Why Forgiving Direct Student Loans Is Inadequate

While there seems to be a corporate outrage that the United States may forgive part of direct student loans, the very fact is that the solution is only a relief and not getting to the root of the problem. It will continue to plague us unless we root out the problem.

What the situation was a half century ago

I can personally vouch for this situation. Thanks to Lyndon Johnson’s Great Society, the idea was to boost more people into the middle class, which at that time was about half the population. The idea was to invest in its citizens and get back more taxes as more payers would be earning more money and able to contribute more taxes. Ironically, as then it was merely a war on poverty, now we’re in a global economy and need a larger middle class to compete. Then we imported only tea, coffee, and bananas, only because they don’t grow here. So, many were able to go through college with no debts with basic educational opportunity grants, now Pell, paying for the tuition.

At the time, I was under survival benefits from the Social Security system, which enabled me to go virtually free with the benefits running until I was 22. I experimented for eleven years at Penn State, always trying to get a major which would make me employable.

Now, what is the difference between a Pell grant and forgiving student loans? Actually, forgiving student loans often means that the student had graduated, not a given for a Pell grant. There is a dropoff rate, which would render those grants wasted. I know of some who never graduated during my undergraduate days. I won’t even mention other useless grants like corporate welfare, which has grown considerably over the past half century.

How it deteriorated

Even during my time at Penn State, the state kept cutting its support of the state colleges. There was a hostility toward higher education, even in the late 1970’s. Consequently, tuition soared. When I started at Penn State Wilkes-Barré, tuition was around a thousand a year. Since then, prices have risen six times, but today it costs over eighteen thousand a year at Penn State. The states don’t seem to mind paying for “prison industries” instead of investment in their residents.

After correcting for abuse of bankruptcy, a reform allowed bankruptcy of student loans only if the former student could show hardship, and even then only Chapter 13 (which requires an income). The plaintiff had to wait five years without any sent payments to file for Chapter 7 (which then discharges the loans and takes whatever assets to pay for it). Instead, in violation of equal protection, Congress made it almost impossible to file for bankruptcy. Repealing this last law and reverting to the earlier compromise would ease the situation.

Over the past half century, corporations have shipped jobs overseas, and the folly of it has reduced the middle class and the ability to pay back those same loans. The recent shortage due to the supply chain only further exposed the folly of making goods overseas and making us vulnerable to shortages. The same goes for importing labor over American labor. I’ve seen many foreigners making loads of money who come to me to do their taxes. I once thought that Americans were too lazy to become educated and skilled for those jobs paying over one hundred thousand a year, but now I think importing foreigners for cheaper labor as part of the mix.

Conclusion

It’s obvious that forgiving some student loans doesn’t solve the problem. This country cannot compete in a global economy with a shrinking middle class and worsening inequality. States don’t invest in their higher education, more must take out student loans, corporations make the jobs as “not what you know, rather who knows you”, and finally not allowing the poorest of the students to declare bankruptcy. Then the predators charge usury because the debtors cannot shop around for better rates nor cancel the debt. Another aspect is employers’ refusing to hire those “overqualified” for their jobs, even when there’s a labor shortage.

My parents instilled in me that working harder brings rewards to get ahead in life. Should employers fear educated workers, then it discourages these very workers to find suitable employment or to be stuck in severe underemployment, and then slide into what I call the Alopexian Paradox. I still believe that everyone has talents and should be encouraged to develop them for our benefit. Unfortunately, the attitude today seems to be: I have mine, I deserve it because…., and you don’t.