Sunday, September 4, 2022

Student Loans

One of the hot topics in the news right now is President Biden's plan to forgive a portion of existing student loans. So far, hard facts appear to be in short supply. Opinions, on the other hand, are being flung about with wild abandon like a barrel of monkeys excreting through a ventilation duct fan on high. 

"It's unconstitutional."

"It's a transparent attempt at vote buying in advance of the midterms."

"Why should I pay off the loans of someone who got a useless gender studies degree."

Etc, etc, etc. Let's look at things logically for a moment and see if we can come up with something approximating a rational conclusion. 

"It's unconstitutional." Let's get something out of the way right upfront: politicians regardless of party have been finding ways around the constitution since five minutes after the ink was dry. It's human nature. Lawyers exist to find ways around laws. Is it any surprise that a large number of politicians started life as lawyers? You want an example? The Second Amendment of the Constitution clearly says that the right of the people to keep and bear arms SHALL NOT be infringed. And, yet, the National Firearms Act of 1934 ("the NFAA") blatantly and unconstitutionally infringes upon that right and has not been overturned to date. 

So, the president making noise that he will sign an executive order to forgive all or a portion of Federal Student Loan debt is no more or less constitutional than the NFA. In terms of overall Social Contract violations, this ranks pretty low on the scale of nefarious and diabolical threats to the Republic. The Turd Theater that we've been put through the last two years over a virus has done far more damage than giving a $10,000 haircut to what a bunch of folks trying to get educated owe the federal government. 

"Vote buying" Be honest with me. If someone offered you $10,000 and a wink and a nod, would you vote for them? What about if you identify with a different party and hold political views diametrically opposed to the person offering you cash? For the majority of the population, I would expect them to gladly pocket the money and then do whatever they would normally do anyway. Is there a segment of the population that is easily influenced by cash? Yep. I know a few of those. I'd be willing to bet that the people who think this is a vote buying scheme also think that the Democrats rigged the 2020 presidential election. Why would the Democrats "give away money" to buy votes when they can simply rig the elections to get the outcome they want anyway? 

Another thing to think about, the election is in November. The website to apply for forgiveness will not  even open until October and will be open until December. No one is getting anything paid off before the election. I'm cynical and skeptical enough to grant that it is possible that the administration is banking on the average student loan debtor not having the critical thinking skills or the free time to put two and two together and get "SCAM". There have already been rumblings about challenges being filed in court. So, what are the odds that anyone sees a dime wiped off their debt ever? 

"Why should I payoff...?" YOU aren't paying off squat. Neither am I for that matter. Think about this for a moment. When a kid signs the paperwork for a Federally backed student loan, the school isn't paying the professors and text book publishers with empty promises. The .Gov sends cash to the school in the form of revenue collected through taxes, tariffs, and (apparently for a short time) running a brothel in Nevada. The kid, in turn, agrees to pay back the loan to the .Gov at some point in the future plus interest and maybe a first born child unless the student can guess the name of the creepy old guy that shows up to claim...oh wait, wrong story. So, the truth of the matter is that Biden is simply saying he is going to hit "delete" on a certain amount in the government's balance sheet and move forward. 

Now, an argument could be made that the government will have to collect a certain amount more in taxes over the next however many years to offset the shortfall in expected recovery in student loan payments. That is, in my humble opinion, a fairly specious argument considering student loan payments have been on deferral since the pandemic began and the government has been running a deficit budget for all but 16 of the last 100 years. When you are talking about a deficit that almost equals the amount of tax revenue collected each year, this student loan forgiveness plan is barely a drop in that ocean. Don't take that comment to mean that I am in favor of more government mismanagement of our hard earned tax dollars. All I am saying is that there are bigger fish to pick and low hanging fruit to fry in terms of balancing the budget and getting spending under control.

If there is something I am missing here, I'm all ears. I've spent a fair bit of time thinking on this one. So, knee jerk reactions need not apply. Give me something equally well thought out to consider. 


  1. you loan your spawn some money to buy a car, house, whatever....and they don't pay it you would just write it off as a very expensive lesson learned.
    The government borrows the money from the Federal Reserve and doles it out to various programs. One of those recipients doesn't pay back the loan....does the government say que sera....or is the government obligated to pay the Federal Reserve?
    Remember now, the "Fed" is a privately held company.

    1. Steve, the Fed is a whole other can of worms for another time. That said, your question is something I had not considered in terms of downstream consequences. Frankly, I am not well versed enough about how the Fed goes about its business to give a thoughtful and intelligent response. My gut tells me that the Fed would adjust the prime rate and/or increase/decrease the money supply to meet its needs.


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