–The ever-increasing disaster of student loans

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Mitchell’s laws:
Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive,
and the motive is the gap.

Despite the misguided hand-wringing of the debt hawks, we repeatedly have recommended that the federal government pay for grades K-16 and beyond (Step #4 in the “Ten Steps to Prosperity.”) See: “How to eliminate college student loan debt.”

The fundamental purpose was not debt relief, but educational. Poor kids have difficulty paying for college. Even scholarships and other benefits don’t suffice. America need to educate all its children, not just the rich.

Because poor families need income, they often discourage their children from attending college, preferring them to find jobs. That is why we also recommend Step #5: “Salary for attending school.”

In summary, there are at least five reasons why the federal government should pay for K-16 and beyond:

1. Being Monetarily Sovereign, the federal government can afford such payments far better than can the states and cities, which currently pay for K-12. Paying for K-16 and beyond, would remove a huge burden from the states and cities, allowing them reduce local taxes (which mostly are regressive) and use tax dollars for local needs: Infrastructure, police and fire, etc.

2. Help improve the quality of education, by attracting better teachers, principals and superintendents.

3. Increase upper high school and college attendance by poor students.

4. Reduce the Gap between the rich and the rest.

5. Eliminate the disastrous student loan program.

This last is the subject of an article in Reason.com:

Student Loan Debt Skyrockets—and So Do Delinquencies
J.D. Tuccille|Oct. 6, 2014

Last week, President Obama boasted, “We’ve helped more students afford college with grants, tax credits, and loans, and today, more young people are graduating than ever.”

What he didn’t add is that “we’ve” also piled a growing load of crippling debt on young college student that they’re increasingly unable to bear.

As Ericka Davis writes for the Federal Reserve Bank of Dallas, “Over the past decade, student debt has skyrocketed and delinquency rates have nearly doubled to levels much higher than for other consumer lending products.”

In 1983, average tuition, fees, room and board at private, nonprofit colleges added up to $18,143 in 2013 dollars. This year, that number has risen to $40,917.

Clearly, the need for tuition money has increased dramatically, while:

Starting pay for recent college graduates has definitely not kept pace. Lots of recent college grads are underemployed, many in gigs that don’t require the degree they have yet to pay for.

Part of the problem is that student loans, unlike all other loans, are not based on credit or ability to repay.

As Ericka Davis writes for the Federal Reserve Bank of Dallas:

*”Student loans are often originated when borrowers earn little income.
*”Many borrowers have only a vague idea of their future earnings potential and ability to repay.
*”Borrowers can defer payment of unsubsidized loans while enrolled in college, which results in an even larger debt burden.
*”And many borrowers do not understand the structure and repayment options associated with student loans.
*”Moreover, with the exception of certain programs or an undue hardship petition or death, student loans are rarely forgiven.”

Large loans to people who have no current income and an unknown future income, no collateral, a deferred payment schedule, misunderstood terms and no discharge in bankruptcy — what could possibly go wrong with that??

While deliquencies in all other loans are on the decline, student loan deliquencies have been rising.

monetary sovereignty

Since 2008, 30 year olds with student loans have, on average, seen their credit scores slide relative to 30 year olds free of such debt. That means add-on financial problems across their lives, in addition to the load they carry.

Those owing student loans are burdened their entire lives, even after they somehow manage to pay off their loans.

The Fed report says “more research” is needed of the growing debt problem.

Oh, gimme a break. “More research”? There is no way to make this pig look like a swan.

You probably will hear about “refinancing” and “easier terms” and all sorts of Band Aids on cancer, but the only solution is to give everyone — rich and poor — the same shot.

That is why we have had free K-12 education for decades. We just need to make K-16 and beyond, similarly free.

Typically, the government will try every wrong solution, before it finally is dragged to the right solution: Free schooling for all.

Why not?

Rodger Malcolm Mitchell
Monetary Sovereignty

Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

The Ten Steps will add dollars to the economy, stimulate the economy, and narrow the income/wealth/power Gap between the rich and the rest.

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

Monetary Sovereignty

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.


9 thoughts on “–The ever-increasing disaster of student loans

  1. @RMM: One concern that I had had, and a persistent criticism of having a generous government that affords too many benefits is that people would become really lazy.

    But I found this:

    “Contrary the orthodox opinion, generous welfare benefits do not lead to higher unemployment, longer durations of unemployment or a disincentive to work.”




    1. Yes, the myth is the belief that poor people are congenitally lazy, good-for-nothing, criminals, who sit on the porch getting drunk and taking drugs, rather than work.

      But the myth easily is dismissed with this:

      Federal benefits to the poor make no one rich. Yet, even rich people work. So why wouldn’t poor people continue to work after receiving those puny federal benefits?

      This myth is promulgated by the right wing, who refer to the poor as “takers” and the rich as “makers.”

      It’s all part of the goal to justify widening the Gap between the rich and the rest.


      1. Why does this nonsense that the poor are lazy come from? Is this the only way to con the masses in believing lies?

        It’s not that the poor are lazy, it’s that if you are given a choice of working and not working – and the working wage is less than the not working wage – why would anyone in their right mind pick the working option? FYI – I would not and neither would anyone else.

        The rich have a choice of working and not working – is it not clear that by working they stand to earn more than in not working?

        Given your success in business, something must have happened along the way. Wow….

        And to say that I am a heartless person… I am not the one forcing people to pay up to force an agenda. The liberals are happy to “help” the poor as long as they are not the ones paying.


  2. http://www.cnbc.com/id/102075949

    Off Topic, but in the AIG case, Ben Bernanke was asked why the interest rates AIG had to pay were so high and why the equity stake taken by the government were high also. Ben’s response was “to protect the taxpayer”.

    At that point, the conversation could have continued:

    Boies: “Protect the taxpayer from what?”
    Bernanke: “AIG defaulting on its debt.”
    Boies: “And if AIG defaulted on the debt, what would happen to the taxpayers?
    Bernanke: “Nothing, but some people believe it would have caused hyperinflation”.

    What else could Bernanke say?


  3. @Endisnear,

    You ask, ‘why would anyone in their right mind pick the working option?”
    Because if you love what you do you value your INTEGRITY, reputation and productive ability. The work itself becomes the “pay.” And there are those who aren’t too happy about their jobs but do them anyway out of personal responsibility and pride.

    My father who lived through the depression told me he refused to sign up for government relief out of pride and a desire to be useful rather than take something for nothing– and he was in his “right mind.”

    Apparently you’re swayed by those who have learned from poor example of selfishness and the quick buck, not the majority whose natural inclination is to be both responsible and themselves rather than lower their level to that of dishonest undeserving takers .

    This nonsense that the poor are stereotypically lazy comes from biased candidates with an agenda of gaining votes by looking “tough” as well as shifting the blame away from the very system that encourages all sorts of “taking” by all classes of people.

    Ironically, some of the biggest takers are the ones who make the laws, run and hide, avoid the camera and reporter wanting answers, take the fifth, bend with the wind, hypocritically break their own laws, vacation far too much, cut the budget, encourage crime, rarely agree on anything except to keep fighting the 3rd world and feed the pentagon contractors while we embarrass ourselves as we keep losing lives and face “over there.”.


    1. I’m sorry, but thats not reality. Why do you think i get bashed on this blog?

      We both know that people dont work to “feel responsible”. Of course, there are a few that do. The majority of people out there believe all we need is “better policy”. I know that these programs do help some folks in need, the majority is gaming the system. I know many that have multiple off the book incomes in the thousands, quit their jobs to get unemployment, and sent their wives and children to get foodstamps and anything they could get their hands on. In the mean time middle income people that are not willing to commit fraud get their incomes destroyed. I’ve seen it time and time again. Here is the deal, most people would never work if they got money from somewhere. Of course, the government knows full well that would never work. Someone has to be robbed to keep the game going. Being extremely busy with their jobs, family, etc.., the middle class is the perfect target. And the idiots still believe in government.

      And you really think im being swayed?

      You are either for or against criminal activity. You and Rodger clearly look the other way when it suits your agenda. Oh yeah, i keep forgetting that more dollars are good for the economy. Yeah right.


      1. ..most people would never work if they got money from somewhere.

        You are assuming this…. No one has any evidence this would happen as it has never been allowed to happen. But it may have to be the case some day. Automation is hot on our heels. Menial work will disappear and truly needed workers of the future will have to be well-trained specialists. The private sector is not going to pick up the slack. Only the public sector can and must do this. There is no other option in a world that demands you need money to survive unless you wish to return to 3rd world cave man behavior eating bugs or cannibalism.

        But let’s finish your thought: “most people would never work if they got money from somewhere.” IF they DID then, given human nature as you know it, what do you honestly think they would do with their time, knowledge and energy?


  4. End. . .

    You get bashed for good reason, primarily because you spout ignorant myths and cover them with invented bullshit.

    There is your myth that “most people would never work if they got money from somewhere.” Of course, the excludes you and the rich, who work despite having money.

    And of course, you don’t really say how much money is necessary to keep people from working. (Would you not work if you could get food stamps?)

    And I assume you have money, but still you work. Why? Oh, it’s not enough money for you to quit working? How much money would it take to keep you from working?

    And then there is the overall cynical belief that the poor are lazy cheaters, while the rest of us are hardworking, noble and honest. Total bullshit. On balance, the poor are the hardest working people of all. Merely surviving requires much more effort for the poor than most of us realize.

    And of course, despite the fact you have been reading this blog for months, you still haven’t been able to learn that your federal taxes do not pay for social programs. So you think the middle is “getting robbed” to pay for the poor. After all this time: Ignorance beyond comprehension.

    And then there is the myth about all those people who supposedly quit their jobs to get unemployment, and you’ve “seen it time and time again.” More bullshit.

    In short, you have absolutely no idea what you are talking about, repeatedly lie, and are immune to learning. So you get bashed.


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