Student loans, the bugaboo of the progressives is back again in the news. The other day I read an article telling how President Biden is mulling the idea of capping loan payments at 5% of income instead of the present 10%. It went through the ins and outs of the benefits of Biden’s plan and concluded it helped the well-off more than the poor. The article made me think of the larger issue, the loans themselves.
The idea of total loan forgiveness put out by some on the far left is a nonstarter. The great difficulty aside from the government incurring the cost of these loans is that those who have yet to take out loans will be under no obligation to pay them back. How can you say we are going to pay for the loans of those taken out prior to 2021 and not those now and into the future? If the government is to take on those payments you can bet everyone will take full advantage of this largesse.
In a sense paying off the loans is saying you can go to college for free, No matter what you borrow the government will pay for it. Even reducing the amount of the loans by $10,000 or so to be equitable would have to apply to those who take out loans in the future.
The worse part of the idea is it penalizes those who duly paid back their loans. What dupes they were to pay each month when those who shirked their responsibility had the government pay for them.
Right now the worst thing that is happening is keeping the dream alive that at some point your loan will be forgiven. What would any normal person do who believed that? Obviously stop making payments on his loans and get a new and bigger TV.
Problems like this I like to approach by asking “cui bono.”
Many of you know that back before 1965 when the student loan program started that one could work during the summer and come up with all or a sizeable portion of the tuition for college. When the federal government began to guarantee repayment of the loans the ability to earn enough by working became a distant memory.
The educational institutions began to increase tuition each year forcing students to rely more and more on loans. Obviously, the great beneficiary of the loan program are the colleges and universities. The other beneficiary is the student. It appears to me the burden should fall on them.
Right now the loans have varying interest rates attached to them. I knew a student who left school owing about $60,000 who kept deferring payments on his loan until the amount reached up to $84,000. He struggled for three years to wipe it out fighting against the interest rates that made it difficult.
My simple approach for a start would be to eliminate the interest a student must pay. If you leave college owing $50,000 that is the amount you must pay back. If there is to be interest involved, the educational institutions must pay that. After all, they are the ones who received the money from the loans.
Other provisions could be added to it as time or income limits like Biden’s 5% solution. The overall idea is to put the burden on repayment on those who benefited from the loan.