Joel Best (professor of sociology and criminal justice at
the University of Delaware) and Eric Best (assistant professor of emergency
management at Jacksonville State University) as carried in today's WSJ.
* * *
* * * * *
Let's call her Alice.
She earned her Ph.D. in the mid-1990s when academic jobs
were scarce, and she wound up an academic gypsy. She left graduate school to
take a one-year full-time academic appointment, but then found herself cobbling
together part-time teaching jobs at different community colleges in a large
metropolitan area, earning a couple of thousand dollars for each course she
teaches. She is a dedicated teacher, but her annual income is between $30,000
and $40,000.
Alice owes $270,000 in student loans.
She "only" borrowed about $70,000 to pay for
grad school, but she's never been able to afford much in the way of payments,
and after consolidating her loans and accumulating interest charges for years,
she's watched her debt roughly quadruple.
If Alice taught students in a low-income high school or
was a recent graduate, she would be eligible for various programs that would
allow her to discharge at least some of her debt.
* "DISCHARGE" TO THE AVERAGE TAXPAYER WHO HAS
LONG SINCE PAID HIS OR HER OWN DEBTS, HAS BEEN SAVING FOR YEARS FOR HIS OR HER
OWN CHILDREN'S COLLEGE, AND WHO NOW HAS TO HELP COVER "ALICE." (IT'S
A HELL OF A SYSTEM, AIN'T IT?!)
But since Alice graduated at a time before income-based
repayment and loan-forgiveness programs, there is no federal program to help
established part-time community-college faculty discharge their old
student-loan debts.
* HOWEVER...
The federal government is quite content with Alice's
situation.
* HUH...?
The $270,000 she owes is carried on the government's
books as an asset.
* AHH...
The government reasons that, since it is nearly
impossible to discharge student loans through bankruptcy, it will eventually
collect all of the more than $1 trillion in federal student loan debt that
Alice — and millions of other student borrowers — owe.
Not likely.
Alice has figured out how to avoid repaying and still
stay in the government's good graces. She is able to defer her loans without
accruing additional interest by enrolling in two community-college courses per
term while she works toward a business degree that she hopes will lead to a new
career. Meanwhile, her $270,000 balance remains on the books, growing all the
time.
* WHAT A SYSTEM...
Alice doesn't think of herself as a deadbeat...
* BUT SHE IS. (SHE DEFINITELY IS!)
Within a few years, she'll be of an age to collect Social
Security, and at that point she expects the government to begin withholding
about $30 from each monthly check to pay her student loans. That will hardly
offset the hundreds of dollars of interest charges that accrue each month.
(*PURSED LIPS*)
Meanwhile, Alice has friends with full-time jobs who are
appalled by her taking courses to avoid repayment, but she says she has to
choose between paying for a place to live and repaying her loans.
* OH, I'M SURE ALICE DINES OUT... GOES ON VACATIONS...
PERHAPS HAS A NASTY STARBUCKS HABIT...
* IN OTHER WORDS, ALICE MAY NOT HAVE THE LIFE SHE FEELS
SHE "DESERVES"... BUT SHE NO DOUBT HAS A FAR BETTER LIFESTYLE THAN I
BELIEVE SHE'S ENTITLED TO.
It is Alice's place in the larger picture that is the
more important story.
The federal government assumes that almost all
student-loan debt can be treated as an asset because federal loans are not
dischargeable under normal circumstances. So it really is not a problem if the
total debt exceeds $1 trillion ($2 trillion around 2020 on current trend),
since all that money is sure to be repaid. But that assumption looks more and
more fanciful.
Studies by the New York Federal Reserve Bank show that
only about 56% of borrowers are making payments.
* COMMON SENSE SAYS SHUT THE PROGRAM DOWN; CUT THE
LOSSES!
Among those under 30 and in repayment — that is, they
have not received permission to postpone payments — more than a third are
delinquent. That's a lot!
(At the peak of the recent housing crisis, only about 10%
of borrowers fell behind on their mortgage payments.)
Alice is part of the 44% of borrowers who are not
repaying student loans for various reasons.
* CAN WE SELL THESE PEOPLE TO CHINA AS SLAVES...???
(KIDDING! JUST KIDDING! OF COURSE ANY FOREIGNER SHOULD BE ABLE TO BUY AN
AMERICAN DEADBEAT - NOT JUST CITIZENS OF CHINA!)
Why isn't this high percentage of borrowers who are
excused from making payments alarming federal policy makers and most of the
analysts who study student loans?
* BECAUSE OBAMA'S OBJECTIVE IS TO "BREAK" THE
SYSTEM... "BREAK" AMERICA SO THAT IT CAN BE "FUNDAMENTALLY
CHANGED."
* YOU THINK I'M CRAZY? THEN HOW DO YOU EXPLAIN IT...?
SERIOUSLY... HOW DO YOU EXPLAIN IT?
There is really no prospect that Alice is going to be
able to cough up more than a quarter-million dollars and pay off what she owes.
At some point, the government is going to have to reclassify billions in loans
and interest as losses. Meanwhile, as college costs rise and more students
pursue higher education, student borrowing grows. According to the Department
of Education, students borrow over $100 billion annually, and the figure rises
with each new academic year.
* FOLLOW THE MONEY, FOLKS; WHO IS GETTING HOSED... vs.
WHO IS GETTING RICH!
This is a big problem.
* FOR THE TAXPAYERS. FOR THE COUNTRY. NOT FOR THE
DEADBEATS. NOT FOR THE COLLEGES AND THOSE WHO PROFIT FROM RUNNING THEM!
Unexpected write-offs of billions of unpaid student loans
will confront Americans with a set of ugly choices: Will we raise taxes to
cover the losses — which is impossible to imagine in today's political climate?
Do we cut other federal spending — which is nearly as
unlikely since we're talking about substantial sums?
Or... do we significantly increase the national debt.
* FOLKS. THIS ISN'T THE FIRST TIME I'VE BROUGHT THIS
BUBBLE TO YOUR ATTENTION. DON'T SAY YOU WEREN'T WARNED.
* FOLKS... UNDERSTAND... IF NOT STOPPED... OUR GOVERNMENT
OFFICIALS ARE GOING TO DESTROY AMERICA. (JUST CONSIDER ALL THE HARM THEY'VE
DONE JUST OVER THE PAST DECADE!)
This will be a continuing crisis; each year's increased
borrowing will require confronting the same choices in future years.
Washington recently acknowledged that there are a lot of
Alices; in mid-September the GAO issued a report documenting the rapid increase
in the student debt among those over 65. But many of the proposed reforms, on
tinkering with interest rates and the like, would increase — not reduce — total
student-loan debt.
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