Government Backed Student Loans – A Deal With The Devil
How’s this for a business proposition? I owe you $17,000. If you forgive my debt, I won’t use Uber or Lyft for my transportation needs. Or, how about I agree to give up texting and mobile messaging for a year in exchange for debt forgiveness? Doubt I’d get any takers.
I received an email about a recent survey, “Survey Reveals What Millennials Would Rather Deal With Than Paying Student Loans”. The sender suggested, “The insights would be a great fit with your audience.”
They questioned 500 millennials, age 18-34. At first, I thought it was a joke:
“We’ve … compiled some key findings:
- A staggering 49.8% of all respondents said they would give up their right to vote in the next two presidential elections in order to have their debt forgiven
- Ride-sharing services like Uber or Lyft don’t seem to matter to millennials quite as much… According to the results, 43.6% were willing to give up these services forever in exchange for debt forgiveness
- Interestingly, 42.4% of respondents would also give up traveling outside of the country for 5 years, while only 27.0% said they would be willing to move in with their parents for 5 years
- Millennials seem to value texting more than the other options – only 13.2% reported being willing to give up texting and any mobile messaging equivalent for the next year in exchange for having their debt forgiven
- Only 8.2% of respondents chose to select none of the above and said they would rather keep paying off their student debt”
I asked the sender, “… My generation was faced with a choice. The rich kids went to college, the poor kids joined the military (gonna get drafted anyway) and then came out and used the GI bill to help fund their college. Were there any questions about trading military time for debt reduction? I received a polite response saying that was not part of the poll. Did it even dawn on them to ask?
The survey sponsor appears to be in the loan business, promoting refinancing student loans.
While I passed on the idea, I soon changed my mind. The survey appeared on Facebook, generating some brutal feedback. Many called respondent’s snowflakes and much worse. They felt the respondents had no clue about sacrifice and the real world.
Might part of the problem be the survey itself? If respondents were only given those silly choices, they would check the ones they felt most appropriate. Perhaps student loan debt is not that much of a problem. They are not willing to sacrifice much to make it go away.
Here’s one example. Survey says…49.8% would give up their right to vote in the next two elections to have their debt forgiven. The article also mentions less than half of the millennials voted in 2016.
What some consider sacrifices doesn’t cut it with many Americans.
OK Millennials, listen up!
When you took out a student loan, you entered into a contract, borrowing money to complete your education. You felt your education would lead to a better job and you could repay the debt from your earnings.
The government was a co-signer, guaranteeing repayment of the loan. By doing so, the banks offered YOU very low interest rates.
Today, paying off your debt is an inconvenient challenge. In my article, “Student Loans – A Multigenerational Curse” I outlined you are not alone:
“Since the 2008 recession began student loans have skyrocketed to over $1.4 trillion.
The Wall Street Journal reports, “Revised Education Department numbers shows that … at least half of students defaulted or failed to pay down debt within 7 years.” Many young people (not all graduated) owe several hundred billion dollars they have been unable or unwilling to repay.”
The survey says, “…The Federal Reserve puts the median student loan debt balance at $17,000, with monthly payments of $222.” More than half are failing to honor their contractual obligations.
|Government guaranteed student loans are a deal with the devil.|
With some very limited exceptions, you cannot discharge student loans in bankruptcy court. As a taxpayer, I LOVE that provision. In 2012 Marketwatch reported:
“According to government data … the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees’ Social Security checks on those grounds.”
What is debt forgiveness?
Unlike bankruptcy, debt forgiveness is when a lender voluntarily agrees to allow the debtor to forego payment of the remainder of the debt. It’s a gift, plain and simple. If student debt is forgiven or defaulted, the government pays off the bank.
Unfortunately some politicos, pandering for votes, are promoting the concept, willingly giving away billions of our tax dollars.
Let’s cut to the core. Asking for debt forgiveness is asking taxpayers, your friends and neighbors, to pay for decisions YOU made for YOUR benefit.
The Student Loan Debt Clock tells us the current total is over $1.5 trillion. Reference.com says there are approximately 138 million US taxpayers. If all student loan debt were forgiven, the cost would be approximately $10,870 per taxpayer.
Its no wonder the feedback on Facebook was so negative. Taxpayers work hard and don’t want to pay off someone else’s debts.
What to do?
Student loans should be a last resort when it comes to financing an education. Students should be educated about debt and the consequences before they take out the loan.
As I outlined in my previous article, college costs should be minimized. Four-year graduation should be expected, 36% of incoming freshmen get it done! Students are making adult decisions, many times at an early age, and parents need to guide them so they don’t end up with a huge debt burden.
I checked out the Army ROTC website:
“Scholarships and stipends in Army ROTC help you focus on what’s important. Namely, getting that college degree – not how you’ll pay for it.”
A college degree and a few years as a military officer have worked well for many young people. If you are not willing to do so, that’s fine, just be responsible and honor your contractual obligations.
27% of the respondents said they would be willing to move in with their parents for student loan debt forgiveness. That’s a bass-akward solution for sure!
A recent US Census Report tells us:
“More young people today live in their parents’ home than in any other arrangement: 1 in 3 young people, or about 24 million 18-to 34-year-olds, lived in their parents’ home in 2015.
… At 24.2 million people, the population of 18- to 34-year-olds living at home is a large and diverse group. …About 81 percent are either working or going to school.”
If you are going to live at home, do it while you are going to a local junior college, saving a tremendous amount in educational cost. The goal is to transition into adulthood easily with no debt burden.
While many parents want to help their children, having them move back home after college for extended periods of time is an economic and emotional burden. Parents must move ahead and get their retirement in order.
Based on the survey and available choices, it’s easy to conclude that student loan debt is more an inconvenience (average $222/month???) than a real burden. If debt consolidation will help reduce monthly payments, investigate the option. However $222/month is not the case for many millennials.
My granddaughter and her husband married in their senior year in college. Their combined student loan debt is significant. They both work, husband got a second job and they are responsibly working to pay off their debt and raise a family. Yes it is difficult.
There are ways to legally obtain some debt forgiveness. Military.com highlights many Student Loan Forgiveness and Discharge Programs. It involves more sacrifice than promising not to text. Here are some options:
“Public Service Loan Forgiveness Program
Under this program, members of the military who have been employed by the military or a qualifying public service job for the last 10 years may have their federal student loans FULLY discharged.
Public service qualifying occupations include:
** Emergency management
** Military service
** Public safety
** Law enforcement
** Public interest law services
** Early childhood education (including licensed or regulated childcare, Head Start, and state-funded pre-kindergarten)
** Public service for individuals with disabilities and the elderly
** Public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations)
** Public education
** Public library services
** School library or other school-based services
You need to be employed in these positions at least full-time, which is considered to be at least 30 hours a week or what the employer considers to be full-time.”
If you have student loan debt, sacrifice and do what it takes to get the loans paid off as quickly as you can. If you are in college, or headed in that direction, get a good education in four years with minimal student loan debt. Work your tail off so you can easily transition to your next step in life.
Decisions and behavior have consequences. Welcome to the adult world!
On The Lighter Side
I need to catch up on some Public Service Announcements. Last week I announced our new Facebook Business Page. If you are not a Facebook user, don’t worry; our newsletter will still arrive in your inbox every Thursday as always.
I want to keep our weekly publication FREE and am trying to find ways to generate revenue to offset our costs. I neglected to thank everyone who shops on Amazon through our LINK. We get a small stipend and your prices remain the same. It’s very much appreciated and the revenue is slowly growing each month.
I recently interviewed Tim Plaehn about determining which dividend stocks are on his radar. Last week he published an article, “3 Warning Signs That Your Dividend Is About To Be Cut.” He outlines some more candidates that investors may want to trim from their portfolio.
If you are looking for safe dividend income, our friends at The Dividend Hunter have a unique Monthly Dividend Paycheck Calendar. Their model portfolio is approximately $500,000 and averaging over $4,000/month. Tim has offered our readers a 50% discount on their first-year subscription price. CLICK HERE to take advantage of their generous offer.
We appreciate our readers going through this link as we receive a small commission, which also helps offset some of our costs.
I wanted to include a cool photo this week. If you are anywhere near Cheyenne, WY go see BIG BOY, the largest steam engine ever built. They only built 25 of them and one resides in Cheyenne.
I had to stand on the top of a hill to get it all in the frame. I asked Jo to stand next to it to give some perspective on just how big it really is.
This week’s humor is called “Petrol Pump Wisdom”. Apparently it started in Johannesburg South Africa:
Until next time…
“The government was a co-signer, guaranteeing repayment of the loan. By doing so, the banks offered YOU very low interest rates.”
9%, offered to my daughter by a major name that is also a credit card, is not low when they “borrow” from the FED for next to zero interest rates. “Usury light” let’s call it.
OK Miller, listen up!
NO ONE takes money out of his/her pocket when you borrow from a bank for a mortgage, student loan, car loan, etc — that money is created ‘out of thin air’ and becomes a new asset for the bank. However, you are not allowed to create your payments — you must repay that loan with the fruits of your labor and ingenuity.
The government can forgive the debt at any time with no cost to anyone by simply reversing the thin air creation process. Of course, the bankers don’t like that, because that wipes out their repayment stream, which is the only reason for their existence.
Govt guaranteed loans serve two purposes:
1 Buy votes by subsidizing the recipient industry, eg, real estate, academia, defense contractor, …
2 Buy votes with the new money ‘given’ to the borrower.
Do you expect governments, at any level, to repay the trillions in debt and off-budget obligations they are running up yearly? Did the politicians and bankers pay any penalty for the last mortgage derivative crash, caused by ignorant/reckless/corrupt politicians and bankers? [Think bailouts, the most blatant and immoral subsidy, done with EVEN MORE newly created money.] In fact, there is now a whole derivative pyramid built on poorly vetted auto and student loans!
This is not an apology for ignorant or reckless borrowers [btw, not all qualify for such characterization]. But your misplaced moral indignation distracts attention from and condones the REAL immorality — it actually argues FOR the totally corrupt political/financial system we all are subject to, ie, the system that loans money with no cost, and therefore no vetting, and extracts payment in real labor or asset forfeiture.
Thank you for the response. I disagree with one issue. When the government decides to forgive a student loan there is a cost. They have mortgaged the future buying votes by creating that money you outlined very well. There is still interest on that debt. That robs tax dollars that can be used much more productively by individual citizens and society.
Until the government and banks are held accountable for their mistakes, (which is unlikely to happen) the public will suffer. My friend Chuck Butler refers to them as “debt slaves”. Many become debt slaves because of their behavior, and many do so because they allow the government to spend money recklessly. How can we possibly explain to our children and grandchildren that they must pay for the sins of the last 50+ years?
Feedback appreciate, it makes for good dialog.
Something just doesn’t click with this article. 138 million taxpayers? Individual people who actually pay taxes to the federal government? Population of the USA….. 320 million….many, I would imagine are kids, old folks, students! (Ha!) I don’t think so. (Please excuse the sentence fragments. Thanks.) My daughter didn’t want to finish college. Her parents kept the pressure on. We followed the formula. 1/3 parent, 1/3 student working, and 1/3 borrow. She graduated Magna Cum Laude and continues to struggle with debt even after living with parent(s) and living with out the benefit of money in the bank or health insurance.
Lastly, $222 a month is truly an inconvenience and not a burden……if you have a job with benefits because you have chosen not to make a deal with the devil.
Summary: The costs are too high, and the jobs aren’t there. We’ve got a generation of wonderful, intelligent, young people who didn’t get an invitation to the party. Whatarewegonnadoaboutit?
I try to provide the source for much of my statistics when I can. Please go back to the article and you will see Reference.com is highlighted. If you click on it, you will end up at this link:
https://www.reference.com/government-politics/many-u-s-taxpayers-d77a9265390f4bdb# Here is what it says:
“According to the most recent tax data, 138.3 million taxpayers reported earning approximately $9.03 trillion in adjusted gross income and paying $1.23 trillion in federal income tax. There are approximately 245.3 million adults in the Unites States.”
My point is a simple one. It is a heck of a lot of money and I don’t know anyone who feels it is right that they should pay off the debts of others.
Thanks for the feedback,
How do you explain the fact that the banks pretty much get almost free money and then lend (not really, it’s guaranteed by the government) it out at upwards of 9%?
I have written about the banks several times. It is a travesty. The entire TARP bill and bank bailouts was the politicos deciding to bail out the corrupt banks at the expense of the citizens. It has affected all generations of Americans.
If a bank is too big to fail it’s too big. It should be broken up just like they did in the trust busting days of yesteryear. Instead they pass BS legislation that is leading to another round of the same thing.
I agree that the deals were made with the devil, but I’m confused about which devil are you talking about the Government, the Bank (or even the universities which gave them their worthless degrees at inflated prices) ????
I also disagree that any debt forgiveness would come from taxpayers, as the government would just print the fiat currency and discharge the debt.
Please see my response to Phil as he addressed some of the issue of debt forgiveness. Whether the government prints the money or not, eventually the debt will become an issue for the younger generation and it’s a crime.
The devil is the bank, the government (co-signer) and university are enablers.
In a free market, competition normally brings prices down; however that is not the case with the university system. Educational cost is growing well ahead of inflation. I agree with you, there is little, if any, accountability as far as the quality of the product is concerned. Most degrees are worthless. The sad thing is many students are entering into agreements with little understanding of the consequences.
Thank you for taking the time to write.
I like your article and agree, that this student loan process is a crime. I am involved in it and should have not pursued it to a master’s; however, there is a unspoken “catch” to this. When you file your taxes for the year, the government gives a nice little incentive with the tax credits for students. Not only do they throw out the bait when your applying for college with “guaranteed loans, they keep feeding the fish as long as you’re attending college through the tax credits. The whole system is messed up and colleges are bringing in the money by the dump truck loads. I started college in my late 40’s and will most likely carry this debt to my grave. But like most individuals, I made a choice to attend college because of my career change. Thanks for the info and I hope it helps others out before they take the “guaranteed plunge!”