Tags: student loans | debt | forgiveness

Universal Student Loan Forgiveness Would Create Unfair, Biased Outcomes

Universal Student Loan Forgiveness Would Create Unfair, Biased Outcomes
Democratic presidential candidate, Sen. Elizabeth Warren (D-MA) speaks at the Polk County Democrats' Steak Fry on September 21, 2019, in Des Moines, Iowa. (Scott Olson/Getty Images)

By Tuesday, 24 September 2019 12:38 PM Current | Bio | Archive

Imagine that the government gave you a seven-year-old Toyota Corolla with 100,000 miles on it.

Actually, a better way to think about this is what if the government paid off the high interest loan you still owe on that car? You’d feel pretty good, right? That’s is… until you find out the government also paid off the loan on my 2019 BMW 760i. Sound fair?

Okay, let’s try again.

Imagine the government paid off the student loan that you have paid on for seven years after getting a degree in interpretive dance from some third-rate college online. Great news! You’re finally free to quit your job in fast food, practice your Arabesque position, and try out for the New York Ballet Company. But wait… The government also paid off my loans (plural) from Stanford and Harvard, and I’m now free to accept that residency in brain surgery at the Mayo Clinic — I think I’ll take a week and drive there in my BMW.

The idea of debt forgiveness is perhaps the most unfair and biased idea to ever come from the crowd of social reformers vying for your vote. It is also a terrible use of taxpayers’ money, but more about that later.

Yes, my examples are extreme, but nonetheless, they are only a moderately exaggerated picture of reality. Which college majors, and which school’s programs, have more deserving students?

Do we pay off some unknown state college’s debt and not an elite private university’s? The stereotype being of course that graduates of, say, Arkansas State University are somehow underprivileged and those from Middlebury College are not. The obvious bias here is blind to the rich farmer’s kid that went to ASU versus the intercity one from a broken household with seven siblings that borrowed heavily to attend Middlebury. Fair?

Let’s forget about which college’s graduates are deserving of loan forgiveness for a moment and focus on college majors. We need good K-12 teachers, but we also need good orthopedic surgeons. Do we reward educators and punish doctors — both of which are helping society, and both of which are in short supply — solely because M.D.’s make ten times what teachers make?

But first, before we throw a trillion dollars of taxpayer money at this, let’s look at the purported justification for it. We’re told that student debt is burying Millennials. According to the pitch, they’re putting off home purchases, foregoing marriage, and even delaying childbirth because of their monthly student loan payment. Writing a government check for about a trillion bucks to about 50 million folks with average monthly payments of about $400 we’re told will somehow change our society. But, wait!

What if we didn’t pay off student debt, but instead, we went back and re-read the first paragraph of this article? Now there’s an idea! Ignoring which car is better, like the Social Democrats’ plan proposes doing with colleges and majors, why don’t we pay off everyone’s car loan? Let’s do the math here. There’s about 110 million folks with car loans, the total amount outstanding nationwide is about a trillion dollars, and the average monthly car payment is about $450.

That’s right. For the same trillion dollars we’d help twice as many people eliminate a monthly payment that on average is actually more than on student loans. If having a monthly payment is holding back America, here’s a way to get plenty more bang for the taxpayer buck.

But, what about the guy that got his car loan paid off and then went and borrowed to get another car? Does he get that second loan paid off too? Rhetorically, what about the student that borrows for their undergraduate degree, and then a few years later goes to graduate school? Are both loans paid off by the government? See the hypocrisy?

There really is no easy way around it other than this. If you borrow money, you need to pay it back. It doesn’t matter if you used the money for school, or a car, or a vacation. Forgiving debt on a macro level encourages irresponsible borrowing on the micro level.

However, is there anything we can do about loans for jet skis? Asking for a friend…

Kevin Cochrane teaches economics and business at Colorado Mesa University in Grand Junction and is a visiting professor of economics at the University of International Relations in Beijing, China. He is a regular contributor to several national publications including the Washington Times, Washington Examiner, and American Thinker. He previously was the economic correspondent for both CBS and NBC TV affiliates in Southern California. For 27 years he formerly was a senior banking executive with a major NYSE listed bank holding company and the CEO of a national multi-bank operating company. To read more of his reports — Click Here Now.

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Imagine that the government gave you a seven-year-old Toyota Corolla with 100,000 miles on it.
student loans, debt, forgiveness
Tuesday, 24 September 2019 12:38 PM
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