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Biden Wants You To Pay for Someone Else's Debt

Biden Wants You To Pay for Someone Else's Debt

Roth: Canceling student debt doesn’t fix the problem



The government, particularly at the federal level, has morphed from a protector of individual rights to a bizarre game show. It is consistently giving away cash and prizes to a small group of people at the cost of the unwitting sponsors, the taxpayers. One of those giveaways that has resurfaced is the call to cancel student debt. While the costs of college have become enormous and in many cases exceed the value of what students receive in benefits, canceling debt for some or all graduates does not fix the problem.

The problem, not surprisingly, begins with the government itself. The federal government took over the majority of college lending under President Obama, and it has become the largest predatory lender in the country. It preys on teenagers and saddles them with tens of thousands of dollars in commitments that are not generally dischargeable in bankruptcy court (another government decision) for accreditations that often aren’t able to produce a commensurate return on investment (“ROI”).

This has hurt, not helped, the wealth creation opportunities for many young individuals.

Providing easy and available financing to young people, who have not been taught in our government-run schools how to evaluate ROI, increases the demand for college educations, driving up costs.

Furthermore, there is no underwriting process for student loans. There aren’t more favorable terms for an A student pursuing an engineering degree with strong job prospects vs. a C student pursuing an underwater basket-weaving degree with fewer prospects.

This process of evaluating risk and pricing it appropriately is done for just about every other type of loan that one takes on for a reason. Also, built into every other underwriting process is typically the chance of full or partial default, which creates a mechanism for the allowance of bankruptcy.

The government has completely upended this. Without underwriting and bankruptcy, young people are on the hook, allowing the colleges to continually increase their prices without themselves having any skin in the game or any recourse directed back at them.

This has caused the cost of college to skyrocket, far exceeding inflation or the potential increase in wages students might get for their degrees. One 2021 study showed that the cost of college had exceeded the rate of inflation by almost five times over the last 50 years.

So, how does the government picking some group of people to have their debts “forgiven” solve anything? It would unfairly shift the burden of the costs (via more national debt, inflation, etc.) from the person who took on the obligation and received the benefits from it to all taxpayers. Those who passed up college, went to a cheaper school, made sacrifices to pay down their college debts, or carry other types of debt burdens would be unfairly penalized by the government picking winners and losers.

It would do nothing to help get college costs under control and prevent the same situation from happening in the future. It wouldn’t put any schools on the hook for selling degrees that aren’t worth their costs.

All it does is give the government power to play game show host and ultimately buy more votes.

Moreover, the suggestion by some Democrats that President Biden go around the legislative branch and its powers to forgive debt with a stroke of the pen is once again showing that they have no desire to uphold the Constitution.

Nothing regarding the college cost burden changes until we get the government out of the school lending arena — an arena that it had no business being in to begin with. Debt should be created via a market-based underwriting process, and with that, the ability of individuals to discharge their student loans through bankruptcy courts should be available to all debt holders.

Students who are taking out loans should be shown, at every step of the process, what their expected return on their investment is, based on their major, school, and other factors, and they should be required to sign off on that as part of the process.

Colleges need to either be part of the underwriting process and hold a piece of the loan or be allowed to be sued if graduates aren’t able to use their degrees to better their professional outcomes.

In the meantime, given the cheap debt that has been given to the government and corporations alike for more than a decade, students who do not have the ability today to go through bankruptcy should either be given that option or the rate on their interest paid should be recalculated to an appropriate market rate, and interest paid above that over the past five years should be allowed to be applied to reduce their principal balances.

We need to stop focusing on the symptoms and address major problems. For student loans, as it is for most everything, it starts with getting government out of the way, not with it buying votes.

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In another articulate and insightful Facebook post, Mike Rowe of "Dirty Jobs" fame explained why he doesn't support student loan forgiveness and why he pities those who were "possibly sold a bill of goods" by going into debt for a four-year college degree.

"Lots of people on this page have asked me to comment on the various proposals to forgive hundreds of billions of dollars in student debt. Many it seems, suspect that I'll be supportive of these efforts, since I've written at length about the outrageous rise of college tuition, and the scandalous ways in which hundreds of thousands of students have been conned into borrowing ridiculous sums of money to purchase degrees that never lead to an actual job," Rowe wrote. "Well, for the record, I do not support student loan forgiveness."

Democratic politicians such as Senate Majority Leader Chuck Schumer (D-N.Y.) have recently championed the idea of canceling up to $50,000 in federal student loan debt for each individual with government loans. Rowe argues that such a policy is fundamentally unfair, "especially to the millions of Americans who have paid their college debts, and sacrificed much to do so." He also says that American colleges and universities will be incentivized to increase their already skyrocketing tuition rates because now the government is sending a signal that it will pay off student loan bills even if students can't.

"Tuition will never come back to earth, if we bail out those who borrowed more than they could repay," Rowe wrote.

He cited an article by National Review's Kevin Williamson that pointed out how canceling student debt is a boon to the wealthiest and most privileged Americans, not to the poorest.

"The majority of student debt is held by relatively high-income people, poor people mostly are not college graduates, and those who attended college but did not graduate hold relatively little college-loan debt, etc. As the New York Times puts it, 'Debt relief overall would disproportionately benefit middle- to upper-class college graduates.' Which ones? 'Especially those who attended elite and expensive institutions, and people with lucrative professional credentials like law and medical degrees,'" Williamson wrote.

Rowe concluded by expressing sympathy for those struggling with student loan debt.

"You were quite possibly sold a bill of goods," he wrote. "You were very likely pressured by your friends, your parents, or your guidance counselor, to attend the 'right' school. You were perhaps a victim of this persistent, pernicious, and preposterous push to peddle a four-year degree to every person with a pulse, and for that, you have my sympathy."

"But that's not my fault. Nor is it the fault of the American people," he added. "The fault belongs to you, and so does the debt."

That's why, Rowe explains, he has worked for more than a decade to encourage people to pursue alternate career paths to obtaining a four-year college degree and why his foundation, Mike Rowe Works, funds work-ethic scholarships to help people get training for skilled jobs.

"I don't want to see more people borrow money they can't afford to pay back," Rowe wrote. "But nor do I wish to pay it back for you. I will however, encourage you to apply for a work-ethic scholarship, and wish you every success in the future."