Guest Post by Martin Armstrong
Trump should reverse what the Clintons did to student loans. He should RESTORE the right to go bankrupt. This huge problem was created by the Democrats who exempted student loans from normal protection for consumers. In addition, the bankers then exploited the entire issue by getting parents to co-sign.
The entire argument for eliminating the right to go bankrupt was that they had no collateral. The FRAUD here is the bankers managed to get the Democrats to hand students to them on a silver platter. Then they then pulled a fast one by demanding parents co-sign. That way, they can take their parents’ house.
The scary thing is that the generation of Americans over 60 years of age is on the hook for worthless degrees, owing $86 billion in student loan debt. True, some of these people owe for degrees they themselves obtained in hope of getting a better job. They have discovered that the degrees mean nothing and their age tends to scare companies because of pensions. The bulk of these people in the 60+ group had their kids late in life and co-signed for their children of which 40% are still living at home. Interest rates are not cheap and run from 5.05% to 7% annually. Compound that out and you will nearly double the cost of a degree by interest in 10 years.
A number of major companies NO LONGER require a degree. Here are just a few. BTW – neither do we.
- Ernst and Young (EY)
- Penguin Random House
- Costco Wholesale
- Whole Foods
- Hilton
- Publix
- Apple
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At what point are we going to hold people accountable for the debts they incur? Don’t get me wrong. I fully understand the role that the federally-guaranteed student loan program has played in driving up college costs, driving up college profits, promoting inappropriate demand for college education, and influencing other factors like artificial grade inflation, cheating, and so much more. But at what point do we finally say that people who received a product or service (and who cannot return it), must pay the bills??
That bankruptcy laws exist in the first place is not something to applaud. Indeed, there need to be limits on the aggressive or even violent behavior of creditors, but if you purchase something, you should be expected to pay for it. If you borrowed money, the same applies.
Keep in mind that while bankruptcy for any traditional loan is an always-present option, known to all players before the loan is made. That is why credit history, previous bankruptcies, etc. are important and part of the loan process. When the BANK or other lender is on the hook, they pretend at some level, to care.
When they made student loans, banks knew they were NEVER on the hook, but that the taxpayer was by virtue of the federal guarantee. Putting the burden of these loans back on the taxpayers (who are already being stolen from to provide other government grants, subsidies for public universities, etc.), is just ridiculous.
I am all in favor of ending the federal guarantee once and for all, tomorrow! Just think of the impact in bank behavior, what majors would result in much higher interest rates (gender studies anyone?), or what massive cuts universities would be forced to make to accommodate the vastly smaller pool of available monies. It would be wonderful to watch.
Additionally, changes to labor laws that put power back in the hands of employers would also be helpful. Employers are essentially forced to rely on degrees because they are no longer allowed to test, or otherwise challenge a job candidate in a manner that would prove job-worthiness. This trend towards “needing a degree” is not truly a product of the changing free market, but once again, government micromanagement.
But if we are going to go down some “forgiveness” route, then the school(s) that received these funds need to be part of the process, including paying back some or all of the monies they were given, and the banks to need to step up, for they knew exactly what was going on, and how much risk-free money they were making on the deal.
Yes, we should end any government guarantee of new student loans BEFORE allowing all student loans to be discharged in bankruptcy, but we should still allow ALL student loans to be discharged in bankruptcy. Sure, the federal government (taxpayers) would lose much of the $1 trillion in student loans that they’ve guaranteed, but in the context of $21T in federal debt, what’s $1/2 trillion or so between friends? I suspect you haven’t considered all of the positive effects that would flow from making student loans dischargeable. Student loan volume would probably fall by ~ 70%. Lenders would only lend modest amounts and only to students studying subjects that are likely to result in higher earnings. Borrowing $100k to get a BA in poetry would be a thing of the past. Poetry and sociology professors would have to get an actual job – which would leave them less time to lecture us about “mansplaining” and “toxic masculinity”.
What’s to stop someone from borrowing to get a degree and then filing bankruptcy? Nothing. Nothing more than whatever stops someone from borrowing $70,000 on credit cards and spending it all on scuba diving vacations. Student loans are unsecured. So are credit cards. Lenders beware. Neither a borrower nor a lender be. Anybody who defaults on their debts knows their credit will be fucked for years. So they’re not totally devoid of reasons to try to borrow only carefully and minimally.
You are right that formal programs offering loan “forgiveness” are mostly bullshit. Forgiveness only flows to government employees – teachers (“it’s for the kids”), social workers and “heroes” (blue-uniformed storm troopers). In other words, democrats. We don’t need a government program of “forgiveness”. We just need to remove the particular protection currently extended to student loan lenders that’s not extended to any other unsecured lenders.
Mr. Liberty,
College is a fraud against 17 year olds. I can’t think of a single comment you have ever made that I have disagreed with except this one.
If you make a loan to someone without collateral, you are a stupid fuck and deserve whatever you get.
Also, we do not have debtors prisons. What, we should have more homeless around the country?
The whole fucking enchilada is fraudulent.
But the banks aren’t going to be on the hook, the taxpayers are, and I can guarantee that I did not make the loan or the guarantee.
Don’t blame the student, blame the dumber than fuck politicians.
It. Is. All. A. Fraud.
We are getting socialism straight up the ass.
Sorry Martin. Clinton isn’t responsible for this. George W Bush did this. “In 2005, Congress passed, and President George W. Bush signed, the Bankruptcy Abuse Prevention and Consumer Protection Act, which exempted federal and private students loans from discharge.”
For someone who claims to be Mr Liberty you sure are an authoritarian. The problem with these student loans is that they were turned into predatory lending when they became guaranteed by the gov’t and non-discharchable. On purpose, as a plan! Universities were able to charge whatever they want to strengthen their endowments and banks were willing to lend it because it is risk free. Those endowments are then used to set policy and launder money free of taxes. Lots of that money goes right back to the politicians. Harvard is a great example. Look into it. Where were the freshman congressmen taken for their orientation this year? I was caught in the middle of this change in law while getting a doctor level healthcare degree. When I started the program my total expense was supposed to be 125k. By the time I was done it as over 350k. How are you supposed to make a future analysis of your decision when the rules are constantly changed under your feet? I wouldn’t have pursued that degree had I known the end cost. To double down on that I bought a house after I graduated that lost 1/2 of its value in the first 2 years I owned it. Soon after I lost about 35% of my patients in my practice because they no longer had jobs or insurance. Now I struggle to make a living and would have been better off without the stupid degree. Here I am loaded up with debt because I was playing the game and I wasn’t aware o it. So, Mr Liberty, that is why your iron fist approach to loan repayment responsibility has it’s flaws. You don’t understant that the whole thing is a game to harvest us and then control us when they change the rules! No personal offense implied.
No offense as well, but without the government guarantees, there likely would have been no loans. So all sorts of people screamed for the guarantees. I get the parasite-host relationship here. None of it was good. But you did get an education. So you did get SOMETHING. It was not pure theft by any means. The other decisions you made only compounded the problems. My wife and I lived in a small, one-bedroom apartment in a not-so-great section of town when we graduated. When we moved from that apartment to our next, we sold one car and I rode my bicycle to work to help cover the costs. When we finally were able to afford a home, we had over an hour commute each way in order to find an affordable place that was not beyond our means. We refinanced as interest rates went down, to the point where we could live and pay for our home with one salary if necessary. The next home was the same even though our relocation to another, more affordable state, and much higher salaries would have enabled us to buy a way bigger, more expensive home. It paid off. Now, thanks to very conservative choices and lifestyle, our mortgage will be gone next year (with quite affordable payments over the term). Outrageous options were ALWAYS being thrown in our faces by every bank under the sun. WE made the decisions ourselves as to what we were going to do. There wasn’t any different game a few decades ago when we went to college. Both my wife and I could have tried to get loans, but we both worked to make it affordable (and yes, I have already acknowledged the role the changes made in college costs).
So we made the right choices, we paid all of our bills on time, we saved for a downpayment, we bought a conservatively priced and sized home, we bought cars we could afford, we did without, and all along, our taxes have been going up to pay for the poor choices of others. When does that stop?
I will agree that the banks, the colleges, and the federal government played an equal role….but so did the students, who were more than happy to borrow the money rather than seek alternatives. So why should the students and their parents be let off 100% (and yes, what about all those who managed to pay it all back?)? I already said that if there is some sort of “forgiveness,” all parties who benefited should play a role. That MUST include the students and their parents as well.
“without the government guarantees, there likely would have been no loans”
You say that as if it were a problem. That’s not the problem. That’s the solution.
I think that’s what Mr. Liberty is saying; or, at least, part of what he’s saying. Oddly, I agree with all of you, and I don’t see the conflict. Bankruptcy protections are for the lender, not the borrower. So that lenders have a claim on borrowers’ property when they can’t repay. Lenders normally have to take some percentage of bankruptcies into account, and they only loan money they think will be repaid. What FedGov did is provide Super-Duper-Bankruptcy protections to lenders (including Fedgov itself), so that they could loan to anyone without having to worry about whether the borrower, himself, could repay.
The problem here is parents co-signing for unwise loans in enormous amounts at high interest, and expecting the person they’re co-signing for to have the ability to repay — based on absolutely nothing. And the kids (remember that these are dumb kids, “encouraged” by clueless parents to borrow huge amounts to go to a college to get even dumber) are constantly told — after the fact — that they must repay or their credit will suffer and they’ll never own a house and so on. These same kids were told by teachers and parents alike that college was the only way to get ahead.
Regarding the government, if a kid defaults, it IS debtors’ prison … well, debtors’ house arrest, anyway. Before the lender goes after the co-signer, the student must default … thus screwing his credit rating for a decade (the decade of their lives where a good credit score is of greatest value).
Mostly though, it’s really shitty parenting. Usually through social pressure, total ignorance, a heaping measure of stupidity, and living in a world of 20 to 30 years prior when what they think about the costs & benefits of college may actually have been true.
I agree. As a young man in boot camp in the 70s our Bluejacket’s Manual advised us to have our finances in order before we took a wife (That’s how it was written then). My wife and I have only had one child as that was what we could afford. We didn’t wed until our jobs were established. Other sailors would have half a basketball team and cry that they were on Aid to Families with dependent children getting the free government cheese as well as the earned income tax credit and any other freebie that they could latch on. We paid our child’s way through college with the provision that we would not pay for the textbooks. The federal aid forms get the parents on the hook.
I appreciate Eyas’s attempt, and I agree with what was said, but I fully realize that it would be a solution. I make that point. But my point here is that in the face of banks being unwilling to lend, vested interests pushed for the legislation that would take banks out of the responsibility loop, thus freeing up tons of money. Without the available money, nobody would have gotten into these situations. But it does all still come down to choices. Nobody was forced to do anything. Lies were told, future expectations were presented as near promises, but nobody’s hand was forced to sign anything.
We are talking about kids. Criminal.
Yes, you were fortunate to have had a different set of circumstances and were able to navigate them well. Those opportunities don’t exist any longer. As I mentioned, I would have been better off not going back to school, but how was I to know that? The rules were changed when I was already in too deep. I was 2 years into a 4 year program when we got the first of many 50% tuition increases. That’s where your “so did the students, who were more than happy to borrow the money rather than seek alternatives” argument goes poof. I manage to pay my bills and my loans but my lifestyle is not even half as good as it was before I went back. In other words the degree is less than worthless it is a negative drag. To top it off I’m in a highly regulated profession and the gov’t continues to interfere in what we do (obamacare) and is driving our compensation down further as inflation is skyrocketing. My 18 year old is really sharp and I’m trying to convince him to pass on college all together, of course the rest if the family thinks I’m crazy because they are stuck in the old reality. Times have changed
Neither borrowers nor lenders come off looking good in this malignant game of college loans. Both should be penalized, the borrowers for failing in due diligence, the lenders for predatory behavior. But the banks (and the colleges, which are supposed to be in loco parentis, not enablers for loan sharks), are guiltier. They knew what they were doing. They had the qualifications and experience to understand the ethics-free nature of most of these loans, regardless of whether they were legal.
On the whole, the college students were naive rather than manipulative. Sure, they should pay something for their folly, but a lifetime of undischargeable debt is a cruel vengeance. How many of us weren’t conned in one way or another when we were young and unworldly?
Great post, Anon
I think we’re all right in our own ways. The problem is that the goalposts are being moved and we’re not being told. We are all being decivilized, if that is a word. I’m sure people in the 50’s would look at the financial situation Liberty presented above as his own and say that he must have been irresponsible because he had to send his wife to work. The point is we need to think long and hard before using the “irresponsibility” card. Certainly there are some deserving of it but many of us are just caught in the game where the rules continue to change and the elites continue to benefit. I think that is why we all ended up on this blog…
Anon,
That was a cheap shot at Mr. Liberty. He is pretty damn consistent about Liberty.
“At what point are we going to hold people accountable for the debts they incur? ”
Never.
If the government incurs debts they will NEVER repay …. then why should I give a FF about repaying my debts? I’m just doing what they are doing …
Not to mention that government steals from me every single day.
Don’t even talk to me about “moral obligations”. This entire government is immoral. Corporations are immoral. And the organized church is the most immoral of all. I’m just following their lead.
Every red blooded American reading this should do their Patriotic Duty — don’t pay what you owe!! Let us all hasten to bring about the utter destruction of this utterly immoral culture. We need a do over.
Stuck – you first. When you tell the IRS to piss off, we will watch anxiously to see what happens. You can be Martyr Stuck!
What makes you think I haven’t???
I can’t believe I actually agree with Stuck completely on this issue. The whole student loan system was a massive interference by the Federal government in something they never had any business in. The near monopoly that public universities enjoy with public funding is a big part of the scam. I don’t feel sorry for the government, I don’t feel sorry for public universities, I don’t feel sorry for banks, and I don’t feel sorry for taxpaying Americans who have enable, if not allowed, all of this. I think the facts of the student loan debt problem justify some kind of solution that places most of the burden on the people who were in a position to understand that this was a kind of exploitation.
“I can’t believe I actually agree with Stuck completely on this issue.”
Why???? It’s not like I’m some kind of Mega Ignoramous. I give careful thought to most of my opinions. (When I’m not shit-flinging. Stirring the pot. Doppleganging. Being Sarcastic. Trolling. Stuff like that ….)
Stucky +100
…and all these Colleges and Universities have endowments funds into the millions that they could loan to their students interest free begs the question: why does the federal and state governments continue to give tax payer money to these college/corporations who are stockpiling these monies for investment—are colleges regulated or audited by the IRS like other industries who put money in stocks, bonds, and offshore accounts /offshore investments and why do they allow students to borrow money to pay for academic majors that bear no fruit out in the job market? Please post your ideas for getting government out of the education business.
So do those who graduated with no debt get free money?
Nope, we get jobs, or at least keep the jobs we had while going to school while looking for a job in our field and get to pay bigger taxes for the losers who borrowed big dollars for useless degrees that aren’t applicable to any job in the private sector.
Drop the government subsidies, get the government out of the student loan business and make student loans dischargable in bankruptcy. Tuition costs should start to crater as banks decide to only provide student loans for areas of study that generally translate into a paying job, or perhaps get out of the student loan business altogether.
What horseshit. If you allow student loans to be wiped clean in bankruptcy, then they will not get paid. The kids will go to school, come out, and immediately declare bankruptcy. It is ridiculous to think it would not happen just like that.
Big Injun Chief ,these ” loans ” are never going to be paid back anyway and when you know the whole damn debt money system is a fraud then maybe we should let it die. None of this ” debt ” will get paid back unless the Bankers are allowed to sell off America.Then what ?
In Canada, student loan debt is dischargable in bankruptcy, but only after 7 years have passed since you stopped being student. Get rid of government money and remove the incentives for banks to give loans to every kid who asks, and I expect lots of kids will choose not to go to college and then won’t have any student loans debt.
Fuck’em, they borrowed the money. Taxpayers need to claw it back. By the way stop student loans. I would love to see thousands of communist professors ( sorry for the redundancy) fall of the gravy train.
everyone in the situation bears some responsibility but government & the schools themselves bear the most–
we should immediately quit guaranteeing new loans & allow future loans to be discharged in bk,while giving a tax credit for the % paid on existing loans–in a few years it wouldn’t hurt to consider some forgiveness of existing loans if the people are paying–
btw,on the e-verify thread of a couple of days ago i said that it would eventually be turned against citizens for domestic use–oh jim,your pay is now docked $100/week,your ss# matched a guy who owes $25,000 in student loans–
my daughter got a rude awakening about a year ago & it sure helped her attitude,at least for a couple of days–she was becoming embittered because she wanted to go away for college & she had the grades to be accepted into most of the top tier schools–
however,we have always let her know we would pay her entire college bill but that she would be staying local & commuting unless she received a 100% scholarship,which didn’t happen–she has a bunch of kids she graduated with who are going to upper level schools such as duke,yale,harvard,notre dame,etc–
last year when she was still in hs she came come one evening & said,”dad,susy’s parents are still paying for their student loans,how can that be?”–those parents are in their mid to late 40s,and dad might even be 50,i’m no good at judging age–
yep,that loan was really worth it,wasn’t it?but you know what,their daughter is going to one of those expensive out of town schools also–
Here’s to another teenager’s rude awakening!
And there’s no frickin’ way I’m shelling out $50k for a wedding, either!
My parents did that to me. I had the grades, but my family didn’t have the money to send me away to school and getting loans was out of the question. I hated it all through my time living at home, working part-time and commuting to university…BUT when I graduated debt free, unlike many of my fellow students, I quickly became grateful and thankful to my parents for teaching me an important lesson. I had learned to be very frugal and finished school debt free. I got a good job within a year of graduating, and could consider buying cars and real estate shortly thereafter, while my in-debt friends had to use what could have been car or real estate money on loan repayment for many years after graduation.
Big picture I sometimes think it is just a plank in the Cloward–Piven political/economic strategy outlined in 1966 by American sociologists and political activists Richard Cloward and Frances Fox Piven calling for overloading the U.S.
Just another tactic in the overall strategy to bankrupt the U.S. and as many eaters as possible.
And to date successful.
Let’s not forget the college admissions and finance offices who’s job it is to mold young skulls of mush and convince them to sign on the dotted line for a degree in lesbian underwater basket weaving . Then look into the politicians and who donated to have lobbyists turn student loans into financial indentured servitude where everybody gets paid the IRS is the collection agency and the taxpayer makes good on the loan to the banks wow what a deal NINJA LOAN FOR EDUCATION
Once again, you knocked it outta da park.
Every college degree should be studied like a commercial proposal, since that’s what it is – you borrow $xxx with a promise to pay it back in yy years at zz interest because you EXPECT you can service that debt. SO – why not put every college degree through a financial analysis? It would stop a lot of bullshit –
“Hello, and welcome to Wilmington Bank. So, Suzy, you want to go to college and study Mayan History. Fascinating subject, I agree, but let’s just run the numbers on it, OK? You will spend $150,000 at U of Florida studying Mayan History for four years. After that, what are your job prospects?
You could become an archaeologist, and spend years excavating ruins in the jungle heat, humidity and mosquitoes – but wait, I see that the current backlog of actual archaeologists and prospective positions, considering openings due to retirement and accidents would see you actually start earning money as an archaeologist – fourteen years after you graduate. Let’s try something else –
Since U of Florida has a GOOD reputation in Mayan Archaeology, but not as solid as Harvard, Yale, Oxford, Ecole Francais and several others – it’s not likely you could convince National Geographic or a private firm to sponsor your digs. Let’s try something else –
You could start your own dig, but where would you get the money? Who is going to sponsor you when you’re already $150,000 in debt, not famous, not in tight with a known archaeologist (at least at that point), and not politically connected? Let’s try something else –
You could graduate and teach archaeology. There are 135 positions in the continental US, all currently filled. Without a famous dig to your reputation and good prospects for publishing new research, who is going to hire you to teach? Let’s try something else –
There is nothing else. I’m sorry, Suzy, and I’m not trying to deny your dream. But it’s YOUR dream, and you will have to be the one to make it happen – without relying on any money from Wilmington Bank. But best of luck to you in your endeavors, and should you change your mind and consider a degree in engineering, chemistry, IT, or mining, come back and see me.”
Why would you lend money if you knew it was extremely unlikely you’d ever get it back? And why would you treat a relative (if Suzy’s your niece) any differently?
I went to state schools, studied engineering, my dad was an engineer and helped me graduate debt-free. My wife was the same way. My eldest went to study English (my fault, I read to her as a child and it took) but she paid off her minor (~$7.5K) student loans ahead of schedule. My son went into IT, just graduated, debt-free. It can be done – I just went through ten years of graduate school (a M.S. and Ph.D. , both STEM) and graduated debt-free.
Just be prepared – you aren’t going to drive the latest cars, you won’t eat at fancy restaurants much and you won’t wear fancy clothes – but at an age where others are facing “involuntary retirement”, I’m a consultant, and have nearly as much work as I want – and probably will, until I can’t pull up my work boots and wear a hard hat and respirator (visiting jobsites often require this). So, one or two projects a year until I’m too weak to work and ready to retire, and keeping the mind and body busy – what am I supposed to object to in that?