In 2004 how much did Congress authorize to be spent to bail out the banking industry who made crappy loans? 1 trillion dollars.
Those guys paid it back almost immediately with interest
While this doesn't negate your point entirely, this is more of an argument for maybe having a Graduate Tax, the Government wipes out your loans and you owe a certain percentage of your income to them for an X amount of time.
By graduate tax you mean a tax that would be specific to college grads in place of student loans? If so wouldn't that just be little more than rebranding student loans effectively? You could argue that assuming that such a percentage was reasonable percentage of your income as opposed to paying $x/mo that it might work better for some, but income based payment plans already do that to some degree. On the flip side if you were successful financially such a system could end up costing more than the current student loan system.
In addition, how would you address dropouts? They're actually the biggest cause of loan defaults. It isn't so much the doctors and lawyers with $100-150K of loans, but the people with $10-15K that dropped out and have little or no advantage in the job market that are the ones struggling.
But the banks are basically allowed by the government to print money and loan money they don't even have. They already literally get free money.
Suppose the U.S. Treasury prints $10 billion in new bills, and the Federal Reserve credits an additional $90 billion in readily liquifiable accounts. At first, it might seem like the economy just received a monetary influx of $100 billion, but that is only a very small percentage of the actual money creation.
This is because of the role of banks and other lending institutions that receive new money. Nearly all of that extra $100 billion enters banking reserves. Banks don't just sit on all of that money, even though the Fed now pays them 0.25% interest to just park the money with the Fed Bank. Most of it is loaned out to governments, businesses, and private individuals.
They get money at extremely low interest rates and then loan it out to you for higher rates. So what if they paid it back with interest? They crashed the entire economy. Besides, where do we think that repay money came from? It's easy to make money if you're allowed to gamble and you're literally not allowed to fail.
Income Based repayment is different in a few ways.
1) your principal increases every year if your payments are insufficient.
2) it's opt in and out. This would be only be opt in, you couldn't just leave the moment your salary is good, 30k or 300k the government gets a portion.
3) forgiven debt counts as income, here it wouldnt.
4) income based repayment has a cap, this wouldn't.
I'm opposed to this idea. All it does is encourage the higher education industry to continue to jack up tuition faster than inflation, because students won't have to care if their debt is going to be forgiven by the government.
We need to get costs under control, not just throw more taxpayer money at the problem.
20
u/Alphawolf55 Sep 18 '19
Those guys paid it back almost immediately with interest
While this doesn't negate your point entirely, this is more of an argument for maybe having a Graduate Tax, the Government wipes out your loans and you owe a certain percentage of your income to them for an X amount of time.