2020/02/03

Finding Solutions

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Yesterday's post sounding the alarm on the student debt crisis caused quite a stir. It was encouraging to see that the overwhelming majority of responses were positive or at least cautiously sympathetic. As a sample of public opinion, this blog's readers track with polls of voters on the issue of student loan forgiveness.

Predictably, we did get our share of, "Personal responsibility!" "Free market!" "Bootstraps!" which argue nothing except that the person regurgitating those empty slogans is living in an epistemic closure bubble where it's always 1988.

Happily there were also thoughtful readers who raised serious points of contention. The main criticism I'd like to address, and which should answer the others, is that my post highlighting the problem didn't offer solutions. Frequent visitors to this blog will know that its readers are pretty sharp customers. We spent the weekend mulling over the student debt crisis, and we ended up finding solutions that should at minimum form a basis for negotiation.

A point that should be emphasized is that we're not here to make demands on taxpayers. Politics is the art of deciding how best to order public affairs for the common good, and this process requires compromise. The plan I'll lay out here is intended as an opening offer toward making a deal with Americans who are skeptical about student loan forgiveness.

First, it's necessary that all sides accurately grasp the problem. The number one objection I've encountered to forgiving student debt is the assumption that US taxpayers will be on the hook for the forgiven amounts. Debt relief skeptics raising this objection are arguing from outdated information. These folks have the mistaken impression that most student loans are held by banks. While that was true before 2010, it is no longer the case.

A provision in the Affordable Care Act allowed the federal government to acquire student loan debts, which it did in earnest. Whereas the government owned zero student loan debt prior to the Clinton administration, by January 2009 it owned $150 billion, and that figure has skyrocketed to over $825 billion now. Today, the US government has an effective monopoly on student loans, acting as the creditor for 55% of student debt.

Because the federal government guarantees almost all student loans, they foot the bill in case of default. The current student loan default rate is 11.4%, and it's expected to rise to 40% by 2023. Some experts warn that total student loan debt could reach $2 trillion next year, and that default rates could hit 50%.

That means taxpayers are already on the hook for over $100 billion in student loans and could be looking at a crushing trillion-dollar bill within three years.

But that's if nothing is done.

Here is my proposal for averting a student debt apocalypse:

The US government cancels its share of the debt.

As US students' primary creditor, the government could simply write off the lion's share of student debt.

For those who doubt this is possible, consider that the Pentagon frequently creates and destroys 23 times more money than all student loan debt on its own ledgers.

Also bear in mind that the government already cancels student loan debt on a case-by-case basis through federal debt forgiveness programs and court rulings. This plan would simply scale up existing relief measures from the micro to the macro scale.

Though an excellent start, cancelling the government's share of student loans still leaves us with over $600 billion in crippling debt. That brings  us to ...

Seizing universities' endowments to pay down the rest.

Total US university endowments exceeded $500 billion in 2016. Even if that number hasn't risen since, which it almost certainly has, taking those funds and putting them toward student debt not forgiven by the government would reduce the total student debt burden to $150 billion. Wonder of wonders, that's the same amount of student debt the feds held prior to the Affordable Care Act.

Really makes you think.

Anyway, this plan's first two provisions would slash the national student loan burden from $35,000 per borrower to $3500 per capita. Even a jazz/tap major working at Starbucks can manage that bill.

And keep in mind, Baby Boomers, your cohort holds over $65 billion in student debt. I'm for wiping your slate clean, too.

That solves the immediate problem, but we want to avoid a repeat of what happened in 2010, so here are some preventative measures to keep a disaster like this from happening again.
  • Outlaw federal student loan subsidies.
  • Require schools to cosign all future student loans.
  • Make student debt dischargeable through bankruptcy.
There you have it. Not only do we wipe out a trillion dollars in crushing debt that's keeping young Americans from starting families, we spare taxpayers the expense of bailing them out and the looming catastrophic expense of the imminent default crisis.

We also stick it to the smug Marxist academics who're indoctrinating our youth with commie propaganda and hopefully turn Millennials away from socialism.

On to the last few objections.

"I already paid off my student loans with hard work and sacrifice. Why should I support a debt relief plan that doesn't help me?"

It does help you, and all taxpayers, avoid a trillion-dollar tax bill and likely financial collapse. But I'm here to negotiate, so as a reward for your diligence, I'll throw in a tax break for Americans who've paid off their student loans. We can hash out the numbers over drinks.

"Seizing universities' private property? You're just a filthy commie!"

No. The Millennials, whom those universities defrauded, are the commies. Seizing scammers' ill-gotten gains and restoring them to the victims is how the government already handles fraud. I'm just applying the same standard to con artists who've unjustly gotten away with their con. If we give Millennials justice and help them escape poverty, we might just win them back to capitalism.

"I had the smarts to avoid taking out student loans in the first place. What about MEEEEE!?"

What about you? This plan is meant to help students defrauded by academia and the government get their lives back. By design it makes no provision for people who A) already got theirs and B) are so consumed with pride and petty jealousy that they begrudge their fellow countrymen getting a shot at the financial security they themselves enjoy.

I guess we could add language sending ex-lacrosse players to your house to pummel you with bags of oranges until you stop being Mammon-worshiping witches, but we'd have to vote to secure funding.



But what do I know? I'm just a small business man striving to navigate a system stacked against guys like me. If you like the plan I've outlined here, please consider supporting my work.

46 comments:

  1. It seems to me that just making student debt dischargeable through bankruptcy would be the best option.

    That way people who got their moneys worth from their degrees and are living prosperous lives will continue to pay off their loans as I believe they should, they got what they paid for. I don't see a lot of people in that situation choosing bankruptcy.

    Yet people who are completely financially screwed by their student loans will be able to declare bankruptcy and get out from under their debt and start living productive lives.

    In addition, if student loans are now dischargeable through bankruptcy I think that the lenders would start being more careful about who they lend money too. I doubt you'd see as many lending institutions giving loans to kids for degrees in Gender Greivences when they know that realistically there is a large chance that those kids are just going to eventually declare bankruptcy.

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    1. I support making student loans dischargeable through bankruptcy. That would satisfy distributive justice. Bankrupting the vampires in academia would satisfy retributive justice.

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    2. Problem with the bankruptcy only option though is it destroys the credit scores of these conned victims. So they discharge the debt, but they still can’t finance a house or car or a business venture.

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    3. It also doesn't work if the bankruptcy system is dysfunctional. The most common bankruptcy type, chapter 7, lets you discharge your debts in exchange for non exempt assets.

      I checked, and if you own more equity in your home than the exemption amount they can, and have, made you sell the house to give the excess away for your debts. This is per state, so it isn't as clear cut a case as one would assume. But the feds have some default cases we can look at:

      home: $23,675
      car: $3,775
      household goods: $12,250 (so long as no item worth more than $575)
      wildcard: $1,250
      wages: exempt after filing, not before

      So anyone barely scraping along, with a real clunker of a car, who is almost a renter in the home they bought, can keep their clothes and cheap tv they got on sale along with their wedding rings.

      More than that, and you may lose the car, the home, and with a spiked credit rating you might not even be able to rent a place to sleep let along store the detritus of your life.

      Will it work for student loans? I'm not so sure. Lots of the people slaving away are starbucks baristas renting an apartment and taking the bus. Lots more are professionals, lawyers, businessmen, never getting out from under the compounding effects of debt growth who would lose everything.

      https://www.natlbankruptcy.com/exemptions-what-can-i-keep-if-i-file-bankruptcy/

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    4. Thanks for looking that up. I'm reexamining my position on bankruptcy.

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    5. A jubilee first, then law reform bringing student debt back into line with all other debt. I'd also look at close-to-free, online delivery of classic liberal arts material. This defeats the idea the "but everyone needs to do tertiary education or you hate education and life of mind". There is absolutely no reason to go into debt for a broad reading in philosophy, history, and the arts - indeed, no reason to even leave the house.

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  2. Brian

    Here's my counter offer.

    The first 2 feasible reforms
    1) abolish student loan exemptions from bankruptcy. They're ordinary debts not prior claims or liens.
    2) debt jubilee and banks eat the losses.

    Next is the seizure of university endowments. Here I'd create an institution which involves the feds, state and municipalities along with parents and students. They'd be in charge of restitution.

    If that's unfeasible then the 3 levels of government legislate the endowments to provide full scholarships +room and board (regardless if they live on or off campus) for all students part time and full.
    Strict limitations of foreign students and priority for local over out of state students.
    All alumni contributions ensure ontinued affordability and not to build a 50 million$ building

    These are my prescriptions

    xavier

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  3. Seizing the assets of institutions full of people actively championing Marxist theory and massive state-sponsored theft seems like poetic justice.

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  4. You have the same opinion as Elizabeth Warren.
    https://www.youtube.com/watch?v=62i2feu9fxk&t=5s

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    1. That's simply false. I support debt relief for all with student debt and paying for it with university endowments. Warren's plan offers no debt cancellation to households that earn over $250k per year. She'd also pay for her plan with a new tax.
      https://www.forbes.com/sites/zackfriedman/2019/06/17/elizabeth-warren-student-loan-debt-forgiveness/#319f376f5e7b

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    2. Ah. The old [Insert Evil/Bad/Stupid Person's name] believes the same thing tactic.

      Which, even if it were true that Warren believed the same, wouldn't necessarily invalidate it.

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    3. If anything, I have the same opinion as Tucker Carlson.

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    4. I happen to know that Nick is not a witch. Under the principle of charity, I interpret his comment to mean that Warren's tone deaf gaffe will make debt forgiveness a harder sell. He's not wrong.

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  5. I like your ideas but for the crime of usury I’d say flogging is also required, just to really impart the lesson

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    1. It would be interesting to see such corporal punishments return. I'm not advocating for anything as I don't know what would or wouldn't work but I wonder what our prisons and crimr level would be like if prison sentences were sometimes commuted in favor of floggings.

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    2. Bellomy

      But would flogging be conducive to the common life?

      xavier

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    3. I have no idea, but is imprisonment?

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    4. Perhaps but I'd in some societical shame as well.

      xavier

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    5. The problem being, Xavier, is that the Death Cult has worked long and hard for decades to nullify the American sense of shame. Some still have it but its definitely a diminishing number.

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    6. Then let us pray for godly sorrow, leading to repentance. Our fundamental ailments are spiritual, so a restoration of personal shame and contrition is part of our national path back to the altar and the Cross.

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    7. I strongly favor the abolition of long-term incarceration and the return of corporal punishment (and probably the expansion of the death penalty, which I regard as more humane then locking a man in a cage with other convicts for life). The theory of the penitentiary was that long-term confinement would bring penitence and rejuvenation. That theory has been disproven by the sad results: petty offenders turned into career criminals and racial gangs vying for power inside for-profit prisons.

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    8. I support the dearhcpenalty for the reasons Dr. Feser gives, but I question it being more humane than life in prison for the simple answer that the majority on death row prefer life in prison.

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  6. Here's an encouraging preventative solution being implemented in some private vocational schools: no upfront tuition costs, but collect x% of income for y years IFF students get jobs making a minimum of $z/year after graduation. Some of these schools even have in-house "sales teams" to help graduates find and land jobs -- the incentives are perfectly aligned. If the student fails to land a decent job, the school eats the cost.

    If Bernie gets the Dem nomination, I wonder how POTUS will address student loan debt relief. It's a perfect "art of the deal" scenario for him. Besides, his focus on "muh stock market" only plays with Boomers.

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    1. Trump should address the issue as Tucker Carlson suggested, viz. seizing university endowments. Unfortunately, in terms of economic policy, Trump is the quintessential Man from 1988.

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  7. Just cancelling it in a debt jubilee is great but definently we need to stop it from happening again. I like your ideas but inwould also purpose a cap. 70% percent of the local average annual wage in your fields of study.

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    1. You're right that we must take steps to stop this from happening again. I further propose levying fines and other criminal penalties on banks that knowingly make bad loans, such as the NINJA loans that caused the 2008 crash.

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  8. Probably already seen by folks elsewhere, but this is an intro to Michael Hudson's book, , and his philosophy on the matter. You can read the transcript of the interview, or watch the video.

    Some other articles with Hudson. I'll leave the analysis of Hudson's positions on Christianity to Brian.

    https://www.nakedcapitalism.com/2017/12/michael-hudson-died-debt-not-sins.html
    https://michael-hudson.com/2017/12/he-died-for-our-debt-not-our-sins/

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    1. Stellar interview!

      I've seldom come across truly irrefutable cases for any position. Hudson just made one of them.

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    2. I've read the book. Hudson is a scholar and has dozens of footnotes to sources. It is meticulous work. My only quibble would be on his assumptions of the timeline for the Bible, where he believes the minority position it got reworked in Babylon to add in jubilee years and such.

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    3. Brian
      As a theologian what's your perspective on his claim that the Lord's prayer was changed from forgiven their debt to lead us not to trespass? And that our Lord was crucified because he advocated debt cancellation?

      I flatly disagree as utvreduced Jesus as nothing but an economic reformer. But he was far more than that

      xavier

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    4. My take is that a hammer specialist's professional biases are leading him to interpret a polyvalent book as being all about nails.

      Yes, the Gospels--and the whole Bible--consistently preach debt forgiveness. The Latin of the Lord's Prayer has always said, "et dimitte nobis debita nostra sicut et nos dimittimus debitoribus nostris." Hudson's error is in restricting the meaning of "debts" to monetary debts. Christ clearly also uses the term to refer to sin, because ever sin gives Satan a legal claim on us, which Christ redeemed through His Passion and Resurrection. He has paid our debt of sin.

      Nevertheless, Hudson's theological gaffes don't diminish his expertise in his own field.

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    5. Brian

      Thanks for the theological insights. So my concern with his narrow understanding of debt is correct. However his insights are still invaluable.
      I'd have to find out what the Salamsnca school fathers wrote about debt and debt forgiveness and compare it with Hudson's

      Thanks again.

      xavier

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  9. About half of all current student loans are in various forms of deferment. Since you usually get half subsidized and half unsubsidized we can say that a quarter of all loans are in the grace period where the government picks up the tab.

    Thus, every year the taxpayers pay $15 billion in interest for the current student debt.

    https://twitter.com/wraithburn/status/1145009849438261248?s=20

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    1. Thank you for putting the current costs of the student debt crisis in concrete terms.

      I've tried pointing this out to debt relief skeptics before. It just goes in one ear and out the other.

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  10. Another thing ... cancel the need for a BS or higher degree by allowing employers to use IQ tests again, when hiring. Let HS grads be clerks and workers again.

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    1. Agreed.

      And while we're at it, outlaw economically suicidal bugman wet dreams like self-driving trucks.

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  11. This comment has been removed by the author.

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  12. "Stupid boy! I paid the toll to pass the troll bridge. Who are you to think you can pass it without paying?"
    "Why did you not simply slay the troll?"
    "Silence! Give the vile troll your coin!"
    "No, I will vanquish the troll instead."
    "Stop this childishness or I will run you through myself."

    And then a dragon ate them all before returning to his mountain of ill-gotten treasure.

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    1. And once again, Sir Conservative on his high horse bravely lost. But at least he kept his fellow countrymen from saving the kingdom the wrong way.

      Epilogue
      The witches who conquered the kingdom called Sir Conservative a Nazi anyway, then completely erased his name from history.

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  13. Alright, no, no, I got it. Make paying off someone else's student debt a giant, fat, juicy tax write-off, and watch the Money-Grublicans fall over their own arses approving of it.

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  14. You do realize that you're advocating for forcing the majority of colleges and universities to close, right? Not that I'm against that in theory--I think that there are far more schools than are needed to educate those students who really benefit from a college education.

    But an endowment isn't just piles of money buried in the school's backyard. Most schools use them as collateral for loans to cover their operating costs between semesters. Seizing a college's endowment is going to make it impossible for them to do business.

    It's like someone who gets paid twice a year but has the usual monthly bills. You can say, "Oh, he has so much more in his bank account than he needs," but once you look at the bigger picture you realize that he's not rich, a large bank account is necessary to get him through the year.

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    1. "You do realize that you're advocating for forcing the majority of colleges and universities to close, right?"

      Yes.

      Federal regulations stipulate that only nonprofit organizations can receive endowments. The entire US college system has been complicit in and profited from a decades-long scam that bilks kids and taxpayers. When the feds bust any other scam ring, no one bats an eye when the courts seize their assets.

      Before anybody argues that unlike a ponzi scheme, universities provide a necessary service, 1) that necessity results from artificial demand imposed by court decisions that barred employers from giving applicants IQ tests, 2) universities are unfit for meeting that demand as evidenced by the rash of illiterate college grads, and 3) seizing the endowments hits bloated Death Cult seminaries like the Ivies hardest. Your local junior college will be fine.

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