3 Reasons We Shouldn't Bail Out Student Loan Borrowers

Total student-loan borrowing is approaching $1 trillion dollars and both Barack Obama and Occupy Wall Street (OWS) protesters are adamant some or all of that debt should be forgiven.

But forgiving such loans ignores that the debt is voluntary, is relatively small for the average borrower, and merely continues the same bailout mentality that has already gutted the American economy.

For a link-rich, heavily documented text version of this argument, go to http://reason.com/archives/2011/11/18/3-reasons-we-shouldnt-bail-out-student-l

"3 Reasons We Shouldn't Bail Out Student Loan Borrowers" is written and narrated by Nick Gillespie and produced by Meredith Bragg.

About 3.33 minutes long. Go to http://reason.tv for downloadable versions and subscribe to Reason's YouTube channel to receive automatic notifications when new material goes live.

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[ihicrack]

Just the same problem as the housing crisis. Loans made that the originators knew had very little chance of ever being repaid in full, all in the name of short term profits.

[tlchop]

obviouslt we shouldn't bail out student debt but if I had to choose between bailing out banks and forgiving student debt I would bail the students out!

[tedatlas]

This is why I chose to go to a cheaper community college. I know there's a certain stigma attached to people who go to them, but I got a degree much cheaper and I don't think I got a bad or sub-par education. There are options out there, people just need to think before they decide to go to an expensive university. It's a huge decision that many kids think they have to make right away.

[benastuart]

buy gold

[TheCruel]

I hope they give me a heads-up before bailing out student loans. I've been working hard to manage without, but I'd like to swipe up one before they forgive debt. ;)

[whiff1962]

The point is is that college boards are beholden to the state political machinery, especially so, here, in Illinois, which is strongly pro-union-public sector!

[whiff1962]

@eswyatt My discussion is quite germane to this discussion of tax payer funded student loan defaults, whereas, your discussion of older students and of "deceitful" university PR is off topic from the content of this video. Yes, university costs could be trimmed, especially public institutions. Let the private universities charge more for the cost of doing business. Its a free-market, or, so it should be. And stop having tax payers footing the bill for low interest, no default loans.

[whiff1962]

This is about personal accountability. I would agree that the university degree has gotten to be quite costly, but when one looks at the wealth distribution of college graduates, I would say that a university degree is a very good investment. The fact that so many older students might have trouble retraining through a university education (of which I am strongly circumspect, where are the stats?) might not fall on the colleges, but on the nature of the free-market of labor?

[eswyatt]

@whiff1962 Most of what you said is off to one side from the discussion. I'm not interested in expanding the discussion into other areas, nor am I interested in "out libertarianing" you. I'm not a libertarian evangelist.

[whiff1962]

@eswyatt First off, the the state should get out of funding universities and student loans by way of tax payer money. Let the University operate as any other business, which is something that any university PR and marketing can figure out. Next, retool the union presence in many universities, especially state universities in democratic stronghold states, That would save a heck of a lot of money on wages, pensions and gold standard healthcare packages. Good luck exposing this so-called fraud.

[eswyatt]

@whiff1962 You're right about it being "a rather facile impression." But I don't think college does older workers any good. And while recruiting campaigns that say otherwise go beyond mere "puffery," they probably don't t rise to the level of fraud. (And some really hard-core libertarians don't think fraud should be a crime; it wasn't for a large part of our history.) In any event, a Stossel-type expose' on the worthlessness of a college degree should do the trick.

[whiff1962]

@ChiotVulgaire I would still bank on a university degree rather than just a high school diploma. The crux is that of personal talent and initiative. The university has no place and blame on individual graduates failing to flourish in the job market. That is the larger picture.

[whiff1962]

@eswyatt Why should colleges be any more accountable for individual decisions? I disagree with your rather facile impression of colleges as somehow deceitful. It is a little more complicated than that, and anyway, a university degree does confer an advantage on the graduate, in general.

[takadi]

87 people were pissed that their lunch wasn't free

[eswyatt]

I agree except I'd like to add that older workers who are lured to college by the false impression, intentionally created by universities, that they can "start over" are victims of fraud, and their debt should fall on the college, not the taxpayer. Employers expect you to be at a point in your career that would be appropriate for your age if you had graduated at 22.

[vellocent]

@Audiofalcon7 What are the core reasons why school loans are so high?  Where would a good place be to research this? I can see at least a few reasons from experience, but I want to hear it from you.

[kuhioffxi]

You forget that these loans are forced by the government. Government says banks have to give out these guaranteed loans. These loans aren’t collected on right away but 4-6 years or even longer. When they do start collecting them, they have a higher default rate at a lower APR then average loans. You add inflation and non-equity student loans shouldn’t even exist from a bank’s point of view.

[krillin876]

@kuhioffxi I agree that loans should not be forgiven, however i believe these loans should be dischargeable in bankruptcy . There is a big difference. The college prices go up for everyone when the loans are not dischargeable. There is no incentive to lower prices when loans are guaranteed to be paid.

[kuhioffxi]

Take responsibility for yourself. Don’t take loans you can’t pay back, stop getting degrees no one wants (architect… really?), stop bitching to others when you are in control of your life and you made the bad decision. Too bad they don’t teach Personal Responsibility 101.

[eswyatt]

Has anyone considered how a bailout might affect the behavior of colleges? My gut feeling is that it would increase the rate of tuition increases and grow the education jobs program which is already out of hand. But I'd have to think about it more.

[dafedge2007]

@Spudst3r There is also that the interest rate is typically twice that of the current Prime Interest rate, (6.8 to 3.25), that it is one of only two debts that are not wiped clean by bankruptcy (the other is a mortgage), and that a bachelor's degree is no longer a benefit of the wealthy but a minimum requirement for a knowledge based economy. There is a reason that they have higher incomes and lower unemployment, but it's not because they have good incomes and good employment...

[ChiotVulgaire]

Okay, normally I'm with ReasonTV, but this is a larger problem than they realize. A lot of colleges out there are far more predatory in their policies, or charge outstanding prices for near-useless degrees. The worst part is this is all part of a huge social construct created by previous generations who believed that college is not just a part of success in life, but the very crux of it. We weren't told we could go to college, we were told we HAD to go to college.

[Spudst3r]

There are a few factors unfair about current student loans:

- Previous generations who imposed this on us enjoyed much cheaper rates of education.

- Human capital doesn't just benefit the individual, it benefits companies and society.

- The actual earning power of undergraduate educations has dropped dramatically from what it was.

People making the argument for loan forgiveness are essentially saying their educated should have been more subsidized. And I think they're right.

[fbibarbie]

Stop taking loans for money you don't have that is how you get bank rubt and get in debt never take loans save your money up gah!!!!

[AliceNchainz011]

@rodrigodet Yeah, the Tea Party/Libertarians are against bailouts across the board for philosophical reasons (whether they be failing banks or other groups). Occupy feels that the government should only bail out the poor