Sunday, June 11, 2023

Student Loan Debt and Whataboutism

When the debate about student loan debt devolves into whataboutism, you know something isn't right.

Congress passed a bill to thwart President Biden's student loan forgiveness initiative.  Biden proposed forgiving up to $20,000 in student loan debt.  The Supreme Court has yet to rule on a lawsuit that also serves to overturn this program.  We'll have to wait and see about that.  In the meantime, Biden has vetoed the bill passed by Congress, and Congress doesn't have the votes necessary to override the veto.

So, back to square one.

Is student loan debt forgiveness a good or bad thing?  There are many logical arguments on both sides of the debate, and then again, there is whataboutism, which I have written about before.  Whataboutism isn't a logical argument, it is an argument made by a toddler. "Not fair! Little Jimmy gets a candy bar, why can't I get one?  Unfair!  Unfair!  Wah!"  It is a neat way of short-circuiting debate by changing the topic from why YOU don't get a candy bar to why Little Jimmy gets one.  Lost in the discussion is why you are entitled to candy bar in the first place.

And let's be clear: both sides on the student loan debate devolve to whataboutism and thus ignore the more cogent arguments.

What cogent arguments?  Well, to begin with, will student loan forgiveness (and/or "free college") cut the real cost of education, or merely pass it on to the government, with no checks and balances?  The real question is, of course, why has college gone up in cost by several times the rate of inflation, for well over two decades now?  Student loan forgiveness addresses the symptom of the problem, but not the cause.

It is akin to giving a bleeding man a transfusion to replace the blood he has lost.  It may save his life for now, but unless you can stop the bleeding, you will have to give him endless transfusions.  We need to stitch up that wound in the long run, or eventually we will run out of blood and the patient will die.  The idea that we can tell colleges to just charge "whatever" and send the bill to Uncle Sam is a flawed one - but that is what student loan forgiveness essentially does - along with many "free college" schemes.

The other argument - that both sides miss - is if we "forgive" student loan debt today, what will we do tomorrow?  Is this a perpetual debt-forgiveness, or are kids who are Seniors in High School today totally screwed?  Is this a one-time deal or what?  It hasn't been thought through.  But then again, a lot of legislation unfairly singles out certain generations.  For example, when I turned 18, I could drink legally - for about three months.  Then they raised the drinking age to 21.  Congress is always talking about raising the retirement age, or cutting benefits.  Since they don't want to lose older voters, they say, "Don't worry, this only applies to people born in 1960 or later!"  What have these assholes specifically have against me, anyway?  It seems that every law enacted these days wants to take a shit on the post-baby-boom generation.  But I digress.

The reason colleges have jacked tuition and other fees is because they can.  Just as in the post-pandemic era, companies have raised prices because people are paying them, colleges have raised tuition again and again and - until recently - people kept going.  They groused about the cost, but they keep signing those student loan docs.  And since "student loan forgiveness" is bandied about so much, many in the back of their minds (and many more in the front) believe they will never have to pay that money back.

We need to attack the real problem - too much easy money being thrown about.  We set up this student loan nightmare on the premise that it would allow poorer people a chance to go to college.  We set up home mortgage interest deductions on the premise it would make homes more affordable. In both cases, the net result was that prices went up - since subsidies and loans are available, people can afford to spend more - and they do.  Since student loan debt survives bankruptcy and is guaranteed by the government, banks lend out money to people they wouldn't loan a nickel to, under ordinary circumstances.  The banks get their money back, the student and the government don't.

In some regards, the problem may be solving itself. As the incoming freshmen class of 2023 is smaller than that of 2022 (and 2024 projected to be even smaller!) schools are scrambling to fill seats.  Smaller schools are going bankrupt.   Some students are seeing through the whole game and deciding to do something else instead.   Eventually, college fails the cost/benefit analysis, although it takes time for people to figure this out.  Chrysler was selling "full-sized" 8 MPG cars well into the late 1970's - and people were buying them, too!  And like college students complaining about student loan debt, the owners of these beasts complained about gas mileage and the cost of gas, rather than actually doing something about itEnter the K-car.  Will college create its own K-car?  Stay tuned.

But what about whataboutism?  Well, like I said, both sides use these arguments.

People agitating for student loan debt relief argue that "Well, companies got PPP loans during the pandemic and got those loans forgiven!"  It is classic whataboutism.  The discussion of the merits of student loan forgiveness are tossed out the window and now the topic du jour is whether PPP loans were "fair" or not.  Whether some other guy got a loan forgiven or not, is really irrelevant - and doesn't address why college costs more than a modest house now.  It doesn't solve the problem, it just derails discussion.

And no, maybe forgiving PPP loans wasn't "fair" but does making two unfairnesses even things out?  Besides, PPP loans were designed to support payroll for companies that had to shut down by government mandate - companies and businesses, particularly small businesses, that would have gone bankrupt by the millions, without that support.  How would that have played out?  And sure, some folks scammed the system by claiming to have a company and then getting a PPP loan - and you read about these people, every day, going to jail for that.

But look what happened!  Here I am defending a loan program that I don't want to defend, and all talk about Student Loan Debt Forgiveness is out the window.  Classic illustration of how Whataboutism works.  It is a pretty insidious trick!

Similarly, another whataboutism argument raised is, "Well, when you boomers went to college, tuition was less that the price of a Starbucks, today!  You only paid $6 a semester to go to Harvard!  Today it is a billion dollars to go to State School!"  Or something like that.  You might as well say, "Well, when you old people were my age, you got to fight in World War II! All we get is some lousy deal in Afghanistan!  It isn't fair!"  And yes, that is a ridiculous argument, but no more ridiculous than the "Pepsi used to be a nickel" arguments about tuition.  Each generation lives in a separate era, and you can't compared one to the other, or argue that since the roaring 20's were so much fun, the Great Depression should never have happened.

Usually, the people making this argument are trying to deflect from more serious questions.  For example, I saw this argument being made online by someone claiming they had an "advanced degree" but could not find a job, and had a hundred grand in debt.  Now, assuming for the moment the person isn't a Russian troll (which is most likely, given the writing style) note how they fail to mention what their degree was in and where they got it.  It is scandalous, by the way, these schools advertising - mostly to minorities - encouraging them to get useless "Masters" degrees at for-profit schools.  Democratic administrations have tried to shut down these diploma mills.  In contrast, Trump actually ran such a school.

It is always telling when someone leaves out facts in an argument, and in most of these "I am hopelessly in debt with student loans" arguments, they fail to mention basic facts, like where they went to school, what they majored in, how much they owe, and how much they are making at their job. Not discussed, of course, is all the stupid bling they own in their lives.  "That's not relevant!" they say, but of course it is in fact, key.   Kind of hard to complain about $25,000 in student loan debt when you are driving a brand-new car and eating in restaurants five nights a week.  Yes, there are some who are really impoverished by student loan debt, and then there are others who just would rather not pay it off and buy nicer shit instead.

On the other side of the coin, conservatives argue about "moral hazard" and Whatabout the guy who never went to college?  How about him?  How come the blue-collar worker doesn't get all this free money!  Unfair! Unfair! Wah!

(I might add another one, whatabout the guy who paid off his student loans - last year or ten years ago?  Does he get a check from Uncle Sugar?  Because surely it is "unfair" to give debt forgiveness to the guy who just refuses to pay - on the premise that debt forgiveness is right around the corner - while stiffing the fellow who scrimped and saved to pay off those debts. Unfair!  Unfair!  Wah!)

More whataboutism.  It does raise an interesting issue, though, in that if we do forgive student loans, or offer "free college" then more people might go to college, even if they are not predisposed to do so.  Gee, I wonder who benefits from all of this?  Do you think maybe the lobbying groups for the nation's universities are pushing this agenda?  They are idiots if they aren't.  And of course, they are.

Whether or not PPP loans are "fair" or whether or not Student Loan Forgiveness is "fair" to the non-college-educated worker are just whataboutism arguments and irrelevant to the discussion.

In terms of "fairness" a better argument is whether such debt relief should be given across the board, regardless of need.  Does a young lawyer making a hundred grand a year - who can pay off his student loan debt by writing a check - deserve to have his debts wiped out?  And again, what about the students next year - and the year after?  We do this as a one-time deal, is it "fair" to subsequent generations?

Sounds like more whataboutism, too - but it raises sticky issues that these plans are not well thought out.  It is sort of like our Governor trying to buy votes by sending everyone in the State a check for $250 - as a tax rebate, regardless of how much you paid in taxes.  They thought it was sending a message of "fiscal responsibility" but as I noted, it was little more than creeping socialism - guaranteed basic income on a small scale.  Real fiscal responsibility would be to put that money in the bank, use it to pave our roads, or lower the tax rates next year.  I suspect the opposite will happen - our tax rates next year will go up, simply because they gave back that money.  Similarly, handing out twenty grand to every student isn't a very well-thought-out plan.

One other problem with Student Loan Forgiveness is that payments on student loans have been suspended since the start of the pandemic.  Now, they are slated to start again, and some GOP lawmakers want retroactive interest added to these debts, which could double the balance due.  You would think that during this period of payment suspension that wily former students would have either banked their loan payments or made payments, so they could get ahead of the game and bypass three years' worth of interest.  Sadly, since so much talk has been made about debt forgiveness, I suspect many just spent the money (and not on food/clothing/shelter) instead of paying down debts.  Only a chump would pay off his student loans at this point, and miss out on the free money.  You see, once again, how government actions have unintended consequences. Whether or not this debt relief is warranted, we need to decide once and for all, as dragging this out only serves to alter the behaviors of borrowers, who have zero incentive to pay back their loans at this point.

By the way, it should be noted that $20K in debt forgiveness would wipe out about half of all student loan debt, as the average borrower only has about $35K in debt - less than what I paid for my truck.

So, how do we fix this problem, then?  Or does it really need fixing? You could argue that the system is already correcting itself as colleges and universities see fewer applicants.  Everyone has ideas, but I think there are some things that could be done to really fix the problem.

1. If we forgive student loan debts - in part or in full - then going forward, we need to regulate what colleges can charge for tuition and other fees, if they want to qualify for federal aid and loan aid for their students.  Medicare sets prices for medical procedures and prescriptions - in fact, it sort of sets prices for the whole industry.  Why shouldn't Sallie Mae set maximum tuition prices - if they are being asked to guarantee the loans?  Ditto for Pell grants and whatnot.

2. Abolish private student loans - these are the loans the GOP lobbied for, once federal student loans were excluded from bankruptcy.  Why not let private bankers have fun with bankruptcy-proof loans?  It is a lenders wet dream.  Like I said, when I was an undergrad, I could only borrow so much, but as a law student, they just throw money at you - you have to have the willpower to not accept all of it.  Limiting the amount of "funny money" would force students to make harder choices in what school to go to, which in turn would cause schools to curtail their obscene tuition increases.

The real problem with student loan debt isn't the debt, it is the schools, who are charging insane rates for tuition and providing college degrees which are worthless in the marketplace.  And we are asking 18-year-olds to sign loan documents that can scar them for life, if the make poor choices.

Merely forgiving debt puts a band-aid on a wound that is hemorrhaging blood.  It doesn't solve the problem, it is more of a political gesture.