And here you have it from agencies and Regulators:
Regulators and officials at agencies [at] the Federal Reserve, Treasury Department, Consumer Financial Protection Bureau and Federal Reserve Bank of New York have all warned that student borrowing may dampen consumption, depress the economy, limit credit creation or pose a threat to financial stability.
Finally! Finally! Finally! Finally. Finally? Wait a minute. I shouldn't be that excited. Yup, I am getting ahead of myself. We're not there yet. We're only kinda talkin' . . .
Because the language is important here. After all, the student loan crisis may:
a) hurt consumption
b) is depressing the economy
c) is limiting credit creation, and
d) is a threat to overall financial stability.
I think the word may is inappropriate here. It's not that it may dampen things, but rather that it has dampened things. Big time. It most definitely has dampened things, and my work, along with others, has shown that for years. And my book, which is being published by Seven Stories in 2014, will also show that. So, we need these (ahem) damned policymakers in DC to move from using that verb may, and instead start using the verb has. Then, perhaps only then, we just might get down to business. This is a matter of getting out of denial. That takes time, but I think they've had more than enough time to be out of the denial stage.
I know what the cynics are going to say: don't hold your breath. But you know what? While I might not hold my breath, I'm definitely going to hold onto my hope.
46 comments:
C: Keep fighting the good fight! Am overjoyed to see you continuing to get the message out there.
How dumb can you get? Student loans positively SUPERCHARGE the economy. Have you even seen all of the construction that is taking place on pretty much every campus in America right now? I hate to think what the construction industry would look like without student lending.
You look awfully simpleminded when you (in effect) claim that money somehow vanishes from time and space the moment that Sallie Mae receives it. Do Sallie Mae employees have "big-ticket purchases" that "stimulate" the economy? Do law school professors have mortgages?
I guess you are some kind of walking talking economic recovery miracle machine. When YOU spend a dollar, it makes America safe and strong. When someone at Sallie Mae spends it, it ruins and collapses the economy.
LOL, you must be one MAGICAL creature, Cryn!
I like that you focused on such a seemingly innocuous verb. Remember in In The Loop, where one of the (accurate and) cutest alterations made to a memo justifying the 2003 attack on Iraq was to change all the uses of "may" to "does," or similar conclusive terms.
Obviously forgiving student loans would stimulate the economy in the short term. However, it would act as an enabler to the poor choices made by one generation of young people and encourage similar bad behavior by future generations.
How would it "stimulate" the economy? You think the lenders set the repayments on fire or something? Or do they perhaps bury the money underground like pirates' gold as soon as they receive it?
There's a new branch of fool's science positing student debtors as "magical spending creatures," viz., "It's better for the economy for ME to spend that dollar in your pocket. So gimmiegimmiegimmie! For 'merica!"
Anonymous May 16 @ 12:42 AM:
Most of that construction money is coming from government grants. A major source of complaint is that rather than using government funds for education, schools are using it to build shinier campuses to bring more students in droves to their classrooms. The just raise the tuition to pay salaries. I wrote about this in my master's thesis.
Anonymous 10:00 AM:
If you had been following this scam for the last several years like I have been, you'd know that it isn't entirely fair to blame a 17-18 year old kid for taking out school loans the way he was told to do. Rather, greater accountability should be attributed to the 40 year old loan officer who knows that, based on credit check (for private loans, at least) the kid majoring in philosophy will in no way EVER have the ability to repay the loan, but the bank wants this to happen because when the student defaults, the bank makes more money since student loans are rigged.
Even greater blame should be placed upon lawmakers for accepting campaign funds in exchange for removing truth in lending, usury protections, bankruptcy protections and refinancing rights from student loans so that basically, the lender has NO risk, WHATSOEVER and the student is in debt for life. What kind of teenager can foresee this? These kids are targeted, plain and simple and they pay for the rest of their lives.
Cryn, I love you more and more all the time. You rock! You bring hope to so many of us!
Is it just me, or does it sound like these anonymous Sallie Mae lovers are finally shaking in their boots? Because talks of fictitious pirate's gold are an insult to people who can't afford to live or eat because their student loans are so high... Or the family members who have been left behind after their indebted loved ones have succumbed to suicide because they could no longer handle the pressures of student loan payment and an inability to find an adequately paying job.
This isn't Disneyland, folks. Real people out there are hurting and dying because of this. Let's have a little decency and respect.
@2:01 You don't need to understand the ins and outs of finance in order to know that borrowing a lot of money to get a degree in philosophy is a bad plan. Do you think applicants for student loans should undergo the same vetting process as other borrowers? If student loans could be discharged in bankruptcy, like other debts, but you had to convince a financial institution that you are a good credit risk before you got any money for school, would that be a better system?
4:59,
You're missing the point. Sure, the teenager made a bad decision but the grown adults who KNEW better made an even WORSE decision. My point is that if we're going to start pointing fingers, we need to look at the entire picture. I offered a fictitious example, mind you. You need to remember that there are lawyers, engineers, architects, chemists, etc. WHO CANNOT FIND JOBS, EITHER!
I don't really think spending time arguing over who did what wrong is really a good use of our resources because people are too stubborn to consider perspectives other than their own (note: I have explained that both lender and debtor bear accountability).
The truth of the matter is that whether we decide to do something about this or not, we WILL pay for it. It is set up that way. Defaults are on the rise and will only get worse as more graduates cannot find work. When a student defaults, the creditor adds default and collection fees to the tune of 50%, then sends it back to the taxpayer. It would be less expensive for us to take care of it on the front end than it would be to wait until everyone's balances have doubled, tripled or quadrupled (based on length of time in default) before the banks force us to pay for it (which they can do, thank Congress).
There are no easy answers, but you need to be open minded to the fact that you and I do not know everything and rather than having a nasty argument on a blog created by a caring person, we should be discussing real solutions to this problem, and demanding changes from our leaders!
P.S. Cryn, your word verification does NOT play well with mobile devices!
@6:24 I think that part of the problem is that enlightened liberals like Elizabeth Warren and President Obama overestimate the extent to which sending more people to college can remedy social problems like economic inequality. I think part of the solution to the rising cost of higher education is for fewer people to go to college. Do you think that's true?
@624,
They do NOT "send it back to the taxpayers" when the borrower defaults.
They "send it back" to the borrower who defaulted.
11:20,
They actually DO send it back to the taxpayer because they are federally backed loans. They also chase the borrower to the grave. It is common for them to double-dip. Like I said, you and I don't know everything.
10:13,
In a way, you are onto something. While I believe that everyone should have access to an education, I believe that it should be within reason. Right now, universities are loosening their admission and academic standards just to increase their enrollment and attrition rates. There has to be a happy medium where there is a place for everyone to self-actualize. I do not believe university is for everyone, but I do believe that everyone has talent and should have the opportunity to develop as a human being. I am fine with charging tuition but this loan situation has gotten insanely out of hand.
^ Actually, you don't know anything. The entire amount was taken from the taxpayers up-front in the expectation that the student would repay it. When he fails to pay the money back, the government doesn't "take" another identical amount of money from the taxpayers all over again. Obviously.
Strangely enough, you seem to want the taxpayers to write off that entire amount - and convert the "loan" into an enormous birthday present.
Just correct your statement and drive on. Denial is an ugly thing.
@210,
I'm not going to pay someone NOT to kill himself.
The problem isn't the loans, it's the fact that there are no jobs for graduates anymore.
@10:19 The oversupply of PhDs and JDs is nothing new. A liberal arts degree has never been much help when it comes to finding a job, because that's not what a liberal arts education was designed to do. The weak economy is shining a spotlight on long standing problems in higher education.
@May 17 11:40 AM - that is not correct. That is absolutely incorrect. There was a point in which people with liberal arts degrees could find well-paying jobs in all sorts of sectors (private and governmental).
I will be writing a follow-up to a lot of the inaccurate assertions that have been made in this string of comments.
That said, I greatly appreciate the lively conversation that has taken place! Thanks to all of you for speaking up.
-Cryn
Author of Higher Ed, Greater Debt
4:32...
I think we are talking about two different kinds of loans. I am talking about private student loans. This money does not come from the taxpayer. You are talking about direct federal loans, this money does. Where I am still confused is how the federal loans are handled that used to be disbursed through private banks.
Why am I sensing hostility? Where did I say that the money should be written off? Calm down for a second and try to understand that some people actually want to have a rational conversation about this. Like I have said, there are NO easy answers but whether you have student loans or not, this WILL affect you so you are going to want to come up with a solution as much as I do.
I'd like to say something about the liberal arts debate:
The university was founded by the liberal arts. The oh-so-holy Harvard University is even considered a liberal arts university. When people talk about academia, they're generally referring to the liberal arts. In fact, in the university world, the Ph.D. is generally more highly regarded than the M.D. (note the extra stripe on the Ph.D. gown). Liberal arts majors learn to think from multiple perspectives (something greatly needed in the student loan debate). They analyze and synthesize, something that is said to be of great value in the workplace today.
What saddens me is that the university is turning into tech corps training. We seem to value only those degrees that can produce money for corporations. People seem to think that professional training is so much more important than the advancement of human knowledge. Nurses, engineers, plumbers, accountants and IT professionals are all needed and valuable in our society, but if everyone went into these professions, we'd be in trouble. I don't understand why it is so difficult for society to understand that we need all different kinds of people to function.
That being said, I personally know several liberal arts majors who have done very well for themselves, but most are in their 40s and 50s and graduated during a time when people could still find jobs paying a living wage. Nowadays, JDs are ending up working $10/hr jobs as legal assistants because their field is so saturated.
Everyone is hurting, it doesn't matter their major. We do not live in yesterday's world anymore and we'd do well to have some compassion for one another.
@CJ I'll be interested to hear your response.
@1146,
Haha, yes, you do that, Cryn. LOL, can't wait to read your learned treatise on the heavenly delights that await us all if the money passes through broke-ass students' fingers, and the opposing terrible calamities that will occur if those monthly student loan payments instead end up in the hands of the people who originally lent the money out.
Tch-tch, it looks like all these turrible property rights are going to completely destroy the American economy until the end of time. If ONLY we could give all our money to the "magical spending creatures" instead of the people who earned it - people who DEFINITELY wouldn't use the money to buy houses or cars for themselves.
This forthcoming explanation of yours is going to be full of unintentional hilarity.
Does your "book" even ADDRESS the fact that the lenders are putting the student debtors' repayment money to use in the economy? No, of course it doesn't.
Dear 11:18 Anonymous, the rhetorical hurdle you're going to need to overcome will be the following situation:
Susan walks down the street, carrying $100. John jumps out of a dark alley, clubs her over the head, and takes the $100 away. The police come and arrest John, take the $100 from him, and give it back to Susan.
"Hey," protests John, "I earned that! Liberals!"
The question for you is, did John earn the money?
A quality college education should not cost $50,000/year. Cryn, keep fighting! You have my support!
While I am a true believer in personal responsibility, I also believe that predatory lending is occurring. How can any 18 year old, especially one whose parents have not gone to college, really know what he/she is getting into when those loan documents are signed?
We are all told growing up that college is the ticket out of poverty and the fancier the school, the better. Fancy schools are expensive schools.
A lot of people are getting obscenely rich taking advantage of this widespread social norm.
Thanks, Cryn, for your hard work. I am looking forward to reading your book.
^ What "hurdle?"
I simply stomped Cryn's bullcrap "sweet, sweet magical spending creatures will supercharge the economy" premise into the ground and all the way down to China.
Game, set and match.
As to your (entirely irrelevant and unrelated) "analogy," (1) the deadbeats gave their money to the so-called "robber" voluntarily, which by itself defeats your claim that it was "robbery," and (2) the debtors want to take "their" money "back" from some uninvolved guy who's sitting in his house down the street, and permit the so-called "robber" (to whom they intentionally gave the money, again) keep the entire amount.
A good deal for the student, and a phenomenal one for the schools. Not so great for that uninvolved guy sitting in the house down the street, though.
Is this "hurdle" of yours underground or something? I think I stepped over it without even noticing.
Now, if you're up to the challenge, maybe YOU would like to explain why an economy is amped up and strengthened when a JD debtor makes a "big-ticket purchase," but is damaged when the lender/taxpayer (whom Cryn wishes to rob) spends the exact same money on HIS house or car.
Don't tell me what's "fair." Tell me how transferring $X-amount of money from taxpayer A to debtor B will "help" the economy - when the money is being spent/invested/lent out no matter WHO has it. And do show your work, hm?
@7:56 Most student loans are owned to the government. That means payment on those loans mostly go to pay the federal deficit. Reducing the deficit strengthens our economy in the long run, but doesn't create jobs in the short term the way people buying houses and cars does.
Anonymous 11:18/7:56,
The "hurdle" would be the one that is keeping you and Cryn from being in agreement. You both have essentially the same moral standards, and if you approached the "debt" issue from a different perspective, you might find yourself agreeing with her. Here's how the dialogue works:
1) You agree that mugging someone for their money is a wrong that should be redressed;
2) You agree that enforcing property laws with standards of agreed-upon fairness, such as "no mugging," allows there to be civilizations and economies;
3) You agree that selling someone in the economic marketplace an empty box, promising that it is filled with gold, is a type of theft, and should be punished similarly to mugging.
Once we're there, you've come to agree with some pretty basic contract law stuff. We then move into a discussion of whether or not there was deception involved in the loans.
The second issue you've raised is "economic stimulation." I wasn't aware that I'd commented on that part of it before. Cryn certainly has, but I don't feel that she's correct in every instance.
^ Riiiight.
I'm pretty sure the government spends the money, rather than using it to "reduce the deficit." And even if you are right, the bondholders will spend/invest the money - MAYBE even on houses and cars!
@5:23 I don't think the plight of today's student debtors is analogous to someone who was sold an empty box that they had been misled to believe contained gold. In a narrow sense schools have delivered what they promised, bona fide degrees from accredited institutions. Those degrees just weren't worth as much in the job market as the borrowers had hoped. Perhaps some college administrators actively misled young people about the value of a degree, but mostly the student debt crisis has been driven by society's collective delusions regarding the value of higher education.
^ You're begging the question, dude. I for one think there's a huge difference between mugging someone and selling him a law degree.
You are the only person on this page talking about "fairness" and "justice" (though they blather about that elsewhere). If you re-read the main post, you will see that Cryn's bogus argument is based on pure economic utility. Which has been properly demolished, by the way.
You're basically talking to yourself on the "fairness" topic.
Fairness is at the heart of this issue, Anonymous 11:18, 7:56, 9:20, and 9:24. The reason it is an issue is because of "fairness." If these student debtors had completed their educations and been able to enter a workforce that in any way resembled the one they'd been offered in return for all the money and all the years of their lives, they would not be complaining about the debts; they would be paying them off and living good lives.
Fairness, and some level of realistic trust, is what allows there to be economies. Without a sense of fairness, we must be always armed, vigilant, and un-trusting. We never borrow money from someone with whom we do not have familial connections and/or an intimate history.
Fairness rules (some of which you could call "contract law," if you wanted to) provide a massive social savings by allowing people to trust that certain behavior--such as lying about empty boxes or hitting someone over the head to take their gold--will not be tolerated.
In the absence of some level of fairness, people stop trusting. They stop investing. They stop buying, selling, trading, and even producing.
We've gotten thousands of years into civilization, here, by many of us believing (however erroneously) in these rules of fairness. The stronger they are enforced, the healthier humans are, because they feel safer in their breeding, producing, and living. Without it, economies stagnate.
^ LOL, looks like you agree with me that Cryn's appeal to economic utility is a bad-faith smokescreen.
Obviously you refuse to defend the central claim of Cryn's post that - ***FAIRLY OR UNFAIRLY*** - forgiving student loans will somehow supercharge the economy with new spending.
In fact, nobody here is defending that claim anymore, and Cryn's promised response is still absent.
And now my work is done.
It's probably not "bad faith," but it is a mistake to adopt the methods of the enemy.
Cryn rightly sees a problem--the great wrongness and suffering caused by the theft. She sees this problem alongside another problem--the callous, ignorant indifference of most people.
In an attempt to make more people aware of the problem, and to begin remedying the aftereffects of the situation, Cryn has chosen to focus on "economic benefits" rather than on the initial unfairness. She may or may not be correct about the economic benefits (she's more correct than you are, but it's almost a 51%/49% situation), but that question shouldn't matter at all in the context of fairness.
What happened should be treated as racketeering, and the people behind it punished accordingly. Even if the "economic benefits" argument worked, and achieved some minor improvement in awareness and remedies, a failure to punish the perpetrators only further empowers future thugs.
I mistakenly rejected this recent comment:
Anonymous just wrote (5/20/2013) -
"You are a fool. And a magical spending creature. LOL, we must keep, spoil, and nurture you like some exotic pet on whom our nation's very survival depends.
You are also a fucking lunatic. "Racketeering," indeed. If you ever saw real racketeering take place, your head would probably explode Scanners-style."
@3:45 Just out of curiosity, HA, do you think recent grads w/ student loans they can't pay made a mistake when they decided to go to college, or do you think they made the right decision to go to college but shouldn't have been charged as much for their degrees? Wow, that was a run on sentence.
(Thank you for saving that, Cryn. :))
9:45 Anonymous, yes, they made a mistake. Was it their fault? Should they have known better? Yes, and no. With the benefit of hindsight, it's easy to see how a criminal took advantage of you. With an understanding of marketing, any prospective student "should have" been able to realize they were being gamed.
Let's find fault with the perps, first. Once they've paid back the money and are cleaning up trash along the highway, we can discuss whether Joe Student wore Too Short A Skirt when he went to the club that night.
Was their education intrinsically valuable anyway? Probably not, but they should have "education." Fixing the financial scams associated with what we now call education would be a big first step toward causing actual formal education to happen somewhere in America.
You simply don't understand anything about economics. People always sell goods for more than they are worth (more than they are worth to the seller, that is).
If the law degree turned out to be worth far MORE than the student paid for it, would the STUDENT be the "racketeer" and "robber?" And would you be in favor of "liberating" that surplus from the student (or from uninvolved taxpayers, actually) and "returning" it to the law school?
You know, the law school? The party that got "robbed?"
@1:38 When you talk about criminals who took advantage of student borrowers, to whom are you referring? Part of the reason so many young people go to college is because enlightened liberals like President Obama and Elizabeth Warren encouraged them to do so. Would you include either of them in the 'criminal' category?
11:41, the financiers in this case were the ones who created the incorrect perception of the value of the degrees. They claimed that the chest was full of gold. It's not a question of disagreement over the value of the gold, but about whether or not it was gold, empty air, fool's gold, or yellow-painted rocks.
12:13, of course. The Democratic Party is much better at this kind of thing than are the bad cops.
@ 1:30 Why do you think so many young people were so easily cheated by these supposed criminals? Why didn't mom and dad warn their children about such people?
Because they didn't know to, as a result of the financiers' parents working so hard to destroy the critical-thinking aspect of education a generation earlier.
Alley-oop.
I'd like to add that mom and dad grew up in a different time when, adjusted for inflation, college tuition was several hundred times more affordable and grants were abundant. My father's entire education was funded by grants because even though he worked two jobs, he was low income and had two kids. Fast-forward to my generation. My parents thought, "we did it on our own, so can our kids!" Well, actually, they didn't so it on their own. states were still aubsidizing education costs back then and as i explained, my father received grants. that isn't to say that he didn't work hard, but you get my point. So they didn't save up for us or think to warn us since their educations were free. To add insult to injury, dad's degree was conferred during a time when good jobs were to be had so my "need" was calculated using his income.
Again, why are we screwing the people who are actually TRYING in this country? I would think republicans would like to help people who are trying to not be on entitlement programs.
@ 3:46 "Again, why are we screwing the people who are actually TRYING in this country? I would think republicans would like to help people who are trying to not be on entitlement programs."
I don't think pursuing a BA constitutes 'trying.' I would argue that our higher education system, as it existed until the 1980s, was an entitlement system. It used to be college was a place for people to hang out while they figured out what they wanted to do w/ their lives. That's not the deal we make w/ our young people today. Unfortunately, many students are still acting like it's 1963 and going to college just to give themselves something to do.
11:57,
I feel like I am banging my head against a wall. I shouldn't have to spell this out. "Trying" does not end with earning a BA and I think you are well aware of that. I think it's safe to say that most kids in school these days are working and after graduation, are doing everything in their power to find jobs that pay well enough to live, eat and pay their loans. How is earning a BA not part of trying when you've been told your whole life that you cannot get a good job without a degree?
There are graduates who are prostituting themselves because they can't make enough money to pay their debts. People are prostituting, hurting and dying. People are going homeless, childless, without cars and even meals, ALL because of this evil system. The irony is that they went to school, believing they were guaranteeing themselves that this would never happen.
I don't know why it is so difficult for people to understand that THERE ARE NO EFFING LIVING-WAGE PAYING JOBS FOR GRADUATES. There just aren't. And I think it's sick and wrong to sit around and point fingers at the victims of this scam... the people living in their cars and going to bed hungry... rather than looking at the schools, banks, and government that devised this plan years ago, who are all living in mansions and driving fancy cars on the backs of the poor and hungry.
I can't imagine living my life without compassion in my heart. Refusing to have empathy is a waste of a human soul.
@May 22 3:08 - poignantly stated. My I repost your comments for a follow-up?
^ Sounds like most of your "empathy" is for yourself. So I don't see how you are any better than the guy who lives in that "mansion."
If you want a full-time job that badly, why don't you join the military?
[crickets]
@3:08 I say again, the oversupply of certain types of degrees is nothing new. I graduated from college 15 years ago. Back then, my liberal arts education was every bit as worthless as yours is today. You could have learned from the mistakes of people a little older than you and made better life choices, but you didn't.
Post a Comment