11 February 2014

Forgive Us Our Debts…

Billions of dollars in student loans could be forgiven over the next decade, under a proposal in President Barack Obama's budget to expand the program's income-based repayment system.
Student advocates are enthusiastic over the prospect, but critics complain the expansion could extend a program that already encourages young people to borrow too much money and leave taxpayers with their college bills, reports the Wall Street Journal. They also say forgiving debt gives a taxpayer gift to people who need it the least, such as attorneys, doctors, and other white-collar people with graduate degrees.
The program already allows most borrowers with loans issued since October 2007 to make payments equal to 10 percent of their income after taxes and basic living expenses. After 20 years of on-time payments, or 10 years for people working in public or nonprofit jobs, the rest of the balance is forgiven.

Of course, this isn’t really loan forgiveness as much as it is yet another bailout to major banks that back federal loans (either by supplying the money directly or buying the loans packaged as UDOs or bonds).  While I think that this policy is preferable to the current state of affairs, I think it would be far better to either stop federal subsidies of loans and allow bankruptcy or simply declare a jubilee and force banks/lenders to write off their loans completely.

While jubilee likely sounds like a good idea to a lot of people, it’s important to remember that bank deposits are considered loans made to the bank and not assets held in security. (That’s the reason banks pay interest on savings; that’s the usury for the loan.  If you really want to make sure your money is held as an asset, put it in a safety deposit box, which you’ll note costs money.  Funnily enough, it used to be that one would pay banks to hold deposits instead of the other way around, prior to the modern system of fractional reserve baking, of course.)  As such, declaring jubilee means that everyone’s bank deposits (“savings”) will be wiped out completely.  But at least the slate is clean again.

At any rate, the student loan scam is simply a travesty, and an expansion of the federal forgiveness plan is preferable in lieu of the continued inability to discharge the loans in bankruptcy.  Deceiving young people into taking on debt they can’t discharge by normal means is nothing more than slavery by fraud.