This guy is a financial consultant. He intelligently laid out some of the reasons why student loan "forgiveness" is a staggeringly bad policy idea 3 months ago.
Of course, when it comes to public policy, the Biden administration is allergic to anything intelligent.
Anyone remember how those sneaky liars in the Obama administration nationalized the entire student loan business 12 years ago and claimed this would help pay for Obamacare?
I knew then it was a big lie. I also knew it would be just a matter of time before dim-retard assholes began writing off and forgiving the mountain of student debt (now totaling $1.7 trillion, or TWICE the amount of US credit card debt currently outstanding) as another corrupt tool for buying votes.
Student Loan Relief Should Come in Bankruptcy Court
Blanket debt forgiveness would be a massive and unfair transfer of wealth with perverse consequences.
By Richard J. Shinder
May 10, 2022 6:09 pm ET
The Biden administration is reportedly considering expanding its efforts at targeted student debt forgiveness into a broader policy whereby “at least” $10,000 (some have advocated for up to $50,000) in student loans per borrower, possibly subject to an annual income cap, would be eligible for cancellation.
There is a rough consensus that
rising levels of student-loan debt are a problem, and proponents of debt relief note the
aggregate amount outstanding has increased by roughly two-thirds over the past 10 years to a total of some $1.7 trillion. Largely overlooked in the debate are changes made to the U.S. Bankruptcy Code in 2005, which materially increased the difficulty of discharging student loans in bankruptcy.
The “undue hardship” standards that apply to the cancelation of student loan indebtedness create a high hurdle for discharge, as borrowers must meet various tests adopted by the courts. The difficulty in satisfying these requirements, along with the costs associated with filing for bankruptcy, results in little student debt being relieved in this manner.
As a financial professional, I am well-acquainted with the legal regime governing the resolution of financial obligations that can’t be serviced. I believe that to the extent borrower and lender cannot achieve a mutually acceptable agreement, such disputes should be adjudicated through the federal bankruptcy courts created for that purpose.
Unfortunately, the 2005 changes to the Bankruptcy Code, combined with the 2010 federalization of the student-loan market, have placed what is fundamentally a commercial matter—the repayment of financial obligations—squarely within the ambit of public policy. Initially as guarantor and now as lender to student borrowers, the federal government has a direct seat at the table.
Having largely prohibited the resolution of student loans in bankruptcy subjects its ultimate disposition to political caprice. As a policy matter, the president and Congress would do well to take account of several considerations:
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The implications of loan forgiveness for current borrowers. Universal debt relief without borrower-specific qualifications would represent
a massive wealth transfer in an era of record federal deficits and scarce public resources. What is the rationale for blanket relief when the vast majority of this debt is being serviced as contractually required? Traditionally, when the government targets federal resources at individuals, it is to advance a policy imperative or create incentives for desired behavior.
No one can credibly assert that student-debt forgiveness encourages financial responsibility or other normative behavior the way, say, the mortgage-interest deduction promotes homeownership.
Another justification is that students were encouraged to borrow money under false pretenses. But targeted relief for loans incurred in connection with for-profit “diploma mills” already exists and is largely uncontroversial. In the case of proposed comprehensive student debt extinguishment, who perpetrated the alleged fraud—the federal government, the private lenders active in the previous federally guaranteed student-loan market, colleges and universities, some other villain or a combination of these?
Collectivizing the cost of the “student loan crisis” suggests a systemic market or policy failure, not discrete instances of individuals failing to meet their financial obligations.
If this really took place, the public deserves a clear accounting of it.
Even if you support such a policy and are comfortable making student-debt forgiveness a priority over other federal spending, it should be applied fairly. What of those who have already paid back their loans?
There is also the prospect of rewarding failure and subsidizing moral hazard. Each borrower prioritizes student-loan repayment against other spending and makes other trade-offs in the pursuit of an education and career. Blanket forgiveness takes no account of these decisions.
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The message to institutions of higher education. Colleges and universities have increased their costs to match the abundant federal resources made available to students, including student loans. A late 2021 report based on data from the College Board suggests that
the cost of a college education has risen at about 4.6 times the rate of inflation over the past 50 years.
As state-level support for higher education has receded, the federal government’s role has grown. Institutions have become more reliant on tuition payments from students, and federal aid in the form of grants and loans has driven student demand, resulting in considerable cost inflation.
Indiscriminate loan forgiveness, by making higher education “free,” exacerbates these factors and removes any incentive for institutions to manage their costs.
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The impact on future students. Will all future federal support come in the form of grants and not loans? Or will there be an expectation that new loans will be canceled in some future “jubilee” year? Leaving aside the budgetary and inflationary impacts of a policy of serial loan forgiveness or replacement of loans with grants,
any generationally consistent or “fair” treatment of future students would suggest that higher education will become effectively free.
The notion of free college for all isn’t a new one in progressive circles, and student-loan forgiveness is perhaps a step along this path. But is it one we want to take when the value of a college degree increasingly is questioned?
Comprehensive student debt forgiveness is bad public policy. A legal regime—the federal bankruptcy system—already exists for those who truly need debt relief, with rules and consequences that are well-established. Rather than advance yet another inflationary, budget-busting policy initiative, the Biden administration would be better off proposing that the student-loan provisions of the Bankruptcy Code be amended, and reform student lending to circumscribe the outsize role of the federal government in financing higher education.
Mr. Shinder is founder and managing partner of Theatine Partners, a financial consultancy.
https://www.wsj.com/articles/student...es-11652214825
