Friday Open Comments

Roth: Canceling student debt doesn’t fix the problem

The US government is the largest predatory lender in the country and must get out of student lending

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”).

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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.

Any time you put a third party guarantor into the equation, costs go up. This has happened in health care, for example. Hubby needed an MRI for his back, and with the insurance paying for it, the cost was in the thousands. Out of pocket, he paid $420. Imagine the boards of colleges and universities sitting around their conference tables, cackling “the government will pay what we charge!” – so they increase tuition.

But there’s no such thing as a free lunch. And students are finding that out now.

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.

Merit has no place in leftist ideology. Merit is outmoded. Racist. “Old fashioned”. But a system not based on merit is bound to fail. There are no incentives to produce, to excel, to be successful. No reason to be meritorious if merit is not rewarded. So why get a degree that would reward society and so get paid appropriately? There’s no merit in that, and if the government is going to guarantee your student loan, go study aardvarks in English Lit of the 13th century. Don’t bother with a degree in nursing, or engineering, or business. Not nearly as fun as aardvarks. Heck just saying the word “aardvark” is fun. Much more fun than learning how to design buildings that won’t fall down or something boring like that.

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.

But, it would buy votes. Our government was devised to be dependent upon a populace of thinking, if not well educated, citizens. We have lost that in a sea of wokeness and selfish short-sightedness.