Student Loans and Their "Forgiveness" and "Government Knows Best" Debt Induced Lunacy Simply Means Students and Taxpayers Beware!

Outstanding student loans for college are in excess of $1 trillion and growing rapidly. But you ain't seen nothin' yet.


When entering college, most students have no jobs and therefore have no present ability to repay the loans in the future, so here's the question du jour. Who would loan them money for the long term at low interest rates and then agree to "forgive" the repayment of the loans if upon graduation they went to work in politically correct careers?


Well, that's an easy question to answer. The always vote seeking and self interested political class will simply send the final bill to future taxpayers, of course.


Whether the students are later stuck with repaying the loan or the taxpayers, it matters not to the politicians.


Surge in Student Debt Forgiveness is subtitled 'The number of borrowers in the federal program doubles in just one year:'


"{There has been a} $20 billion annual rise in Department of Education outlays, due to an increase in student-loan borrowers using income-based repayment programs.


"Enrollment in the plans has surged, thanks in part to a continuing administration publicity campaign. As of June, the number had swelled to 1.91 million Americans holding more than $101 billion in student loans—nearly a 10th of all outstanding federal student debt. The number of borrowers and debt covered roughly has doubled in the past year . . . .


These plans allow borrowers to reduce monthly payments to just 10% of discretionary income. The loans can then be forgiven after ten years if borrowers work in government or for a non-profit—basically any job as long as it doesn't involve a profit-seeking business.


So the government is spending taxpayer dollars to encourage young people to avoid repaying loans to taxpayers, while at the same time encouraging these young people to work for outfits that don't pay taxes. Margaret Thatcher might have called it a perfect formula for eventually running out of other people's money. . . .


director of the Consumer Financial Protection Bureau, Richard Cordray , said, "This loan forgiveness can enhance the affordability of public service careers." It sure can, because it amounts to significant unreported tax-free compensation for government workers and community organizers. And it relieves any pressure on universities to reduce prices, because it transfers the unbearable costs from borrowers to taxpayers.

"We want everyone eligible to be signing up for the loan forgiveness that federal law provides, which they are earning by virtue of their public service work," added Mr. Cordray. . . .


defaults on federal student loans declined this year, to 13.7% from 14.7%. . . . And in fact it's even higher. . . .  "the government's default measure vastly underestimates the problem. The government considers people in default if they have made no payments in 360 days. A broader measure . . . shows that roughly one in four borrowers is at least 90 days behind on a payment."


And of course middle-class taxpayers who never went to college will pay to clean up this mess."


Summing Up

With respect to spending money we don't have, what will the political class think of next?

Because debt undertaken is debt owed down the road, whether it's owed and repaid by the student or the taxpayer.

Too much debt and too little economic growth combined with a too big government which incentivizes college students to take on debt and stay away from employment in the productive private sector are bad for all Americans. Very bad indeed.

That's my take.

Thanks. Bob.