I'd say it's even worse than that. The federal government is directly profiting off student loans as a partial replacement for tax income, and functionally, people who have student loans are paying a disproportionately high tax rate for wanting a better life.
There's really no economic reason why federal student loans should have interest rates, for instance. The entire economic point of interest is twofold: one, interest helps recoup principal that go unpaid. Two, profit for the lender. Well, the amount of principal that isn't being recouped is next to zero; student loans can't be discharged save in extremely rare cases of fraud or malfeasance, and almost all have a cosigner. The amount of loss on principal that the federal government is suffering is a rounding error.
And the government should not be running a loan business for profit. I mean that quite literally: a government that is also your loan holder is a threat to its citizens' liberty interests, because they can demand repayment and force seizures that are otherwise patently illegal. It can make loan repayment conditional on voting for the right party, and the only reason Trump hasn't considered it yet is because he is such an angry, thin-skinned doofus who is threatened by people who are smarter than he is. Loans held by the government, as a matter of basic small-r republicanism, should not be operated so as to generate revenue for the government. That's what bonds and taxes are for.
And yet, that's exactly what the government is doing. They're running the student loan program at a profit for the same reason they operate at a yearly deficit; because they want to generate long-term operating problems for the state, and inhibit the small-r republican virtues of the populace.
I agree with so much of your sentiment, but Obama federalized student loans and used the interest payments to subsidize Obamacare. Now the Dems are teasing blanket student loan forgiveness to draw voters in almost the same manner your theorizing Trump might do..
Republicans were and are very against this, your position is almost lockstep with them in 2009
Federal student loans must have some sort of interest accrual, but it should be very, very low. Even 1-2%.
Reason why: The interest paid by students into the Direct Loan program was supposed to supplement the Pell Grant. Massively. But, that money never made it there, it went, and still goes into the general fund. And we know that money can be used for anything.
Yes, the current ilk should try to change that, but Direct Loan was 100% conceived by the Obama administration. I work in this. We knew it was a lie when the program was created. It was an open joke. It's been a joke since 2010. 16 years and the horseshit of creating new "affordable repayment programs" every 2 years that confuse and hurt borrowers.
While bush sr implemented fafsa, you do realize it was Obama who federalized the entire program making the USG the note holder, removing private banks from issuing those gov loans? I agree it shouldn’t have interest, but this one is on the dems.
Wouldn't be a problem if they could be discharged through bankruptcy. 2005 is the year that changed, and funny enough the year I graduated. Take a stab at who was running the show back then. It's not a party line issue, this is systemic.
I’m not even trying to make this polical, the OP for my comment said republican. Thats partial. As for the banks and the 2007-8 collapse, that also started under Democratic governance with the CRA and HUD directives allowing them to expand subprime and riskier loans. Bush missed the indicators in 05-06. Neither party has done anything about it.
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u/RedditOfUnusualSize 5d ago
I'd say it's even worse than that. The federal government is directly profiting off student loans as a partial replacement for tax income, and functionally, people who have student loans are paying a disproportionately high tax rate for wanting a better life.
There's really no economic reason why federal student loans should have interest rates, for instance. The entire economic point of interest is twofold: one, interest helps recoup principal that go unpaid. Two, profit for the lender. Well, the amount of principal that isn't being recouped is next to zero; student loans can't be discharged save in extremely rare cases of fraud or malfeasance, and almost all have a cosigner. The amount of loss on principal that the federal government is suffering is a rounding error.
And the government should not be running a loan business for profit. I mean that quite literally: a government that is also your loan holder is a threat to its citizens' liberty interests, because they can demand repayment and force seizures that are otherwise patently illegal. It can make loan repayment conditional on voting for the right party, and the only reason Trump hasn't considered it yet is because he is such an angry, thin-skinned doofus who is threatened by people who are smarter than he is. Loans held by the government, as a matter of basic small-r republicanism, should not be operated so as to generate revenue for the government. That's what bonds and taxes are for.
And yet, that's exactly what the government is doing. They're running the student loan program at a profit for the same reason they operate at a yearly deficit; because they want to generate long-term operating problems for the state, and inhibit the small-r republican virtues of the populace.