How (really) to pay off student debt
Recently, a student wrote an opinion piece for Davis Vanguard arguing that instead of the government forgiving or paying off student debt, the United States should work on lowering tuition fees. Unfortunately, here’s the state of play on this issue: Even students believe that forgiving student debt isn’t necessarily a good thing. “It would be unfair for those who have paid a debt too!” is another common reaction.
The mere fact of discussing debt ignores one of the origins of the student debt crisis. According to investigative reporter David Cay Johnston, federal grants for higher education have declined 55% since 1972. States have cut funding for higher education even more sharply. Gosh, I wonder why the tuition fees are so high?
It looks like the fix is in place. Ignoring this agrees with then-governor Reagan eliminating civic education in California high schools and congressional self-lobotomy, when Newt Gingrich fired his expert staff.
Meanwhile, only mortgage debt exceeds student debt in the United States, so student loans are a major problem. Addressing this problem has not been made easier by recent bipartisan legislation which stipulates that courts can no longer write off student debt in bankruptcy. Members of both parties, Joe Biden and Hillary Clinton included, voted for this change in the law. This change means that in the United States now, we are literally grabbing Social Security checks to pay off student debt.
Another source of the problem is mathematically rooted in the way the debt is composed. When someone asked Einstein what the most powerful force in the universe was, “compound interest” was his answer. The problem is that in compounding, interest inevitably directs the amount owed to infinity.
On the other hand, the real economy which provides the means of repayment is finite. Even the ancient societies of Israel and Babylon knew that debts would inevitably become unpayable, and periodically had “white slates” (jubilees) in which debts were forgiven, not as something revolutionary, but rather as a means of recovery. ” ensure the stability of their societies.
Yet when I mentioned white slates as a potential solution, I even heard people suggest that since ancient times the economy has not really “stabilized”, so the repayment of loans including interest. compounds might be possible today. But the interest mix is up to the task of making the loans non-repayable. A website says about “The Explosive Effect of Compound Interest: If You Had Invested [a penny] at the time of Jesus’ birth, with a compound interest of 5%, it would today be worth the number of balls of pure gold, each the size of the Earth.
606 894 448
So… I’ll stick to my original story: some loans inevitably become unpayable because it is impossible for the real economy to meet the demands of the compound interest owed. Anniversaries for corporations and bankruptcies for individuals are not optional if you want to avoid effectively enslaving debtors.
Currently, the Federal Reserve reports that 40% of the American population cannot afford a $ 400 emergency without borrowing or selling something. This means that the creditors are in the driver’s seat.
Creditors also control popular debt talk, so it’s no surprise that we often hear “everyone should pay their debts”. But this statement ignores the context in which previously covered expenses are no longer paid by the government and the fact that, inevitably, membership makes repayment of some loans impossible.
We also cannot count on the kindness of the lenders. For an example, Mr. Potter, the villain of It’s a wonderful life, was interested in enslaving the people, not giving them what they borrowed.
The feeling that “everyone should pay their debts” also ignores the responsibility of the lender. If I have a tip on a horse in the fourth race and I persuade a bank to lend me money for a bet, should the sheriff honor that lender’s decision and make me lose all collateral for the debt? ? If a dictator borrows from the World Bank, embezzles the money, then flees to Switzerland, should the people still be forced to pay this (odious) debt? Looser bankruptcy allows for better loan underwriting, and believe it or not, sometimes deception and less than honest motives lead lenders to trick borrowers into taking on more debt than they can afford. allow (see Confessions of an economic hitman by Tom Perkins).
Borrowing is not always fair. Reimbursement is not always virtuous and the financialization of all decisions in search of profit is not always healthy, nor even ethical. Ignoring this is the root of many problems, including student debt.
It is also a systemic problem that lends itself only to systemic solutions. Protesting that individual virtue will save the day is a distraction, not a solution.
It’s easier than it sounds