Another bad idea from Elizabeth Warren
Sen. Elizabeth Warren proposes loan forgiveness of $640 billion in federal student loans. Add this bad idea to others she’s proposed or endorsed: Medicare for All, the Green New Deal, free college tuition for all, a $15 hourly minimum wage, and banning right to work laws. The list goes on.
Candidates for the Democratic presidential nomination are tripping over each other to offer ever more radical left programs. “I’ll see your $32 trillion program and raise you trillions more.”
It’s been entirely predictable that one or more progressives would get around to proposing that student loans be cancelled ever since the federal government pushed private companies out of the student loan business a decade ago.
Democrats nationalized the student loan industry, claiming that federal management would save billions compared to private administrative costs. If you believe that, I’ve got beachfront property for sale that I’d love to show you, but only at low tide.
They further promised that since government borrowing costs are lower than bank borrowing costs, the government would make money on the interest rate differential. These “profits” would be applied to reduce Obamacare costs. My beachfront property is still available.
Next, they pulled the wool over taxpayers’ eyes by claiming that student loans did not increase the deficit since they would be repaid. Voila, Democrats borrowed $1.5 trillion — almost $200 billion a year over the last eight years — without it appearing in the deficit.
Worse yet, well over half this money has gone straight to tuition increases, up over 1,120 percent since 1978, while consumer prices rose 292 percent. The Federal Reserve Bank of New York estimates that 65 percent of all student loan dollars result in tuition increases.
In turn, these tuition increases aren’t used to enhance student learning. Instead, colleges hire administrators. The University of California has more senior administrators than faculty. At Berkeley alone, 38 senior administrators have the word “diversity” in their job titles. Between 1975 and 2008, the California State University system added 400 faculty and 8,400 administrators.
Even a cursory look shows how the federal student loan scam works. The federal government borrows money but doesn’t acknowledge it in the federal deficit. The government loans the money to students who immediately forward it to their colleges. Colleges hire more administrators and build fancy student centers to compete with others doing the same and then raise tuition again.
Students are left holding the bag, especially if they’ve chosen majors that offer little chance for careers that will allow them to repay their loans. Are you aware of any middle-income jobs for ethnic studies majors?
Sen. Warren’s plan is faulty on a number of counts. The moral hazard alone argues against it. By bailing out those with outstanding loans today, the government would encourage future students to take loans with the expectation of having them cancelled in the future.
Cancelling student loans will likewise signal colleges to continue excessive tuition increases.
Setting loan cancellation limits is politically treacherous. Regardless of where Warren’s line is drawn, substantial political pressure will arise to increase both maximum forgiveness amounts and qualifying income limits, if not now then in years to come.
Finally, how would Warren explain her proposal to those who already have faithfully paid off their loans? Would she offer to reimburse them?
As for taxpayers, we’ll be fleeced again. We’ll be told how loan forgiveness is only fair for poor, struggling recent graduates loaded down with unconscionable debt. Expect a sobbing single mother with a “general studies” major from some diploma mill to testify before Congress.
Is there an alternative? My favorite is to require colleges to guarantee loan repayment for any student they accept who needs a loan to attend. That would put decision making where it belongs and would result in both more prudent loans and careful consideration of tuition levels.
One-upmanship by Democratic presidential candidates is likely to continue unabated. And if the country is foolish enough to elect one of them along with Democratic majorities in both houses of Congress, expect your taxes to skyrocket while the economy slows to a crawl.
The viewpoints expressed above are those of the author and do not necessarily reflect those of The Independent.
How to submit an article, guest opinion piece, or letter to the editor to The Independent
Do you have something to say? Want your voice to be heard by thousands of readers? Send The Independent your letter to the editor or guest opinion piece. All submissions will be considered for publication by our editorial staff. If your letter or editorial is accepted, it will run on suindependent.com, and we’ll promote it through all of our social media channels. We may even decide to include it in our monthly print edition. Just follow our simple submission guidelines and make your voice heard:
—Submissions should be between 300 and 1,500 words.
—Submissions must be sent to editor@infowest.com as a .doc, .docx, .txt, or .rtf file.
—The subject line of the email containing your submission should read “Letter to the editor.”
—Attach your name to both the email and the document file (we don’t run anonymous letters).
—If you have a photo or image you’d like us to use and it’s in .jpg format, at least 1200 X 754 pixels large, and your intellectual property (you own the copyright), feel free to attach it as well, though we reserve the right to choose a different image.
—If you are on Twitter and would like a shout-out when your piece or letter is published, include that in your correspondence and we’ll give you a mention at the time of publication.
We get it, Howard. You don’t like the left. Blah blah blah blah blah.
Capitalism and fascism. That seems to be all you care about. Sad.
Howard. You have my sympathy. It must have been tough living on both coasts and having a significant career, which undoubtedly required significant time at a college or university. but being surrounded by liberal, progressive Democrats and their social programs. It must have been frustrating to realize that your tax dollars were going to support all those lazy folks on welfare and such.
Then there was that awful possibility that some of your hard earned money might even go towards helping all those brainwashed liberal college students pay off their educational loans. You know, the ones from less affluent backgrounds who chose what you consider to be useless majors . Fortunately, it seems you have settled in a much less liberal area to live out your remaining years and can now vent your long simmering frustrations.
Perhaps my counterpoint opinion would be worthwhile for next weeks edition
Excellent analysis. Student loan forgiveness does nothing for the future or those, like me, that paid off the debt I owed. There will be an expectation that future student loans will be forgiven too.