Friday, March 22, 2019

Student Loans Warping Society

By Professor Doom

      I’m often asked about the long term effects on our culture from the huge student loan scam. I don’t have a crystal ball, so I have only conjecture, but a recent article from Buzzfeed (bear with me, I’ll be making corrections) tries to address this problem:

Jen’s story is like a lot of people’s stories. She’s 35 years old. She and her sister were the first in their family to go to college. She emerged from undergrad with $12,000 in debt, and even though she was making just $30,000 a year at her first job, she made her standard monthly loan payments on time. In 2008, when she was laid off into the depths of the economic crisis, she decided to do what so many other people did then: go back to school…

      So far so good for Buzzfeed, the above really is the typical story. Bottom line, students pay way too much for college degrees which financially reward far too little, hurting them greatly. A significant proportion of those students don’t quite learn their lesson and go into grad school, utterly devastating their lives in exchange for an overpriced graduate degree which is no more useful than their overpriced undergraduate degree.

      The Buzzfeed piles on with their anecdote by giving Jen a stroke, but that’s entirely unnecessary…simply going to grade school sealed her fate, stroke or not, much as it’s destroyed many of our citizens.

Jen is one of more than 44 million Americans with student loans, and her current balance of $70,000 is just a tiny fraction of our collective $1.5 trillion debt load.

      The 44 million number is mostly correct; it’s the official estimate, and I can forgive Buzzfeed for using it. Trouble is, that estimate comes from a strange accounting method, which doesn’t count many students currently in college taking loan money, as having student loans, because the loans don’t “officially” count until the student leaves college. As around 70% of college graduates (and, presumably, college dropouts) have loans, and there are around 20 million college students, we could be looking at 60,000,000 people with student loans now…that’s close to 20% of the population.

The weight of all that student loan debt is markedly different than the feeling of the weight of mortgage or credit card debt — after all, those borrowers can declare bankruptcy, an option unavailable to student loan borrowers.

      If 20% of the population had AIDS, cancer, or some other lifelong debilitating and inescapable disease, it’d be major news. But somehow these lifelong loans just aren’t very interesting to the mainstream media. Hmm.

That Jen defaulted on her loans isn’t uncommon, either — default rates are projected to hit 38% by 2023. Like Jen, most who default don’t do so because they’re lazy, or not out looking for work, but because the loan payment amounts are just too much. Nevertheless, much of the conversation around student loan debt still puts the onus on the borrower.

      Wow, that’s a huge projection for defaults. Of course, the default won’t save the borrowers, since the loan only gets larger when you default. People with cancer or AIDS are luckier, I guess, since they can at least die—some student loans stay even after death.

      Back when we had the sub-prime housing loan crisis, we eventually had a massive default which destroyed several very large and powerful banks, while other banks got multi-trillion dollar bailouts.

      Soon, we’re going to have a massive student loan default. Maybe it, too, will be solved by bailouts, but I can’t rule out a violent revolt…20% of the population is large enough for a civil war, and seeing as they’d have little to lose, it’s at least a possibility.

“A member of my family once said I deserved student loan debt because I chose the unrealistic field of history,” one borrower told me.

     The above sentiment is quite common, but I feel far more pity than contempt for students trapped like this, and I’m not a sweet person by nature. See, these kids were indoctrinated into going to college, indoctrination which started at around the 2nd grade (if not earlier), and becomes incredibly oppressive by the time they’re leaving high school.

     They’re told about the 23 genders, but never told about the perils of student loans. Heck, 28% of students with student loan debt don’t even know it...if they don’t even know they have the debt, perhaps the government is justified in not counting the debt as debt. I don’t agree, of course, since the microsecond the student steps off campus, degree or not, payments accrue.

     So, no, this isn’t the student’s fault. It’s our higher education system’s fault, especially since every accredited school (i.e., a school which can take student loan money) certifies in writing that they’ll act with integrity…even as they rip off and deceive students into taking on student loans.

      Now, there is a possibility of student loan forgiveness:

The issue came into focus in fall 2018, when the Department of Education released information related to the first round of potential loan forgiveness. Out of 29,000 forgiveness applications that had been processed, more than 98% had been rejected.

     Buzzfeed it a bit off here, the rejection rate isn’t 98%, 49 out of 50, it’s more like 279 out of 280…basically nobody qualifies. Eh, Buzzfeed is close enough I guess. The whole forgiveness thing really is a joke:

…just how illogical and intractable the system remains. If you pay even one dollar more than your set income-based repayment, the payment doesn’t count toward forgiveness. If you make the payment a day early, it doesn’t count. If you make a payment on the one-day gap between switching from one public service job to the next, it doesn’t count. If, for whatever reason, you cannot make a payment for one month, your loan will then go into forbearance.

      Now that we’ve established that student loans are crushing a generation of Americans…what’s this going to do to our country?

      Next time around I’ll talk about what Buzzfeed has to say.


  1. Anyone with brains should watch 'Pinnochio' the Disney cartoon and what happens to little children who have fun in school and who goof around and end up slave donkeys.

  2. I went into the Marine Corps back in 1988 with $3800 in student loan debt. The Soldier/Sailor Act of 1946 allows ALL loan repayment to be placed on hold while one is in the military. Nevertheless, the KHEAA (Kentucky) student loan people violated federal law and placed my loan into default while in was in service. I went to a US Senator (Simon) and a US Congressman (Hubbard) for help and their offices did try to help me but the default status was never removed. I told the degenerates I would begin paying the loan as soon as they removed the default status but they never did. One evil bitch in the KHEAA even called my office at the Marine Corps and tried to humiliate me because I wasn't paying my loan. The government will never forgive student loans because they never forgive or forget anything.

  3. Is there really a debt here? Does a promissory note have any value before it is signed? As with all bank loans, it is the signature that creates the funds. Read "Modern Money Mechanics" Federal Reserve Bank of Chicago, for a greater understanding of how money is created under this debt system.

  4. Bush Sr. was President back then! He and I had a big battle at the UN about the Chinese students he was going to deport to Beijing after they demonstrated against the government there, while in NYC, here.

  5. I have found it interesting about the calamity of apparently ever increasing college tuitions and the price of education at these ivory levels.

    But what I have never heard is about accounting principles for college graduates.

    Just using theoretical numbers, let's say you pay $400,000 for a four year education on borrowed money. So, a $400,000 liability shows up on your balance sheet. But if you showed up for any mostly boring accounting class, you also have to recognize that you have a $400,000 intangible asset on the other side of the balance sheet.

    Clearly, if no banks, credit card companies, etc. recognized the value of your intangible asset of $400,000, then the intangible asset (college education) wasn't worth whatever you or your parents paid for it.

    This is the conundrum that is most frequently missed while experts report college debt while excluding the intangible asset in a similar amount for college education.

    And if you've ever applied for a bank loan anywhere, they would almost certainly determine that you submitted a falsified application that included a $400,000 intangible asset - the other side of your balance sheet.

    So, if banks can ignore your intangible assets related to the price of college admission/education, what does that say about the price of a college education?

    So, in this example, you borrow/pay/have parents co-sign loan agreements for $400,000, but banks insisted the asset side of your balance sheet has zero value?

    Mostly, that mystical value of the missing $400,000 asset value is an asset that simply can't be seized - something like a $400,000 piece of real estate, etc.

    Why are kids so stupid these days? Probably because they haven't taken a real accounting or finance class....

    1. It's not so much stupid, as ignorant, indoctrinated, and taken advantage of. Gender Studies is now a mandatory course...but not personal finance, or even the basics of life skills, such as "never take out a loan for something that won't help you repay the loan."

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