Last night I happened to tune into financial guru Dave Ramsey’s show just as Dave was launching into a rant on the looming student loan crisis. He posts clips from his radio show on YouTube, and I managed to find a clip that contains part of his longer polemic.
From the transcript:
…[W]e’ve got a 1.4 trillion dollar now student loan crisis…See it’s scary to me how the paradox is…that we’re fools about education. We’re idiots when it comes to education…what it amounts to…is that so many people have been completely overwhelmed with their student loan debt that now there’s this whole movement out there that says…college is ridiculous. You shouldn’t go to college. And that’s an overreaction. That’s just as dumb as “Go anywhere you want because it’s all gonna work out okay.” Both of those are dumb.
Here’s the whole clip.
I agree with Dave in general, although his conclusion should come with a couple of major caveats.
- Only go to college if you know exactly what you want to do for a living, you need a degree to get the job, and you know a position will be available when you graduate.
- Find a school that hasn’t been SJW converged–no mean feat.
He’s right on the money about the cataclysmic damage wreaked on younger generations by the mostly Boomer college cargo cult. In the live show, he spared a few choice words for the “It doesn’t matter what you major in,” canard. He rightly pointed out that such lies have destroyed countless young lives and rhetorically asked, if we know the banks are only loaning future underwater basket weavers fifty grand because Congress guarantees the loans, why don’t we end federal student loan programs?
Dave advocates applying common sense to financial problems. If known effects of federally guaranteed student loans include inflating tuition costs out of all proportion to any kind of consumer price index and turning young people into lifelong debt slaves, common sense dictates that the reason those in charge do nothing to solve the problem is because they hate their own children.
Financial advisers like Dave Ramsey are primarily concerned with individual outcomes. An even more disturbing picture emerges when we examine the effects of the student loan crisis at the macro level.
- American student loan debt now stands at 1.4 trillion dollars.
- Forty percent of student loan debtors are now projected to default on their loans.
- Since those loans are federally guaranteed, those defaulted loans would put taxpayers on the hook for 560 billion dollars.
That last article in The Hill also warns that the coming collapse of the student loan bubble could rival the economic meltdown we were warned of during the 2008 mortgage crisis. Luckily, or so the conventional wisdom holds, the government stepped in and bailed out the banks. Armageddon averted.
To recap:
Too many bad mortgages threaten confidence in the credit market=government swiftly mobilizes to shield bankers and themselves from the consequences of their poor decisions.
Three generations of Americans are gaslighted into incurring unserviceable debt=crickets.
Or worse. All too often you’ll run into a Tough but Fair™ free marketeer whose insistence that “those entitled Millennials learn that actions have consequences” betrays a thinly veiled contempt for the young and the poor.
Often overlooked are the millions of student loan debtors enrolled in income-based repayment programs. A major selling point of these plans is that they claim to offer debt forgiveness. Make regular payments without missing a month for 20-25 years, the IBR brochures say, and the balance of your loan will be forgiven.
The devil’s in the details. Read the fine print, and you’ll find that the “forgiven” amount is taxed as income by the IRS. Remember that 40% of student debt slaves don’t expect they’ll be able to pay off their loans. Let’s say a student debtor who can only afford the monthly minimum makes regular payments like clockwork for twenty years. During that time, he covers the interest, but that’s about it, leaving him with a $100,000 balance. The $100k is “forgiven” and is reported to the IRS as income for that year. Our ex-debt slave is hit with a $30,000 tax bill. There is no way he can pay it. The IRS throws him in jail for non-payment of income taxes, and he goes from debt slave to debtor’s prison.
You’d think that explaining the real consequences of the student debt crisis would make the Boomer capitalists rethink their “spare the rod, spoil the child” take. You’d be wrong. I’ve had a free market worshiper tell me, straight-faced, that he’d rather see the IRS imprison student debtors and put them to useful work compensating the taxpayers than support student debt relief. Interesting how fast support for the free market turns into support for government-run labor camps.
A couple of details that escape debt gulag supporters: a) How exactly is the government supposed to find work lucrative enough to pay inmates’ debts when the prisoners couldn’t find such jobs in the free market? b) The taxpayers will be hosed even if nothing is done because the expected $560 billion in defaulted loans is federally guaranteed.
Yet by some twisted logic, these champions of capitalism would rather bail out lenders (again) and sentence debtors to federal work camps than simply bail out the debtors. Because prison builds character. Or something.
Or could it be that BoomerCons are so narcissistically youth-obsessed that they’ll jump at the chance to lock up anyone who reminds them of how old they are?
There’s only one internally consistent solution. We bailed out the banks. Now we must bail out the baristas.
