). It's ~$62,000 today. I am unconvinced that a Harvard Law degree today has nearly five times the value, or covers nearly five times the material, that the same program offered in 1970.

VFM #7916 said...

I've seen the arguments put forth by the commenters here over the last decade or so.

Any solution proposed will simply be caulking and crack filling. That's it. The real solutions, such as cash basis medicine and education, will not be possible without a black swan event or other systemic reset.

The question that should be asked is "why?" Why will it take collapse and destruction to effect the needed change?

Inadvertently, @Javahead provides the answer. It's also not an answer they want to hear.

He/She/It sent daughters to undergraduate and graduate school. Javahead, I'm sure their great people. But they (and you) are responsible for the collapse of the West.

It's the result of a set of BAD ideas that have thoroughly permeated the West:

Lie to women that the path to happiness is a education and a career, that they can have a family after their peak fertility is passed.

Lie to them that they can marry a quality man when they've passed peak beauty.

Lie to them that they can have a family and career when they're likely to ditch that high paying job that required so much effort, life, and money to create when they realize they don't want to have it all, because it's too much work.

Lie to them that Men want from women the same thing women want from men; money and security.

Lie to them that motherhood, SAHM, one marriage, one man, submission, and femininity are slavery, but the career treadmill, relationship bitterness, serial monogamy, cats, and vindictive feminism are not.

And that's just the women. Throw men into the mix with the lies told, and the list gets far longer.

The largest lie for both sexes of children is a lie of omission. The omission is that an adult must teach a child what they SHOULD do. Kids get told what they could do, that the possibilities are endless, or they are expected to figure it out on their own, at a point in time where one bad decision will alter their life for a decade.

Return to the tradition of telling your child what they should do. This requires work and bravery on the part of an adult these days when it comes to telling girls what they should do: Marry young to an older man and all the aspects of family that come with it.

For men, they must be told and exposed to trades, work, and the requirements for financial success. A young man must be shown that it's his life, for his purposes, not anyone else's.

The West is rapidly approaching the point where all proposed solutions to existing problems are merely tweaking the settings. Education and healthcare are merely the most recent examples. In response, reality will hit the reset button. To be prepared, question your basic assumptions.

Javahead said...

To VFM #7916: I must respectfully disagree.

Though I may agree with some of your premises (for instance, we told our girls that if they wanted help from us in college, it needed to be for something that they could reasonably make a useful career out of, not "grievance studies"), we refused to handicap them by leaving them unable to support themselves IF THEY NEED TO.

We also did our best to teach them that frugality is good, rainy-day planning is necessary, that life isn't always (or usually fair) so you need to rely on yourself, that nobody owes you a living ...

But there is a major line between "teaching them what they need to be an adult" and "telling them what to do".

"Marry young to an older man" while telling sons "it's his life, for his purposes, not anyone else's"? That second is what we tried to teach our daughters (and would have taught any sons, if we'd had 'em). There's a big difference between *choosing* to be a stay-at-home or only-working-part-time mom, and being forced into it.

*Choosing* to stay at home was what my wife did when the kids were born. Working alternate shifts was what my mom (a nurse) did when we were kids - there was almost always one parent at home every hour of the day. However, as the world is today, depending entirely on one spouse's employment is a major risk - for stability, not the level of income.

Both our daughters are talking about how they'll manage things when they have children (one's married, one engaged to be) - in both cases, they chose careers that offer flexibility specifically so they can be there for their kids. But a major part of "being there for their kids" is "being able to support them if their father is laid off/hospitalized/dies/bugs out".

I'm sorry if this meets with your disapproval.

Quartermaster said...

Allow bankruptcy, but put the school on the hook for at least 25% of the loan. You'll see a lot, if not most, of the grievance studies degrees fall by the wayside. The kids however, should still bear some of the cost. I'd knock it down to 25% of the total loan. They need their little fingers burned to some extent and this way, at least 50% of the debt gets paid.