One of the issues that has been raised a number of times by American Occupy Drones is student loan debt. Drones have suggested everything from easing of restrictions to outright forgiving of all monies owed. So let me get this straight, these individuals applied for a loan to further their own education and agreed to the repayment terms knowing full well from the start the level of debt that they would be undertaking. In most cases I suspect that they reasoned that the investment was a good one as it would eventually result in gainful employment and a higher standard of living. However, now that they have their education they feel that they should be absolved from the debt or at the very least have the rules rewritten in their favor.
My first observation here is that we are either discussing very untrustworthy individuals (taking money under false pretenses), or very stupid/naive ones (entering into a loan agreement without understanding the details or long term implications). If the former is the case I would suggest that the rules need to be tightened even further to ensure repayment, if the latter is the case I do feel sorry for these individuals as they probably wasted a large investment in their own education as it obviously did nothing to raise their intelligence or understanding. Did they honestly feel that simply getting an education guaranteed them a job, or possibly even eventual access to the "1%" club? An education guarantee's nothing! However for the most part (particularly in today's world) it does provide you with far greater opportunity than those without one.
Now aside from my personal observations, lets look at some facts.
- According to a recently released report Student Loan Debt in the USA is estimated at $829.785 billion (slightly under $1 Trillion) and has now surpassed the the amount of credit card debt Americans hold ($826.5 billion, another debt taken on by individual choice, not forced on anyone).
- Student loans by their very nature are much riskier for a lender than say a loan to buy a car, or a mortgage on a home. When a student is loaned money they have no tangible assets or even income, the loan is in fact a gamble based on future potential income, which may or may not materialize. As such the rules on repayment must be far stricter as the only asset available as collateral is the borrowers future potential income, its not like a lender can repossess an education. This is one of the reasons that the Federal Government guarantees most student loans.
- The lender of a student loan is not the villain here, anymore than a bank who lends an individual money for an automobile or a home. The lender is simply entering into a voluntary agreement to supply the borrower with funds based on an agreed upon repayment structure.The lender has no control or say over the cost of the product (auto, home, education) that the borrower is using the funds supplied to purchase.
- In the case of post secondary education in America when we speak about the most expensive universities to attend we are usually also referring to the wealthiest, with many of them sitting on massive endowment funds. Here are just four examples of some massive university endowment holdings, frankly there are dozens more available
- Harvard University - $32 Billion (as of June 2011)
- Yale University - $19.4 Billion (as of June 2011)
- Stanford University- $19.5 Billion (as of June 2011)
- Princeton University- $17.1 Billion (as of June 2011)
$88 Billion (or in simple terms 10.6 % of all
outstanding student loan debt)
So, while it is popular and convenient to blame financial institutions or the government for student loan debt the real question is why are "not for profit" educational facilities charging such high tuition fees when they are sitting on such incredible sums of money?
|$25,000 in school loans for an education? |
About the same price as a new car.
I wonder which has more value in the long term?
Note his political affiliation ....Read More
So lets imagine that the Occupy Drones get Student Loan Debt wiped out, forgiven, erased, whatever you want to call it. Let's say starting tomorrow none of these individuals have to pay back any money they borrowed for their education. Now lets see, since a huge portion of these loans are guaranteed by the US Federal Government that would leave the taxpayer footing the bill. The same taxpayer that is already facing a $14.5 Trillion Federal Debt (whats the big deal it's only another Trillion or so) and watching the US greenback teetering on the brink of collapse.
While the wholesale writing off of all student loans is not likely to occur the reality is there are a number of movements underway to bring it about, here is one of my personal favorites, ForgiveStudentLoanDebt.com. The creator of it is Robert Applebaum, a 37-year-old lawyer who graduated in 1998 from Fordham Law School in New York City with about $65,000 in student loan debt. He admits that he personally chose at that time to put his loans in “forbearance” until 2004 (an agreement between the lender and the borrower that prevents a declaration of default but doesn’t prevent the continued accrual of interest). After making his loan payments every month since then, his debt today stands at $88,000. The website began in 2009 after he posted his speculation on Facebook about what kind of positive economic impact would result if those owing student loans suddenly had their monthly student loan payment as disposable income. The original Facebook post went viral and within weeks he had 300,000 “likes”. Imagine that.....
All I can say after visiting his website is that it appears that the minimum IQ standard to gain admission into Fordham Law School and actually graduate must be very low indeed. Think about it, Robert partakes in the best that America has to offer (education, technology, the legal system) yet feels he should get it all at no cost, worse yet he feels that the other guy (read as "taxpayer") should bankroll him. My suggestion to Robert is that rather than spending his spare time working on a web site hoping to dodge his debt maybe he should get a part time job and just pay off the money that he borrowed. But where is my head? After all he is a lawyer.
Let's for a moment look at Robert's idea and roll it out to it's natural conclusion. If absolving an individuals debt means they have more disposable income to spend thus strengthening the economy......
Why should an individual have to pay back any debt?
Really, why should they be faced with unreasonable car payments, an outrageous mortgage payment, or worse yet actually be expected to pay off credit card purchases (including but not limited to the new tent, sleeping bag, and IPad2 they purchased for their local Occupy campout). All of these debts potentially reduce their standard of living or even worse mean they have to work harder to achieve their goals and as such place an unfair burden upon them, one that the "Elite 1%" does not have to suffer.The downside to any plan of simply "erasing" all personal debt is that financial and monetary markets around the world would undoubtedly collapse overnight, but in the end isn't that exactly what the Occupy Drones are hoping to achieve, intentionally or not?
It is a cruel world........ however
For those that truly believe that the government should underwrite post secondary education I would suggest that if this were to be the case and massive public resources were committed to providing individuals with a career, that in turn the government should determine what that career is and where the individual will work to best serve the "state".
Whoa.... wait a moment Frustrated Joe (or should I say"Comrade"), that sounds like communism and America is a democracy where individuals are free to make their own choices, right?
Funny, I always thought so too, in fact didn't the folks who owe on student loans exercise that freedom in making the choice to borrow the money. The bottom line is that with the freedom of choice comes the obligation of accepting responsibility for the consequences. Unfortunately it appears that most Occupy Drones did not learn this despite the vast sums of money they claim to have spent on education. I guess in that aspect they did get cheated.