7/5/13
Both political parties, and both non-judicial branches of government, are scrambling to reverse the doubling of the interest rate (from 3.4% to 6.8%) on a variety of federal student loans.
Yours truly has written extensively on student loans (See, inter alia,
for just a sampling of my highly unpopular thoughts on this topic. In summary, I am firmly opposed to rolling back this interest rate increase because I am, for the most part, firmly opposed to the idea of borrowing to pay for one’s, or one’s children’s, college education. Why am I so curmudgeonly on this issue, other than my normal predisposition toward curmudgeonliness?
First, the explosion of student debt is the next big debt time bomb in our economy and financial system. We ought to be looking for ways to discourage, rather then encourage, such borrowing.
Second, the whole notion of borrowing heavily to finance college grows from the preposterous, and increasingly dangerous, notion that everyone should go to college. The almost peculiarly American idea that everyone has to go to college has led to an economy top-heavy with people who majored in, say, minority studies, film studies, or sexual sociology from third or fourth rate “universities” and who thus feel entitled to the “middle class lifestyle that a college education affords them.” Meanwhile, we don’t have enough people who can do actual work for which real consumers are willing to pay with their own money, such as plumbers, mechanics, construction workers, etc. Then our hyper-informed populace complains when we import people to do such tasks so our kids can major in, say, gender studies and sit around and complain about not getting the jobs they feel they are owed. Such is the state of modern American society, but I digress.
Third, there are other ways to pay for college, all of which are doable but none of which anyone wants to do as long as Uncle Sam is ladling out your dollars at ridiculously low interest rates. Some of these highly unthinkable methods include:
· working to pay for one’s education.
· attending a community college for a few years before moving on to a four year institution,
· paying attention to costs when selecting colleges and perhaps resigning one’s self, or one’s children, to the ignominious fate of having to attend a state university,
· or, most reprehensible at all to the modern, middle class but ever so status conscious American, actually making some sacrifices to send your kids to college. (You mean I have to give up dual Lexi, a summer home, regular expensive restaurant meals, $200 shoes, and a trip of a life time every year just so my kids can go to college! Horrors! The government should do something about this!)
Simply put, one should borrow to finance one’s, or one’s kid’s, education only as the very last resort. And if one has to borrow to pay for college, one better major in something that will enable him or her to pay back the loan. Unfortunately, we have made borrowing the first resort, and signing up for “your loan” has become as routine as signing up for classes, many of which are educational and financial dead-ends.
Fourth, one would be hard pressed, or unbelievably obtuse, not to conclude that the direction of all these efforts to “lighten the burden on our next generation of leaders” is toward all out debt forgiveness. This would leave those of us who actually took the steps outlined above and thus will have our kids graduate without any student debt looking like the chumps we are. We sacrificed to send our kids to college; our neighbors said “What the hell?”, bought BMWs, joined country clubs, shopped at Whole Foods, and borrowed heavily to send their kids to hyper-expensive colleges and will soon be forgiven of all their debt and thus their obligations to their kids. Who were the fools in this scenario?
And, yes, I am talking my own interest here; I simply don’t want to pay for my kids’ education and the educations of my neighbors who live better than I do. But the next time you find someone whose politics do not reflect, to some degree, his or her own self-interest, let me know. I won’t be waiting by the phone.
Now I have even more reasons to be opposed to this all-out effort to keep interest rates on student loans outrageously attractive, inducing students to further put themselves in debt so deep they will never climb out---until all loans are forgiven in the interest of “fairness.”
First, I hope most people know this but think most people don’t: the increase in interest rates will only be on NEW debt. Existing debt won’t be affected. So students who are not so busy studying the sociology of the vagina or some other such nonsense, and their parents, will know that new debt will be expensive and perhaps will, but probably won’t, make prudent decisions based on the new rate. There won’t be any surprises on the bills for existing debt.
Second, the Wall Street Journal reports today (“Student Loans Caught in Capitol Crossfire, 7/5/13, page A4), the average subsidized Stafford loan has a balance of about $3,400. The Journal calculates that the increase in the monthly payment on such a loan, assuming a 10 year repayment period, at $7 per month. (I calculated $5.67 per month, and I think I’m right. But since I didn’t go to an expensive (er, sorry, “prestigious”) university in reasonable proximity to either coast, what could I possibly know? Thankfully, the difference matters little.)
Six or seven bucks a month? Back in the dark ages, when I went to the university that MIT wishes it could be, that amounted to two pitchers of beer, or four at happy hour, per month. Now that we are in more enlightened times, that six or seven bucks amounts to a frappe lappe dappe mocha moustache latte drink these kids just have to have in order to get though a half hour of studying, or, at the most, two of these dyspeptic concoctions that are, for some weird reason, sold at establishments that bill themselves as purveyors of coffee, which can be made at home for pennies or bought at McDonald’s or White Castle for a buck. But who wants to make such excruciating sacrifices when the government will absolve you from having to endure such indignities?
If our legislators and president had any courage, common sense, honor, intelligence, or even the slightest lack of hypocrisy, they’d let these rates on student loans go to 6.8%, or even higher. So we can assume that, before long, the rates will go back down to 3.4%...further encouraging our kids to impale themselves on the stake of onerous debt. But not to worry; the dire financial straits into which our esteemed public servants have helped put “our students” will give these pathetic lifelong payrollers an excuse to do more “good”…by using your money to forgive these loans, thus sticking you with the bill for your neighbor’s education, as he waves at you while driving off in his new Audi.
