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In Defense of the Responsible
Over on Twitter today, my friend Phil Klein of the Washington Examiner is getting piled on for this piece:
New post: "Elizabeth Warren's plan to cancel student loan debt would be a slap in the face to all those who struggled to pay off their loans" https://t.co/4g6No2MRVm
— Philip Klein (@philipaklein) April 22, 2019
College is really expensive. Too expensive. Especially when you consider the product you’re getting for the cost. Studies show students are spending less time than you can possibly imagine studying and learning, despite the fact that college is treated as a full-time job. There’s a reason why I was able to pull off working 40-50 hours per week to pay for (some) of college while I was also in school full-time.
That being said…
There seems to exist a misunderstanding about student loans vs. other kinds of loans. For some reason, they are thought of in very different ways. Car loans, credit card loans, home mortgage loans… There is an expectation that they need to be paid back by those who put their names on the dotted line. But for student loans, there are continual demands for these loans to be magically done away with, despite a promise made by the student that the loans would be repaid, often with interest.
But Republicans and conservatives need to do better on the cost of college and student loans than “you borrowed it, you pay it back.”
Over at National Review, Kevin Williamson has an interesting idea:
Here is a three-part plan for something practical the federal government could do to relieve college-loan debt. Step 1: The federal government should stop making college loans itself and cease guaranteeing any such loans. Step 2: It should prohibit educational lending by federally regulated financial institutions or, if that seems too heavy-handed, require the application of ordinary credit standards in any private educational lending, treating the student himself as the main credit risk in all cases, including those of secured or unsecured loans taken out by parents or other third parties for that student’s educational expenses. And 3: It should make student-loan debt dischargeable in ordinary bankruptcy procedures.
Why is college tuition so expensive? Because it can be. College has turned into a four-year party with state-of-the-art dorms, gyms, and facilities. Their administrative staffs have ballooned as well. And there have been no limits placed on the largess. They raise tuition to pay for the excess, and parents and the government (in the form of grants and loans) keep on shelling out the cash.
While college has become a prerequisite for a middle-class life, it has also become thought of as an absolute right. While college should be affordable, there are many ways to obtain a four-year degree, and they don’t necessarily involve spending four years away from home at a degree-granting resort. Community college and state schools provide a lower-cost option, especially for students looking to live at home and save money their first year or two of school. There’s also the option of only going to a school that offers a reasonable financial aid offer, and that requires hard work in high school to pull off. (This was a great story today in the LA Times about one such student).
Perhaps because I spent my first year of college at a low-cost and honestly bad school, perhaps because I chose to go to a state school that wasn’t anywhere near my dream school list, perhaps because I worked two jobs at 20 hours a week at each job while in school full-time, perhaps because I never missed a student loan payment in ten years after graduation, perhaps because I had friends with more money and similar test scores and grades get full-rides at better schools because of the color of their skin while I, an actual orphan, did not…. I’d pretty much be ready to riot in the streets if those who took out loans they couldn’t pay for because they thought they deserved to go wherever they wanted and study whatever they wanted to get bailed out.
I made responsible decisions, and if their loans are discharged, I will be penalized for them. I went to less rigorous, less prestigious schools and spent my time working as a waitress and cashier instead of networking or interning because I wanted to minimize my debt as much as possible. My opposition to the idea of discharging student debt (first floated by Elizabeth Warren) isn’t necessarily about fundamental anger about the unfairness with regards to money, but also the different decisions those of us who cared about walking away as debt-free as possible made.
Published in Education
Another suggestion I have liked is to hold the university responsible for (have to pay off) defaulted loans. This would temper the universities’ current incentive to raise prices because easy loans are available.
Also, I think many universities are dishonest (bordering on fraud) in signing students up for loans without making clear to the students what the consequences are. In Whiskey Politics podcast #193 on the student loan crisis, the guest cited that a fairly large number of graduating students are not aware that they have taken out loans. I am not surprised, as universities push on students students the wonderful “financial aid package” the school is providing, and fail to distinguish between the grant component and the loan component. When the student signs the papers, it’s a bundle of papers for a “financial aid package,” and many 18 year olds are likely to miss that a substantial portion of that “financial aid package” is a loan that is supposed to be paid back.
I think the original concern was that students would be able to graduate and very quickly, before they begin earning higher wages and acquiring property, file bankruptcy and discharge the debt. The concern was that, if enough students did that, it would threaten the availability of student loans. I think many other options short of non-dischargeability would have worked just as well.
A good compromise for now might be to make student loans dischargeable in bankruptcy, but only in a Chapter 13 where the debtor must compete a 36 or 60 month payment plan.
Another option, if that is too far, is to make student loans a priority creditor in Chapter 13 bankruptcies. Right now, although their claims cannot be discharged, student lenders are still considered general unsecured creditors with the same priority status as all the other unsecured debt – credit cards, medical bills, etc… This means that if someone files a Chapter 13, which again has a lengthy payment plan, they cannot pay the student loans any more than the credit cards, etc…So at the end of the bankruptcy plan, whatever has not been paid to the credit cards, or other unsecured debt is discharged, but not the student loans – they are still live debts. If the debtor could have been paying extra on the student loans, they may not be discharged, but at least they’ve been paid down.
Just a suggestion.
Isn’t the non-dischargability the price for the 50%+ interest rate subsidy?
I am open to the idea that at some point that this is just cruel.
Stop central planning education. It quit working decades ago.
GOSPLAN lol
That was originally part of it. It used to be that only federal subsidized loans were non-dischargeable, but now all student loans – even private unsubsidized loans – are excepted from discharge (barring an undue hardship which is very difficult to prove).
Well I think fixing that is easy low hanging fruit of low controversy.
Correct, that was the concern.
My suggestion for bankruptcy reform has two prongs: 1) only allow discharge some length of time after leaving school, say five or seven years. That eliminates the “I’m poor now but will be making bank soon” population. 2) “Foreclose” on the degree by placing a permanent hold on the transcript to prevent using it for a license or credits at a later college. That will mean the only professionals who take this route will be those who aren’t able to profit from their investment.
And then of course there will be the general pain of declaring bankruptcy, which is plenty.
I’m of a dual mind on this one. I have student loan debt that will never be paid off. And I’m not irresponsible or lazy. I also could not have gone to school without it. In fact, I started at one school and switched partway through because even with the loans I couldn’t pay the bills. Without student loans, I would not have gone to law school.
Yet, having gone to undergrad and law school, what I’ve discovered is that your school is more important than you think. It isn’t a question of “working hard,” it’s a fact that there are perfectly capable individuals who simply would not have access to higher education. That isn’t meritocracy, it is a massive barrier to entry. Yes, something is pretty dreadfully wrong with our colleges (and graduate schools), and yes, that has given us inflated costs and enormous loans that may never be paid. But the problem is bigger than just “if you don’t have the money, you shouldn’t go to school,” which is essentially what is being suggested.
Williamson is onto something, but it is inadequate. People take student loans because they have expectations. In this country, we expect that upward mobility exists, and that opportunity exists for everyone. For that reason, a lot of people (like me) who grew up penniless see college as being important for making that jump from “poor” to “relatively well off” (or better). When I went to law school, I sincerely believed that I would get a job and work for a few years, living below my means, to pay off the entire debt before launching my career. That vision is not exactly discouraged by most people, least of all by schools. Of course, that could very easily have happened… had I not graduated in the year of an economic crash, spent 3 years unemployed, and taken a low-paying job at the first opportunity. At this point, my loans are such that even if I were to make those sacrifices and pay the maximum amount, I’d have them taken care of in about 25 years. Life doesn’t exactly work like that.
As for the closing paragraph of the essay – I’m not entirely sure what to say. I want to react with sarcasm or bitterness, but let me put it this way. For every example like yours, there is an example like mine, and there are dozens somewhere in between. Our education system is messed up in a lot of ways, and it needs to be reset. Would it be unfair to wipe out loans? Maybe (if you have a very limited perspective). It would certainly be foolish if unaccompanied by serious reforms. But it is also both unfair and simply false to suggest that everyone who might be in need of loan forgiveness are “irresponsible.”
Here you seem unable to see past your own situation. I’ve got a lot of that as well. Poor kid, nowhere close to my dream school, worked hard (and have a wife who worked hard). Good test scores – several schools I could have gotten into that I was simply priced out of. Hell, I had friends who applied to dozens of schools and drove around to visit each one. I applied to three schools because that was the amount of money we could spend on application fees. Yeah, being poor sucks.
But again – don’t be unable to see past your own situation. Not every person in a terrible student-debt situation is someone who “… took out loans they couldn’t pay for because they thought they deserved to go wherever they wanted and study whatever they wanted.” That is insulting. Maybe there are plenty of kids like that. The stereotypical millennials come to mind – maybe someone with a ph.d in gender studies who never had any legitimate claim of expectations, someone whose only expectation is that someone else will come along to wipe out that debt. Sure, be angry at those kids if you want (though you might meet a few and realize that they aren’t all alike). But I honestly don’t think that is a majority of people with debt. You’re reading a lot of character and motivation flaws into a whole lot of people simply for being in a particular situation to which there are many, many paths.
But then again, you’re missing a big group in the middle. Of course it is undesirable to have some doctor or lawyer take out 200K in loans, then declare bankruptcy before going on to make 500K a year. But honestly, I don’t think this is really a serious danger (or, if so, it may be dealt with in other ways).
More likely is a person who took out huge loans expecting to pay them off, but then realized that life is not so easy. If you make 100K/yr, and you have a family, and you live in a home, etc… it can be a serious burden to pay $2000 a month on student loans. In fact, it would be a pretty massive burden. Perhaps the most responsible thing to do would be to graduate, get the 100k/yr job, delay the family for 5 years, pay off the debt while living out of a cardboard box… but again, that’s not reality.
Also, while there are some professions where a person graduates and then jumps directly into a high-paying job, most professions require some time to work your way up, and they have varying ceilings. That debt can be a huge burden in the time it takes to work your way up – and by the time you get there, you’re looking at barely being able to afford a payment that would get the loan paid off in 25-30 years. What does that look like, realistically? Basically, it is (for some people) a monthly fee to work. Then you retire (or, more likely, never get to retire) with unpaid debt.
I can think of a dozen different scenarios where this or that solution isn’t fair to some group or another – in fact, virtually every solution will have that result. We should stop being concerned about fairness and more about mitigation of an ongoing problem.
This is a huge problem.
My daughter went through veterinarian school several years ago, and I remember while she was in school, the annual veterinarians’ conference was centered on this very subject–the students were simply not making enough to shoulder the loans. Out of that conference came the Veterinary Debt Initiative.
It’s a big problem, and a part of the solution might be found within the professions themselves.
FWIW – I was in court this morning [yes, because I have a license, because I have a degree, because I went to college, etc… etc… all because, I guess, I’m irresponsible … I have a 2 word reply to that, which unsaid amounts to “gain a little perspective before throwing out those accusations].
Anyway – I was in court, and we were talking about a kid who I represent. He was displaced from his foster home (whose fault was that? We can play this game all day, right?) and is in our modern-day equivalent of an orphanage, but the modern sensibility won’t allow that to be ongoing, so he can only be there for a few weeks. Father is on the phone from prison, lamenting the fact that the state, who is responsible for this kid, is unable to even find him a home. Court, social worker, attorneys all lament the fact that there just aren’t enough foster homes! Not enough people willing to step up to the plate. Or, I suppose in many peoples’ minds, the state just isn’t doing a good enough job providing foster homes (from where? are they made in a factory? do we randomly assign people to be foster parents?).
Oh, but it’s so easy to pinpoint the problem, didn’t you know? This kid is sneaking out to smoke pot; he thinks he can do whatever he wants with no consequences. He’s to blame. Social worker got a call from an angry foster parent and exhibited all the empathy of a clod of dirt – then she got accusatory and mean, alienating the foster parent. She got the lady so worked up that the lady snapped – and we had to remove the kid because, well, that lady is unstable. The foster parent is to blame. Wait, no, the social worker is to blame. Maybe both. Of course, the dad is in prison. The mom isn’t in jail anymore, but nobody knows where she is. Good thing, too, because there are a few people who want her dead. The Dad is to blame for being a bad parent. The mom is to blame. Wait, no, gangs are to blame. No, the war on drugs is to blame.
Of course, at the end of the day we’ve got a kid with nowhere to go. I don’t give a damn who you call irresponsible, because the fact is, there isn’t a single person involved (and frankly, not a single person in the world) who isn’t irresponsible.
I don’t think we solve problems like this by claiming a moral high ground. We have to first recognize that they are problems; and we should address the flaws in proposed solutions not by looking for unfairness but by asking whether they will meaningfully work. All this sneering at other people for not behaving as we do… duly noted, I suppose. Where do we go from there?
Right – and since we’re so concerned with fairness, I suppose we ought to look at the way professions do deal with these things.
Easy example. If you’re a doctor in my city, you might graduate with 300K in student debt, but as long as you practice in this area (which is rated poverty-stricken), you will get most of that forgiven. Or how about “public service” forgiveness? I work in the area of Dependency Law (CPS cases, to the layman). If you graduate (with any amount of debt) and work for the state, you are considered a public servant, and your loans go away after 10 years. So if you graduate law school and work as an assistant attorney general or a prosecutor (or any employee of the state), regardless of how much you make or what you actually do, your loans get forgiven (even if you’re a rich kid with minimal debt). You could go work in the exact same courtroom, maybe making far less, but if you’re on the other side, and you don’t work for the state, no forgiveness program. So in my job, full debt obligation because I am a “solo practitioner” (even though I get paid by the county in a set amount). The AAG’s on the other side, who make more, with benefits… full loan forgiveness after 10 years.
I only use those examples because they are close to home. But the legal and medical professions are not unique. Start getting into the weeds and you’ll find a million and one cases of bad or unfair incentives, regulations and licensing requirements creating artificial barriers to entry, or virtually eliminating pricing mechanisms… all a bit more complex than “I think I deserve to do something I cannot afford.” No wonder conservatives have a difficult time selling the “hard truth” approach. That truth is not so easy to spot as we presume.
And how about the fact that even if you choose to send your kids to private schools, you still end up paying for schools they don’t attend? Or the fact that levies are not subject to the same voting laws as other issues. In my area, a multi-million dollar levy was proposed, voted on in an off-year at a strange time, and still failed… so they tried again the next year, and the next, and the next, and this year it passed by only a few hundred votes. Is that fair? So because I’m a property owner (whoops, another unfairness!) I get to pay for the kids of everyone who rents, or really, of everyone who sends their kids to public school. That is on top of the tuition that I already pay to not send my kids to public schools. But we needed these millions, for new computers and new buildings (what was wrong with the old ones?) and better facilities and bigger soccer fields!
All because parents can’t just be responsible and put aside the money to send all of their kids to private schools. I suppose I should be rioting in the streets?
Hammer, you know my story … I’m well aware that there are lots of people like us. But the whole reason that student loans were made ineligible for bankruptcy because that was the worry after a couple of publicized cases of doctors and lawyers pulling the exact stunt. If that’s the concern, let’s build in protections against it.
Nine years after graduating, the only job I’ve worked that even required my license is document review. Hell, I had to take law school of my resume to get in the door at a couple of jobs. Frankly, I would take a deal where in exchange for not having my student loans, I could never use my law degree and would lose my bar card. The thing has limited, not increased, my earning potential. $35K a year isn’t that bad of a wage if you aren’t paying $10K a year in student loans.
All of which to say (and yeah, I’m done ranting)
Your friend Phil Klein is an idiot. I’m sure Elizabeth Warren’s plan is terrible, and I’m sure Elizabeth Warren is also an idiot, but it’s not terrible because it’s unfair, or because it’s a slap in the face to anyone (I could some up with umpteen reasons why Phil Klein is a slap in the face to someone or another – is that really the game we want to start playing?). If it’s a bad plan, it’s a bad plan because it won’t work, or because it will have unforeseen negative consequences, or because it will be too expensive or create bad incentives, etc… etc… etc…
The one thing conservatives should cease doing is trying to play the victim game, because all we end up doing is legitimately failing to see the complexity of the world around us, and of bad situations, and coming across as ignorant jerks, like your dear friend Philip. If the message of conservatism is that problems are so complex that they cannot be solved through central planning and top-down human ingenuity, perhaps we should stop with the assumptions that these same problems are so simple as to be explained through snarky insults and solved by telling people to “quit being so irresponsible.”
Seriously —> Mises.org <— is right about everything. The GOP hasn’t been net constructive since Nixon. Be sure to vote.
#GOSPLAN
I understand, but here we get into additional complexities. For instance, it might be a good plan to let folks exchange their degrees for loan forgiveness. But in addition to the obvious problem of student loans including room and board (so it’s, as someone recently said, a free party-for-four-years experience if nothing else), you have the problem of transferrable skills. I could obtain an expensive degree in law or medicine or engineering (or anything else), and I don’t ever lose that knowledge (if I don’t want to). Maybe I trade in my degree and go do something else where that knowledge gives me a huge leg up.
Fact is, you’ll never really eliminate dishonesty and scheming. The real question is whether the benefit outweighs the harm. With respect to bankruptcy, you can look at it like that. But with respect to student debt, you also have to figure out where the real problem is coming from. Is it really irresponsible students? Or is it badly incentivized schools? How about state control of schools? Or attempts to regulate or shut down for-profit schooling? There are so many things contributing to this problem, I don’t think anyone’s focus should primarily be on the handful of individuals who might see it as some sort of long-term get-rich scheme (keeping in mind, even if a doctor did do such a thing, he is only able to make money by providing a valuable service). With respect to democrats and republicans, it would benefit republicans to acknowledge the problem and interpret it using our core free-market values.
Exactly. We need historians. We need English majors. Just not necessarily from Harvard or Yale, and not with $200k in student loan debt when they’re going to teach ninth grade history or English . . .
There is ZERO incremental value to an English PhD at this point. We don’t need English researchers, we need English educators.
And you can buy all three degrees on Ricochet depending on what membership level you sign up for:
Bachelor’s – Coolidge
Master’s – Thatcher
PhD – Reagan
The Lileks level gets you a BS in Segue Studies . . .
I disagree. I worked on three environmental impact statements, and a key player in each one was the English major who kept track off all the changes to our document, and made sure our words and spelling were proper whenever we wrote a section. One guy got his degree from Georgetown, and one gal got her degree from William and Mary. There is a demand for English majors outside of teaching, but I gurantee you these two knew their Shakespeare.
OTOH, they were BAs and not PhDs. But I don’t mind PhDs in English who do real research, not ones who bring Queer Theory into his works, or try to prove his chambermaid actually wrote the plays . . .
Higher education should be about developing your human capital however you define it at a fair price.
What we have now is a bunch of bloodsucking cartels and a messed up economy that doesn’t mesh with said carteles. [redacted] this.
https://twitter.com/OccupyWisdom/status/1120818503899144192
If businesses are suffering from a lack of quality employees, maybe they should be making the loans.
People who eat ramen with ketchup can likely weather a little bankruptcy and might welcome the extra years to get stoned in.
Why can’t we just garnish their wages?
Why not remove the government regulation preventing businesses from conducting evaluations?
But yes, I’ve made the argument that businesses still foolish enough to demand worthless degrees from employees need to be willing to pay for them, too.
I don’t want a government to forgive other people’s prodigal sons on my behalf and out of my tax money.
This is not to say that we can’t try to effect some kind of amelioration, but the idea that person X sacrifices to pay his debts and person Y doesn’t and then has them casually cancelled is offensive to me.
Moreover, in the OP’s example, she went to a lesser college and worked hard to pay off her loans while other people went to prestigious colleges and hope to not pay off their loans – their more prestigiously pedigreed diploma means that they also likely got better paying jobs once they graduated.
It is no shock that young people are unprepared to make good, predictive life decisions and are easily convinced that a loan now will be easy to pay off when they are rolling in the dough from the much better job that their degree will presumeably grant them. And failing that, many of them can be convinced that such concerns are bourgeois, and the important thing to do is sign on to a meaningful cause.
We should all know better. And convey that knowledge to those who need it.