Get the Feds and States Out of the Student Loan Business
My previous four installments in this series have proposed, inter alia, that (i) laws be enacted like those of FIRREA to hold university trustees and directors personally and individually liable in tort, for compensatory and punitive damages, for misfeasance and nonfeasance; (ii) there be a two-year moratorium banning all foreign money and foreign students from entering American universities; and (iii) universities be barred from offering academic tenure to professors. No one proposal, if actualized, will restore our colleges and universities to normalcy and end the Hate America brainwashing to which our children and grandchildren presently are being subjected. But if implemented as a complete package, they can move the needle of the compass back to giving our students an honest education. Herewith my next proposal in this package: get the feds and states out of the student loan business.
No matter how hard a democracy’s government tries, it cannot competently disburse or oversee money. There are too many political incentives to spend recklessly. The politicians may not be addicted to opium, but they all are addicted to O.P.M. — Other People’s Money. So they build bridges to nowhere in Alaska. The California high-speed rail line — from Los Angeles to San Francisco — was projected in 2008 to be finished by 2020 at the large sum of $33 billion; yet the noodle-headed voters approved the bond issue. By 2022, 14 years later, they still were working on only the first phase, the “starter line,” which would not connect with either Los Angeles or San Francisco but now was projected for completion by 2030 and estimated at a revised $113 billion. Government cannot handle money wisely. Each politician adds local projects in “Christmas Tree” legislative packages so that, at reelection time, he or she can campaign on having “brought home the bacon.”
The federal government is not a bank. If it were, it would become insanely insolvent, owing creditors something like $34 trillion. Come to think of it, that’s where we are now. That alone is reason for the feds not to be lending money to university students. When we lend them money, where does that money come from? When we pierce through the gobbledygook and cut to the chase, we essentially have to borrow it from countries like China so that we then can “lend” it to university students. We presently owe China $775 billion. We have lost $197 billion on student loans (unrelated to Biden’s loan forgiveness) in the past 25 years.
When we do lend, we lend an almost unlimited amount of money to fund tuition, dorm rent, food costs, textbooks, and all else. On one hand, students can borrow to an annual maximum of between $5,500 and $12,500 for college (undergraduate studies) and up to $20,500 each year for graduate school. However, if willing, Mom and Dad can borrow every last penny still owing through a vehicle called a Parent PLUS Loan. So students at an expensive college — and they all are — end up owing tens of thousands after four years of “schooling.” In other words, if the college and dorm cost $60,000 per year, and the junior or senior student gets $15,000 in scholarships, he or she may borrow up to $7,500 to cover the remaining $45,000. And the parents can borrow the remaining $37,500 without even proving an ability to repay it later. By the time the kid graduates, he or she owes close to $50,000, and the parents owe their own separate $100,000-plus.
Make sense?
Now let’s think it through a bit more carefully. Imagine America decides that each and every American must own a new car. Not “should” own, but “must.” Well, many Americans cannot afford a new car. But, again, let’s say it is not your choice; you are compelled to buy a new car. Let us reasonably assume a new car can cost as low as $20,000 (Mitsubishi Mirage, Kia Forte, Hyundai Elantra, etc.)
Let’s say huge numbers of voters revolt and say they cannot afford a new car right now with food up through the Bidenomics roof, skyrocketing gasoline and home energy prices, and a basic car wash as high as $30. But they have no choice — by fiat. So, to calm the voters, the feds announce they will lend unlimited funds as needed for every person to buy that mandated new car, and repayments will not start for four years. In that scenario, what will happen?
Many people unwisely will decide: “Hey, if the money is not coming out of my pocket now, why should I buy a Nissan Versa or a Chevy Trax if I can get a Tesla? I’ll buy me a $65,000 car now and figure out loan repayments later. Maybe I’ll have a better-paying job in four years. Maybe my house value will go up. Maybe I will inherit money. Maybe I will be dead. Buy now, pay later.”
Meanwhile, as it becomes clear that the feds really are lending full amounts for every single American to buy a new car — even if they do not and never will have the money to repay — the car companies will start inflating their prices. Why not charge $60,000 for that $20,000 Forte, Elantra — or, fittingly, the Mirage — if price is no obstacle because the government is writing each customer’s check? And if the Mirage now inflates to $60,000, then the Tesla has to rise above $100,000. Why not charge through the roof if the feds will borrow from China to lend it to every American without a ceiling on cost?
That is why colleges suddenly cost $30,00–$45,000 a year and more. And Ivy League–type private colleges cost $65,000 (with Columbia at nearly $70,000). Everyone can afford it — even though they cannot — because the feds will lend the full cost without regard to whether the university tuition and dorm rent are fairly priced. In a variation of Field of Dreams: (i) If you charge it, they will pay; (ii) people will come; and when the bills come due, (iii) ease his pain. Universities become awash in cash, charging highest-ever prices for a product not remotely related to fair market value.
What do they do with all that cash?
Loaded with bucks, universities pay even mediocre tenured professors six-figure salaries. Thus, much of America was scandalized when it was revealed that Harvard’s best-known plagiarist and incompetent fired university president was returning to her previous position that pays … $900,000 a year. Other university millions are spent on DEI — “Diversity, Equity, and Inclusion” — departments, racist offices fabricated out of whole cloth. For example — deep breath — the University of Michigan reported spending $18 million a year on its DEI department and 142-person staff. DEI? More like DIE. The DEI vice provost is paid $380,000 plus all benefits imaginable. Talk about privilege. But that’s not all! A closer investigation later found that UMich actually has more than 500 staff working full- or part-time on DEI with an aggregate salary-and-benefits annual cost of $30.68 million.
Well, at least the federal government ultimately gets repaid on the loans and makes a pretty penny along the way, just as successful private banks do by charging interest. Right?
Wrong.
There is a reason Joe Biden has been forgiving student loans like crazy. First, a great many student borrowers — an entire generation, from the river to the sea, and from the ocean to the ocean — have come to realize that they cannot now and never will be able to pay off their loans. They cannot both (i) make monthly payments and also (ii) afford to live. So they cannot afford to get married. Cannot afford to have kids. Cannot afford to buy homes. They may end up in those “encampments” longer than they planned, financially wiped out for life.
What to do? Biden’s approach: “forgive” the debts and thereby try to buy an election by swaying the under-30 vote.
The federal government must get out of the student-loan business. But if that happens, who will lend prospective students the money needed for college?
First, not all students should be in college. If they are going to waste four years taking pointless courses like “Queer and Feminist BIPOC Traditions from Decolonial Abolitionist Perspectives,” while emerging unable to write a coherent and correctly spelled paragraph, they are better off learning a marketable good-paying trade or skill that offers more than courses in “Puppet Art,” “How to Watch Television,” and “The Sociology of Miley Cyrus.” But even for those who stick with college, let them borrow straight from the colleges and universities without the federal middleman. Lenders can make fortunes from charging interest; look at banks. Look at home loan mortgages. Let the universities likewise lend at interest and get rich without the feds helping out.
Where will the universities get the money to lend? They have billions in endowments. In all, American universities are sitting on $839 billion in endowments. Consider the below list of private universities and their endowments:
- Harvard University, $49.495 billion
- Yale University, $40.747 billion
- Stanford University, $36.495 billion
- Princeton University, $34.059 billion
- Massachusetts Institute of Technology, $23.453 billion
- University of Pennsylvania, $20.963 billion
- University of Notre Dame, $16.617 billion
- Northwestern University, $13.700 billion
- Columbia University, $13.643 billion
- Duke University, $13.238 billion
- Cornell University, $10.036 billion
- University of Chicago, $9.870 billion
- Vanderbilt University, $9.684 billion
- Dartmouth College, $7.930 billion
- University of Southern California, $7.463 billion
- Brown University, $6.201 billion
- New York University, $5.877 billion
- Amherst College, $3.342 billion
- Georgetown University, $3.299 billion
- Boston University, $3.129 billion
- Wellesley College, $2.889 billion
- George Washington University, $2.522 billion
- Smith College, $2.470 billion
- Bowdoin College, $2.424 billion
- Case Western Reserve University, $2.261 billion
- Tulane University, $2.108 billion
- Vassar College, $1.224 billion
- Villanova University, $1.220 billion
- Brandeis University, $1.216 billion
- Oberlin College, $1.199 billion
Those are just some of the private university endowments. Public universities are similar: For example, University of California system-wide has an endowment of $17.689 billion. UC Berkeley has $2.915 billion.
In terms of amount of endowment per student, the universities have plenty of cash available to lend. Princeton has $3.8 million per student. Yale has $2.8 million per student. Stanford: $2.1 million. Harvard: $2.03 million. MIT: $2.00 million. And so on.
Thus, we see that universities are swimming in cash while the federal government, with a $34 trillion debt load, borrows from China to lend to students and parents to pay ever-rising exorbitant tuition and dorm rent, with that money ultimately funding DEI departments and courses taught even by America-phobes whom the universities import to ruin America’s children, haters like Columbia University’s imported professor Mohamed Abdou, whom the university proudly promotes as an “anarchist,” teaching his hate-filled Queer and Feminist BIPOC Traditions from Decolonial Abolitionist Perspectives.
Really.
If the government got out of the student-loan business, the universities still would have more than ample funds to lend at profitable interest, resulting in at least two stark changes:
- Since it would be their money, not an unlimited spigot from Uncle Sam, they would become financially more responsible; would cut back on DEI departments, nonsensical courses, and other profound waste; would and need to think twice before raising tuition and dorm rent through the roof each year.
- More importantly, as with successful banks versus those that go insolvent, lending on interest works for the lender only when the borrowers present a probability of repaying later. If the borrowers go broke, or fail to earn sufficiently, the universities will sustain enormous losses instead of reaping handsome profits. That will create a free-market incentive, slowly but surely, for universities to offer serious subjects that train minds and offer both intellectual stimulation and marketable education. If they are going to send kids into the world after four years with an aggregate loan debt of $250,000–$300,000 and great training in science, technology, engineering, mathematics, or certain very valuable social science learning and skills, all will reap. But if those kids, in debt with their parents for $300,000 after four years, emerge having majored in Gender Studies, they will be default risks. Go woke, go broke.
No one “fix” can repair our broken college and university system in America. But a comprehensive shift, simultaneously implementing several of these proposals (and a few more), will turn the tide.
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