Student Loans

Someone asked me to write about student loans. Too easy. What just happened with student loan forgiveness is so obviously immoral that it is impossible to write about it without coming across as didactic. But here we go.

Forgiving student loans is immoral because:

·      It rewards bad behavior

·      It punishes good behavior

Someone who demonstrated hard work and thrift by paying them off early just had a seagull shit on their head. Someone who postponed it because they (correctly) assumed that they would one day be forgiven, just got a $10,000 check with a giant bow on it.

Of course, the counterargument to this is: what about the people who couldn’t pay them off? Well, that is usually a result of bad decision-making, and most legitimate scholars of ethics and philosophy will usually say that the person who made the bad decisions should bear the consequences of those bad decisions—not someone else. If I’m responsible for your fuck-ups, then we don’t really live in a just society. I mean, we don’t, but we don’t have to make it worse.

The problem is that high school seniors are told this story about how a college education, no matter how much it costs, is worth it—worry about the debt later, you can pay it off. So a kid—an 18-year-old kid—goes to the financial aid office and signs this piece of paper that dooms them to a life of debt servitude. Nobody is prepared to make a decision like that at 18 years old. Nobody has that kind of maturity, and then reality hits. You can’t buy a house, you can’t get married, you can’t start a family because you have this debt. Sure, I am sympathetic—to a point. Because there are some kids who can do the math, and have an aversion to debt. And they should not be punished for getting it right.

What about the economics of it? Also bad. We just did a $300 billion helicopter drop of money into the highest inflation in 40 years. Brilliant. There is some also some debate about who is paying for this. Taxpayers, clearly. This is how it works: the government is the lender, like a bank. The loan is an asset on the balance sheet. The loans are being written off, which results in a loss on the income statement. The government must find additional revenue to make up for it. Or not—we could simply go $300 billion more into debt, and there don’t seem to be any consequences to that.

I take it the tiniest bit personally. I went to college for free—in exchange for serving 5 years in the military. Those five years were pretty arduous, there was a lot of puking involved, and suffering a lot of indignities at the hands of senior officers. Some good moments, but also many of my worst ones, and if I had the resources to pay to go to college, I certainly would have gone somewhere else. I love my country, but not that much. I went to school with a lot of kids who were in the same position—it was a way to get a free education. The foregoing also applies to ROTC.

Which begs another question—loan forgiveness might not be the worst policy in the world, if the government gets something in return. Why not say, hey, we’ll forgive $50,000 of your debt if you serve in the military. Or, we’ll forgive $50,000 of your debt if you serve in Teach For America. Or some other philanthropic venture. Of course, then the government would have to create a vast bureaucracy to manage all this, but it might be worth it to prevent the moral hazard. What lesson are we teaching here? You can get money for nothing. You can make poor decisions and get bailed out by the guy living up the street.

Speaking of which, since taxpayers are bearing the burden, the burden will necessarily be borne by the people who pay tax. And since nobody in the bottom 50% of the income distribution pays any tax, it certainly won’t be them. Yes—rich people will pay for the loan forgiveness. I’m rich, and I pay for a lot of shit that I don’t want to pay for, and I do it without complaint, so where does this rank in the grand scheme of awfulness? Pretty high. I’m an investor, and this is a terrible investment—or at least, has the potential to be. For sure, there are worthy recipients—maybe we have just forgiven the debt of someone who will go onto become a Supreme Court Justice, or a famous author, or something like that. But for the most part, this isn’t the case. The math, computer science, business, and engineering majors all got jobs and paid off their loans. The gender studies majors scrounging 6 bucks out of the tip jar at Starbucks are the ones languishing in debt. And I hate to pick on gender studies, because I know people who work in gender studies, and they are great people, but in the overall range of uselessness of college degrees in terms of career potential, this is about the worst.

Unfortunately, shitting on higher education has become the national sport among conservative pundits. There is a lot of talk about how people don’t need higher education. Well. That is certainly true for some people. The world needs ditch diggers, too, Danny. I’m joking, but we really do need people in the trades, plumbing and carpentry and such. We have a shortage of them. And if you like working with your hands, you can make good money doing that. You can potentially make a lot of money doing that. Joe Blow works at an HVAC company and then gets the idea to start his own HVAC company. At age 50, he is living in a gated community.

But I don’t particularly like working with my hands. I like working with a computer keyboard. So that was never an option for me. And I suspect there are a lot of people like me, who are just not cut out for blue-collar work. More and more people have been going to college, which is partly a reflection of that. The problem is that there are too many jobs available to blue collar workers, and not enough available to white-collar workers. There is a mismatch in supply and demand. I recently heard about a beer distributor who was hiring truck drivers (sometimes without a high school diploma) for $110,000 a year, and hiring college graduates to work in sales for $50,000 a year. Multiply that times millions and you get an idea of how fucked up the economics of this are. We simply have too many people going to college. A liberal arts education is great. I agree with that. I think lots of people should have one. But not this many people. If 15% of the people going to college went into the trades instead, equilibrium would be restored to the economy. But that would also put about 15% of the colleges out of business. Which…might not be a bad thing.

In 2009, the government decided to “help” people out with income-based repayment plans. That’s where you have $100,000 in debt, and they do some means-testing shit to figure out what kind of payment you can afford. So your payment is $300 a month. The problem is that $300 doesn’t even cover the interest accruing on the loan, so the unpaid interest is actually added to the balance of the loan, meaning that the amount you owe will actually grow over time. I’m sure you’ve seen the tweets on this, about how XYZ jackass started out with $100,000 in debt, and 10 years later, can’t figure out how he has $140,000 in debt. If you want to go full social Darwinism here, these people should bear the consequences of their actions because of their innumeracy. If you’re making teeny-tiny payments, not only are you not going to pay off the loan, it is going to get bigger. Obviously, these income-based repayment plans have made things worse, not better. If people were forced to make the full payments, say, $800 a month, they’d have to take down their standard of living, get a smaller apartment, etc., which is typically what people have to do when they pay down debt, otherwise known as austerity.

The problem is that there are no credit checks on these loans, which is crazy—you’re handing out hundreds of thousands of dollars with no idea about the ability or willingness of people to pay it back. And credit checks are hard, because the borrowers are 18 years old, with no credit history, and if you were to do credit checks on the parents, that wouldn’t exactly be fair, because if Dad is Joe Dirtbag the Ragman with a 500 credit score, you don’t want the sins of the father to be visited upon the son. So if you’re not going to do credit checks, then you must, absolutely must, make the loans dischargeable in bankruptcy. That is the solution. You can’t pay your student loans, declare bankruptcy, wipe out the debt, and then live with the consequences of bankruptcy. The government then learns a thing or two about lending so much money to borrowers of unknown character. Bankruptcy isn’t such a bad thing—I’m not sure why people are so afraid of it. There are some nasty side effects—you can’t get a job in the securities industry, and you won’t be able to get a security clearance with the government, but that doesn’t matter for most people, anyway. You get rid of your debt, start with a clean slate, and screw your creditors. Screwing your creditors is the American way, people and corporations do it all the time. Failure must be possible. Without failure, the system doesn’t work.

I will say one thing. In a sense, writing off this student debt is not that big of a deal. Why? Because the government was never going to get the money anyway. For many of these people, they were willing to keep this debt their entire lives, paying the minimum monthly payment, and then dying with the debt. I know a lot of people like that. They had no intention of ever paying it off, outside of having a 20-game run on Jeopardy. And the obvious consequence of this, which everyone knows, is that the student loans are a giant implicit subsidy to our higher education system. The government will lend against anyone’s education, no matter how much it costs. If UConn had tuition of a million dollars, the government would lend against it. As a result, there is no cost discipline in higher education, and tuition keeps going up. Everyone has heard about the assistant vice provost for student affairs whose office is next to the Starbucks climbing wall. It’s beyond parody. Higher education is a fairly simple business—it’s capital intensive, you need some classrooms, you need some dorms, but the economics of it are relatively straightforward. It doesn’t have to cost that much. In 1992, my dorm didn’t have air conditioning, and the conditions were beyond spartan.

There are two purposes of higher education: one, to produce well-rounded citizens, and two, to help someone get a job. It is failing at both. Not many eighteen-year-olds are in possession of the maturity to realize that there are grave financial and social consequences to screwing around in college. I was looking at my college transcripts a couple of years ago, and I was like, yeesh, what a jackass I was. What a waste. I wasn’t partying, but I had other priorities. And I had a hell of a time getting a job as a result of my grades in college. And some people simply aren’t great in school. It’s not for everyone. You would think that wouldn’t be a controversial statement, but it is. Some people think it is for everyone. College is free in some countries, and where it is, it’s a disaster. You should read about it, starting with Argentina. When it’s free, nobody takes it seriously, even less seriously than they take it now, where it is quasi-free, because you never have to pay back the debt. What a shitshow. But easily fixed, with the right people in charge.

Go fuck yourself,

Jared

Music Recommendation: Prodigy – Diesel Power. I’ve always said that if I were ever a baseball player, this would be my walk-up music. Just listen to the opening bars, the first minute or so. Badass.

P.S. We’re Gonna Get Those Bastards will always be free. Feel free to forward to whoever you like.