The Mistaken Premises on Student Loans

Obama, by executive fiat is getting ready to see to it that student loans will be lowered from 15% to 10% of discretionary income.  He is also going to limit payments to 20 years instead of 25.  OK, interesting measures.  Obama is pandering to the Occupy Wall Street degenerates and the liberal "do-gooders" who agree with them.

Here are some thoughts about this.  On the surface, here are the problems I see.  First of all, lowering the rate to 10% of discretionary income would actually cause students who are paying for their loans to stretch the loans out a longer time, and the loan companies would end up receiving more interest from them.  In other words, stretching out the loans could cost students MORE in the long run.  It's like a 30 year mortgage vs. a 10 year mortgage.  Usually you get an interest advantage on the 10 versus the 30, but let's say that you kept the interest rates the same.  This means that the minimum payments would be smaller on the thirty year mortgage, and that means the amount of interest paid over the years will be many times greater than for the ten year.  Students will pay less of their incomes, stretching out the loans, but overall, paying a lot more interest.

But you say, "Aha!"  "In twenty years that won't be a problem, it will be 'forgiven.'"  First of all, this neglects the fact that there will be many students who will actually pay off their loans before the 20 years are up.  This also punishes those who actually paid their loans, and it punishes the taxpayer.  That's right.  Why should the deadbeats who made bad decisions not have to pay THEIR "fair" share?  Would you forgive a loan on a big screen TV after a few months because the person couldn't make the payments?  You'd repossess the TV.  But you can't repossess an "education."  It's not my fault you decided to study theater and couldn't get a high-paying job in engineering or medicine to pay for your $80,000 "education."  You should have thought about that when you chose that, and your academic counselor shouldn't have been so IRRESPONSIBLE when she told you to "reach for the stars!"  But who really ends up paying for this mess?  Anyone paying taxes.  So, if these students get into a bracket where they'll actually pay taxes, they'll be footing the bill anyway.  The government and the loan institutions always get their money somehow. 

"Oh," you say, "but that means the evil RICH will pay for this."  No, YOU will.  The "evil" RICH will send their money where it will get the greatest advantage.  They will move overseas, send jobs overseas, they will pass extra costs on to you in the products that they produce, and you will eventually pay for it in those jobs lost, higher costs, and LOST wages.

"Oh" you say, "we'll just have the government 'do-gooders' control prices on products then."  You will pay for this too.  This time not in the cost of prices, but you will pay with the scarcity of products.  There will be long lines for things that otherwise would be much easier to obtain.  Why do you think stores run out of desired items much more quickly when they have sales?  The shelves will be empty, and you will be left hanging.

This is how economics truly works.  Supply and demand.  Liberals say they want everything to be "fairer" and "kinder" but what they really want is more power over YOU.  There are too many dupes and suckers who buy into this.  The liberals in power are busybodies who want to control your lives, control the way you think and speak and live.  They say that they're doing it in your best interest.  It's garbage.  It's all to enhance THEIR power.  To keep them in office.  And their policies are not fairer or kinder, they just keep you under their thumb. 

When they "soak the RICH" (and I am by no means a rich person), it means not only that there will be fewer rich people, but there will also be many poorer people.  You, the MASSES, will be out of jobs, and you will work harder for LESS money when you do work.  Do you get it?

I do not care if Joe Billionaire pays his "fair" share of taxes.  I want him to invest in the economy and make a good profit, so that I, Joe Worker can have a BETTER STANDARD OF LIVING.  Some, but LIMITED regulation is a good thing.  Antitrust regulations allow us to have more variety of products and a healthy competition which is a boon to the consumer and the worker.

Going back to student loans, the mistaken premise here is that students need help paying off loans, and that the government needs to stick its filthy hands in and help them.  Does anyone ever think that the real problem lies in different areas:

1.  Institution costs are far too high.

Going to Harvard was not the key to the success of the most successful people.  A lazy idiot who went to Harvard is still a lazy idiot.  You might say that an idiot could not get into Harvard.  My two answers to this are a) You'd be surprised. and b) I'm sorry, maybe not idiot, but someone who was convinced to make a poor decision on schooling.  Which leads me to #2 here, which is . . .

2.  Institutions are allowing students to rack up enormous costs for useless "skills" that are not in high demand.

Please, how much psychology, theater, gender studies, insert useless degree area here: _______ do we need? To which you reply, "Well, I can always become a professor."  To which my reply is, if you have subpar grades and are not the gender or ethnic group du jour, good luck with that.  

Which leads me to #3 . . .

3.  INSTITUTIONS need to quit worrying about DIVERSITY for crying out loud and start teaching ALL people who come to them USEFUL, MARKETABLE skills for surviving in a DIFFICULT economy.
And finally, #4 . . .

4.  Government makes the problems worse by trying to correct the "problems."  Let the MARKETS CORRECT THEMSELVES!  Bubbles need to be popped, not sustained!

Last words: if you have been saddled with overwhelming debt from your student loans I would have to suggest that it is probably your own fault.  When I went to college I took out student loans.  I went to an institution where I would finish with a reasonable cost.  I actually paid attention to how much debt I was incurring.  When I wanted to do special things, such as study abroad, or extracurricular trips, I found ways to pay for these things (sometimes with help from my parents) in reasonable ways.  And my parents kept track of what I owed them!  Though I can never fully repay them for everything they did, I paid them back for some of these things.  I don't recommend taking out loans if you can avoid them.  Get a job, be creative, and PAY your way through college if you are determined to go, OR consider an alternate route such as military or vocational opportunities. Start a business! 

Fortunately I went to college in my hometown and lived at home.  Do some people not have that option?  In many cases I understand that may not be possible, but there are so many options for college these days.  Students can get USEFUL degrees inexpensively, and sometimes online.  You don't need a Harvard degree to get a job if you have developed skills that are in high demand both in and out of COLLEGE situations and are industrious, resourceful, and very willing to work.  For those young people who do military service, there are tremendous options for you.  Do lots of science, math, language, and learn your history or how to write without making English or History your full course of study, unless you are absolutely CERTAIN that they are the bridge to a career, such as law or ministry. 
 
Finally, it's time to put the feet of institutions to the fire.  They are offering useless degrees and course areas on the student's dime.  Time and resources are precious.  Companies can't afford to hire lazy workers without skills.  Students must VOTE with THEIR FEET.  Force these institutions to truly compete.  A BRAND NAME does NOT a good institution make.  Institutions need to take a good look at themselves and weed out a lot of waste.  There may come a time when the government gravy train ends for institutions and they will really have to.  It is time for serious institutional reform. Students should consider alternate ways of getting schooling and alternate paths of career advancement.  Students should also consider alternate institutions if it means keeping costs down.  You can go to your local institution and receive a good education.  And don't forget disciplined self-study can really pay off.  My two cents on the student loan mess.

For your information/misinformation: MSN Article - see what the White House is doing.

Judge Judy's take is a lot better than Obama's