Cancelling student debt: Another bad idea from the “free stuff” crowd

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness,” Charles Dickens wrote in A Tale of Two Cities. Thousands of Oregon college graduates in the class of 2019 probably felt the same way.

After years of hard work, they had finally earned their degrees. But 54% graduated with student loan debt. The average debt – $27,542. If it was any consolation, they were not alone. About 45 million Americans (13.7% of the U.S. population) are dealing with federal and/or student loan debt that totals about $1.7 billion.

But fear not, debtors, liberal politicians have been falling all over themselves with plans to help bail you out.

In May 2020, Reps. Peter DeFazio (D-OR) and Earl Blumenauer (D-OR) called upon House Speaker Pelosi and Minority Leader Kevin McCarthy to prioritize long- term relief in any future COVID-19 response in the form of at least $30,000 in one-time student loan debt cancellation for all federal student loan borrowers 

In September 2020, U.S. Senators Ron Wyden (D-OR) and Jeff Merkley (D-OR) introduced a resolution  outlining a plan for the next president to use existing authority under the Higher Education Act to cancel up to $50,000 in individual federal student loan debt for Federal student loan borrowers.

Before the Nov. 3, 2020 election, Joe Biden and Kamala Harris called for student loan forgiveness of up to $10,000, and if a student found a job that paid less than $125,000 after graduation, all their student loan debt would be forgiven.

And then there are all the progressive think tanks, unions and special interest groups lined up behind the debt cancellation idea.

In November, a coalition of 236 mostly progressive groups, including the American Federation of Teachers and the National Education Association, sent a letter to President-elect Biden calling on him to cancel student debt using his executive powers on the first day he takes office. Casting their lobbying as a racial justice issue, the letter said, “The ​disproportionate impact​ of student debt on borrowers of color exacerbates existing systemic inequities and widens the racial wealth gap.” 

The progressive Roosevelt Institute, adopting the “No crisis should go to waste” philosophy,  is calling for the cancellation of student, housing, and medical debt as part of a massive covid-recovery plan. Framing student debt as “a product of and a contributor to our country’s shameful racial wealth gap,” the Institute wants student loan forgiveness to go hand in hand with a commitment to funding tuition-free public colleges and universities.

That’s what the most ardent advocates of student loan cancellation are really pushing for – free college, with somebody else, usually simply called “rich people,” covering the cost.

Sen. Elizabeth Warren (D-MA) argued on Nov. 17, 2020 that forgiving student loans would be the “single biggest stimulus we could add to the economy” in these difficult times. And the New York Times said, “Both sides of the debate acknowledge that tackling the $1.7 trillion in student debt nationwide, which is spread among more than 43 million borrowers, would go far toward jump-starting the economy.” But a lot of economists don’t agree. 

The Committee for a Responsible Federal Budget says the stimulus benefits would be minimal and aimed at those who least need the help. Total student loan debt may be atrociously high, but borrowers often pay back their loans over 10, 15, or even 30 years, so debt cancellation would increase their available cash for injection back into the economy by only a fraction of the total loan forgiveness. “Stimulus dollars that are spent rather than saved provide a stronger boost to near-term economic output,” the Committee has said. 

Continuing current student debt relief policies, including deferring payments and interest, are preferable, as well as income-driven repayment programs under which monthly payments are determined based on a borrower’s income, not the amount of debt. After 20 to 25 years, the remaining debt is forgiven.  

Recently released data from the U.S. Department of Education shows that the national default rate (A federal student loan is considered to be in default if payment is late by 270 days) for FY2017 was 9.70%.  Massachusetts had the lowest loan default rate – 5.83%; Mississippi had the highest –  15.19%.

Oregon had 6,477 borrowers, 10.71% of the total, in default. The Oregon schools with the highest default rate, 7.80%, were Eastern Oregon University and the Pacific Northwest College of Art. The Brookings Institute is predicting a “looming student loan default crisis” that could see 40% of student loan borrowers nationally in default by 2023.

Yes, some of this debt has accrued because of lax government lending standards. As the Wall Street Journal reported on Nov. 23, 2020. “The government lends more than $100 billion each year to students to cover tuition at more than 6,000 colleges and universities. It ignores factors such as credit scores and field of study, and it doesn’t analyze whether students will earn enough after graduating to cover their debt.”

But subsidizing people who run up large college loan debts penalizes those who took their responsibility seriously and acted responsibly, James B. Meigs wrote in City Journal, a publication of the Manhattan Institute for Policy Research, a free-market think tank. That leaves a lot of people feeling like chumps, he says. “…the chumps of modern America feel that the life choices they’re most proud of—working hard, taking care of their families, being good citizens—aren’t just undervalued, but scorned,” Meigs wrote. As Jeff Jacoby, a Boston Globe columnist put it, “…a massive bailout of borrowers would be unfair to countless families that saved and worked to pay for college, to say nothing of those who responsibly repaid their loans.”

Then there’s the “moral hazard” of cancelling student debt. It might encourage students to continue running up risky big loan balances on the assumption that their debts will be forgiven at some point. That would cause a distortion of borrowing decisions, making them insensitive to the ability to repay. 

Of course, what if higher education institutions see that it makes sense to continually raise prices because the government will absorb any losses down the road. But that’s another problem.

Would #NeverTrump Stalwarts Now Support Sweet Cakes?

nevertrump

Liberals like those who condemned the owners of Sweet Cakes by Melissa are now giving a shrug to NeverTrumpers who are discriminating against Trump supporters by refusing to associate with them or patronize their businesses.

The liberals’ unlikely hero in all this today is Phoebe Pearl, a member of the famous dance troupe the Rockettes.

“Finding out that it has been decided for us that Rockettes will be performing at the Presidential inauguration makes me feel embarrassed and disappointed,” Pearl said in an Instagram post today. “…please know that after we found out this news, we have been performing with tears in our eyes and heavy hearts #notmypresident”.

Online comment sections lit up with endorsements of Pearl’s post.

“Proud that you stand up for your views/ beliefs especially to all those trumpies who are always on attack mode ready to become the vicious evil fake definitely not Christians judgmental psychos,” was posted by truthisabitch.

 Boston Globe columnist Jeff Jacoby praised the Rockettes in an article titled, Freedom of Association Isn’t Just for the Rockettes.

“The right to discriminate — to choose with whom we will and won’t associate — is vital to human liberty,” he wrote today. “No one should be forced to play a role in a celebration they want nothing to do with, or to hire themselves out to clients they would prefer not to serve. A liberal baker who declines to create a lavish cake decorated with the words “Congratulations, President Trump” is entitled to as much deference as a black baker who declines to decorate a cake with the Confederate flag…”

Pearl’s post follows actions by other NeverTrumpers asserting their intentions to discriminate against Trump supporters.

HeatStreet, a conservative leaning news website, reported in early December that some Wash., DC homeowners were removing their Airbnb listings so they wouldn’t be put in the position of renting to “…the residents of flyover country.”

“I have a visceral reaction to the thought of having a Trump supporter in my house,” said one Airbnb host. “No amount of money could make me change my mind. It’s about moral principles.”

Television chef Anthony Bourdain said he wouldn’t patronize a restaurant at the newly opened Trump International Hotel in Washington, D.C. “I will never eat in his restaurant,” Bourdain said. “I have utter contempt for him, utter and complete contempt”.

Designer Sophie Theallet gained some notoriety when she flamboyantly announced on Twitter that she would not dress or associate with Donald Trump’s wife Melania when she becomes first lady. She also called on other designers to follow her lead, saying “Integrity is our only true currency.”

Is all this a liberal double standard?

In 2013, Aaron and Melissa Klein, the owners of Sweet Cakes bakery in Gresham, OR refused to bake a cake for a same-sex wedding of a lesbian couple because of the Klein’s Christian beliefs against same-sex marriage.

In early 2015, then State Labor Commissioner Brad Avakian made a preliminary finding that the Kleins discriminated against the lesbian couple on the basis of their sexual orientation.

In July 2015, Avakian ordered the Kleins to pay $135,000 in damages to the couple for emotional and mental suffering they experienced because the Kleins had refused to sell them a wedding cake.

Liberals enthusiastically endorsed Avakian’s decision.

“The Kleins are religious zealots, and not very bright,” wrote one supporter of the decision. “They should stick to baking cakes, and leaving their religion in the back room and/or at home and at church. When one opens their doors to a commercial enterprise, they don’t get to tell people to —- off based on purposeful discrimination.”

“A sign saying “no lesbians are allowed to purchase wedding cakes in my store,” is every bit as discriminatory as a person verbally saying “no lesbians are allowed to purchase wedding cakes in my store” and the business in question should be held accountable,” Mat dos Santos, legal director of the American Civil Liberties Union of Oregon, wrote in an opinion column in The Oregonian.

The federal government, while asserting that you can’t discriminate on the basis of race, color, religion, sex, and national origin, doesn’t prohibit discrimination based on a person’s political bent. So the NeverTrumpers aren’t breaking the law when they support the ability of businesses to ban politically offensive customers, but how is that position morally different from the position the Kleins took?

Do the liberal NeverTrumpers denying services to Trump supporters now want to reverse Avakian’s decision or should they be held to the same standards as the Kleins?