Congress bailed out the big banks with the idea that the money given promptly would be lent out to the public and the economy, thereby, would be stimulated. Some estimates put the amounts received as high as $16trillion. The idea, that the big banks promptly would lend the money, turned out to be wrong. The big banks—JP Morgan Chase, Bank of America, Citibank, the usual suspects—have sat on the monies they received. I guess they await a rainy day. Given the severe drought conditions in many parts of the country, we may have a considerable time to wait for that rainy day.
In the meantime, debt for student loans—nondischargeable and sometimes in six-figures—has passed One Trillion Dollars. Most of that debt is held by the same big banks to which we gave all those trillions of dollars upon which the posteriors of their directors and CEOs now figuratively rest.
I suggest another stimulus, but with money we, as taxpayers, already have paid. Congress should enact a statute—yeah, right, I know, sounds silly Congress would pass anything but gas, but please bear with me—ordering all student loan debt, incurred to date, forgiven.
First, this would not be unfair or unjust to the banks. Their lobbyists have moved more nimbly than ever did Hoosier-born John Dillinger as he jumped over a teller’s counter. Maybe Dillinger moved more quickly—I believe he (famously) said he could rob a bank in One Minute and Forty-Eight seconds—but the big banks reaped (should I have dropped the first "e" in "reaped"?) Far more than the sums of which Dillinger ever dreamt. The big banks manipulated and conned to take those funds. They made themselves (oops! Cliche warning, but the cliche was employed aptly) "too big to fail." In other words, "Give us money or we’ll collapse the world’s economy and then see where you’ll be!" They did not need Thompson submachine guns. They had members of Congress (on the cherished "both sides of the aisle") to whom they donated bundles.
Second, the people who would feel the relief of debt mostly are middle-class. Now instead of paying five hundred or a thousand bucks a month to pay off a debt for the benefit of someone who feels at rest on a two-masted yacht anchored in Aruba where he or she maintains off-shore accounts from which he or she invests overseas and doubly (triply?) screws the American public (remember the initial bailout but also add in capital gains benefits), there people suddenly would be able to spend that money on new cars, home improvements, new clothing, home appliances, and other items, spent here. Those expenditures create jobs. Investments from offshore banks into corporations that build factories overseas create jobs—overseas.
Third, a lot the loans have been made for on-line schools that only graduate 20 percent of their students, represent 80 percent of loan defaults, and were set up as means by which to pry money from people, not to educate students.
This is not a spin on Robin Hood. The money held by those banks was taken from us in the first place. The stole from the middle-class and poor to give to the rich.
What about the future of student loans? This amnesty would discourage lenders from entering the market. I believe that is a good thing. Let’s cut a lot of the waste in higher education. When did colleges and universities become farm systems for professional sports? We should improve efficiency of administration of public universities. Part of what made this a great country was the availability of education. Higher education should be provided free to those who are capable of making the grade. We can finance the effort by gutting some of the silly expenditures for military.
People are as much a part of the infrastructure of this country as are bridges, highways, and railroads. Education is an important part of building every one of those aspects of infrastructure.
And, y the way, I do not have any outstanding student debt. I paid mine off.
The Contracts Clause stands in the way of this. The government can't just kill a contract related to debt.
The US government could offer the same interest-free financing that it provides our overlords, the big banks. This would eliminate most of the student debt.
IIRC, the predecessor "systems" to the Federal Reserve didn't exactly pan out like most might have hoped.
We need people in "high professions." That is why other countries provide free public education. I agree with you about costs in higher education. On the point of scholarships---I received a scholarship from DePauw. However, there are not enough scholarships to go around, even for students with high grades. If we leave those students in heavy debt, we hurt this society. And yes---they are big, BAD banks.
Paul makes a couple of good points. However, Nic, I would say the $7 trillion give-away to the big banks was a real "free money" program, and one from which most people will see few (if any) benefits.
Mark's not completely off-base with his suggestion. Forgiveness is far too extreme. (But then again, the feds helping to pay down mortgages was a better idea than handing banks a pile of taxpayer cash because of their "toxic assets" like we did.) What we need to do though is make student loans like any other consumer debts, subject to the same rules including the possiblity of discharge in bankruptcy. And we need to stop loaning money out for higher education at the drop of a hat for people seeking dubious degrees. The worst problem though is a lack of cost control by universities. Tuition rates have gone up far above the cost of inflation.
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