Student Loans: A New Sheriff in Town \ stacker news ~Politics_And

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Student Loans: A New Sheriff in Town mises.org/mises-wire/student-loans-new-sheriff-town

438 sats \ 13 comments \ @Rothbardian_fanatic 23 May Politics_And_Law

The Secretary of Education has notified defaulted debtors; their loan payments are due May 5. Linda McMahon has sent four messages in one:

Students are responsible for their loan. Pay now or set up a plan. There is no loan forgiveness (write-offs) coming. Involuntary collections will begin if you do not pay. Stop efforts to write off loan balances with novel plans. The impact of this collection effort will echo for years. 5.3 million students are in default; many have not paid for 5 years. This number is expected to expand to over 10 million in 2025. Student loans age into the default status after being delinquent or suspended for review. Using the term “forgiveness” is sophistry, it is a write-off of an asset on the federal balance sheet.

A student loan default initiates a Treasury offset action. This prompts a 15 percent garnishment of wages, Social Security, and other federal benefits. The administration ended involuntary collections in 2020 as a counter to wage losses during covid. Trump extended it once and Biden extended it six times. Garnishment alerts employers and banks to unpaid bills.

Student loan promises and extralegal programs came from the White House and encouraged delaying repayment. From the Wall Street Journal to Mother Jones, and all alphabet Media panel discussions, student debt was a topic. Debtors received notices by mail and email. Universities notified students. Any excuses for debtors not knowing their obligations for these loans are less believable than pleading “my dog ate my homework.” ..

In August 2024, WalletHub survey reported 61 percent of students regret taking out student loans. Seven in ten college students in this survey said they were financially overwhelmed. Two in 10 said they have no plan to pay their student loan debt after college. Eleven percent of borrowers default in their first year. In a 2023 Wall Street Journal poll, 42 percent of college graduates said that getting a degree was not worth the cost. 61 percent of graduates would change their major.

Many debt holders are disappointed with the results. Students in default have heard promises of loan forgiveness for 4 years at minimum. They experienced a 22-month taste of loan forgiveness during the covid payment suspension.

This debtor pool will be intransigent to collection efforts. Legal challenges and injunctions will flourish. Forbes called this explosive situation, a “perfect storm…of heavier debt loads, higher payments, and an unforgiving economy.” This will not end with a bang, but a chorus of whimpers.

Wow, this is a novel situation, isn’t it? The creditors are expecting payment from the debtors! Unlike the federal government, which can default on loans as often as necessary, students are expected to pay back their loans without the out of default and bankruptcy. BTW, the Federal Government defaulted on loans in April when they were unable to pay their matured bonds or roll them over. So, what are all these students who were hooked into college with a bait-and-switch kind of technique to do when they find no work is available at the college educated level? Were they lied to, defrauded by the education system employees when they were told college would boost their incomes? Were they defrauded when they were told that there was plenty of work in their field of study outside of college? I just wonder what is next.

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50 sats \ 12 replies \ @Undisciplined 23 May

I'm adamantly in the camp that they were defrauded and worse, they were relentlessly propagandized for 12 years about the need to go into debt for college.

I've certainly wondered how quickly the "student loan crisis" would clear up if schools and universities were on the hook for the defaulted loans, as something like cosigners.

36 sats \ 10 replies \ @SimpleStacker 23 May

As much as I trash my college sometimes, I think we'd fair pretty well if schools were on the hook for loans because our tuition is actually super low. Probably one fifth the cost of the Ivies.

31 sats \ 4 replies \ @Rothbardian_fanatic OP 23 May

I don’t think the schools would be raising tuition as quickly or as steeply as they are now if they were on the hook for failures. I also don’t think you be seeing the fancy dormitories, student unions and gymnasiums being erected by the admin dicks. You also might not see so many useless admin dicks around. Do I give the impression I don’t like the useless administrators?

20 sats \ 3 replies \ @Undisciplined 23 May

I've never met a teacher who liked administrators.

49 sats \ 1 reply \ @SimpleStacker 23 May

Whenever public money is involved, useless administrative positions proliferate because there's no cost discipline, and people use it as a slush fund to hire their friends and family.

38 sats \ 0 replies \ @Rothbardian_fanatic OP 23 May

Proliferate is an understatement, they explode as fast as a colony of rabbits. And unusually enough, they all look and talk alike. Despicable.

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34 sats \ 0 replies \ @Rothbardian_fanatic OP 23 May

They look lost in the continuum half the time and when they speak, they speak in a language that I never learned.

20 sats \ 4 replies \ @Undisciplined 23 May

This was actually an idea that Mitch Daniels put forward, when he was president of Purdue. The reasoning was similar: Purdue is a relatively affordable university with well above average career outcomes. I suspect there was an element of grandstanding to it, as well as knowing his peer institutions would be hit harder by the reform.

38 sats \ 3 replies \ @Rothbardian_fanatic OP 23 May

Some people will do anything to sink the competition, won’t they? I think Perdue probably had a competitive edge due to being a public institution. The private universities don’t quite have the same backing from taxpayers. I think I prefer the idea of private universities, where there is no taxpayer input at all. It seems their education may be more to the point and effective. But, then there is Harvard and Yale as a contrary view.

20 sats \ 2 replies \ @Undisciplined 23 May

I think the landgrant universities were intended to be self-sufficient, after being given a large tract of land to manage. That's at least what I've heard, but obviously it hasn't worked out that way and they're all perpetually on the dole.

28 sats \ 1 reply \ @Rothbardian_fanatic OP 23 May

I think that is why there are so many Morrell halls on the university campuses. Just as a different sort of question, have you noticed that some of the much older buildings on campuses are definitely a different kind of architecture, built with a different kind of material. The older ones seem to have a lot more red brick and stone than the newer buildings.

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30 sats \ 0 replies \ @Rothbardian_fanatic OP 23 May

To tell the truth, I am in the defrauded camp, too. People have been told there were lots of jobs in their line of study, only to find out they were being mislead. Teaching is one of those subjects, too. I think the proper remedy would to let the debtors escape through bankruptcy, just like every other aspect of business and personal money handling. Another step would to be to make the colleges and banks the creditors, again and not the federal government. After all, where did it say in the constitution that the government should be lending money for education? Remember, all of the founders were well educated, themselves.