Over the past few years, Americans have seen so many people, companies and entire industries bailed out, that naturally, they start wondering when they get “their bailout”, as if the multiple handouts the administration has doled out aren’t enough (a record 47 Million Americans on Food Stamps, unprecedented 99 weeks of unemployment, years of a payroll tax break, Obama phones and too many other government assistance programs to list). So, with a headline grabbing $1 Trillion in US Student Debt, you can be sure that this will be the new bailout topic.
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Reasons People Expect a Student Loan Bailout
- Students Got Screwed – There’s a growing chorus of pissed off 20-somethings that feel they would have had better job prospects had the economy not crashed. Now they feel their degrees are worthless and they’re paying for something they’re never going to use. Right, wrong or indifferent, this is how many recent graduates feel.
- Student Loan Debt Hurts the Economy – With recent college grads unable to find the jobs they anticipated and using what little money they earn to pay down student debt, this suppresses everything from new home formation to consumer spending, which in turn suppresses overall economic growth in the country.
- Corporations Were Bailed Out – As much as Obama has trashed Wall Street and “fat cat executives” both he and the prior administration have bailed out plenty of corporations – Wall Street, automakers, green companies which subsequently failed anyway, and more. Recent students reckon, if corporations were being bailed out, why aren’t they?
Reasons We Should NOT Bail Out Student Loan Debt
- A Deal’s a Deal – OK, so people can walk away from their mortgages, great. Well, here’s one loan you’re stuck with – unless you finagle your way out of it with an obscure hardship provision which is quite rate. If you picked an easy or crappy or “fun” major and now you can’t get a job, that’s not the taxpayer’s fault. There are a lot of people to blame – your parents for not giving you better guidance on the major your chose and the debt you’d eventually own, your guidance counselor for not being more forthcoming about the risks and employment prospects of your majors, the economy of course – it does suck graduating into a lousy economy. That is outside your control. There’s a lot of blame to go around, but that doesn’t mean the taxpayer should then foot the bill.
- It’s Another Tax on Responsibility – So, what about all the students who paid for college themselves or the parents who saved up for their entire adult life to put their kids through college and have no debt? Because they prepared, they paid full price, whereas people who borrowed get a bailout?
- Moral Hazard – We hear this expression a lot. We used to hear it terms of bailing out the banks in that since we bailed them out once, they know they’re too big to fail and will just take the same risks again knowing they present a systemic risk to the system, so they’ll always get a bailout in the future. Well, this is no different. There are plenty of teens now embarking on the same debt journey that will likely graduate into a similarly lousy economy. Should they be bailed out too?
- The Government Screws Everything Up – Just like all the various attempts to boost the economy ended in disaster (the “stimulus” [see the 10 dumbest stimulus programs] that cost close to a Billion dollars and left the unemployment rate over 8%, the cash for clunkers joke of a program, energy tax credit programs with moronic incentives, the list goes on). I stated back in 2010 how Obama was screwing up the economy and it turns out, wow! Everything was spot on 2.5 years later. When the government embarks on a mission, they law of unintended consequences kicks in – every time. They always screw it up. And they’d screw this up as well. What would the terms be for a bailout. How would they prevent the moral hazard problem? College costs would probably just go up even faster! All kinds of crazy things could and would happen. And who pays? The responsible. People like you and I. People that actually pay federal income taxes (because, yes, when the federal government does bailouts, it’s the 53% that pay federal income taxes that fund it) would be the ones funding this bailout. Well, sort of. Because the current generation of American adults is engaging in generational theft by way of rampant borrowing with no intent of ever pay it off. The interest alone on the national debt is Billions per day and someday, we will have to start at least stabilizing our deficits which means massive debt service payments for future generations to even tread water (I have no faith that America will ever actually “pay down” its debt, but someday we may have to at least slow the bleeding in order to prevent an interest rate spike).
What Are Your Thoughts On a Student Loan Bailout?