Student loans: Another screwing of the middle classes

Let’s be clear. Every time the government pays a creditor, it creates new dollars, ad hoc.
In fact, paying creditors is the method by which the government creates dollars.

Thus, the U.S. federal government cannot unintentionally run short of its own sovereign currency.

Let’s be clearer. The U.S. federal government has absolute control over the value of the U.S. dollar (aka “inflation.”) Not only does the government control interest rates (which affect the value of the dollar) but the government arbitrarily can and has changed the value of the dollar many times.

Coinage Act of 1792
Coinage Act  of 1834
Coinage Act of 1853
Coinage Act of 1857
The Mint Act of 1873
Coinage Act of 1965
Nixon “Shock” of 1971

With the unlimited ability to create dollars, and the unlimited ability to control inflation, the federal government has no need to ask anyone for U.S. dollars.

It already has infinite dollars.Facepalm - Wikipedia

In fact, all U.S. tax dollars sent to the federal government are destroyed upon receipt.

These dollars, formerly part of the M1 money-supply measure, cease to exist in any money-supply measure after arriving at the U.S. Treasury.

Thus, federal taxes are not collected to provide the federal government with spending money.

The sole purpose and effect of federal taxation is to control the economy by rewarding what the government wants to encourage and by penalizing what the government wishes to discourage.

Thus, the government never should lend dollars, because lending requires repayment of dollars, which the federal government doesn’t use.

The government should give dollars when it believes dollars are needed. Giving, rather than lending, adds growth dollars to the economy.

One goal of the federal government should be to ease the ability of middle- and lower-income students, to attend college if they wish to.

Unfortunately, to achieve that goal, the government provides colleges students with dollars, via lending.

The above facts are what make the following article so infuriating.

Predatory student loans
Servicing company required to cancel $1.7B in debts for 66,000 borrowers
By Stacy Cowley The New York Times

Navient, once one of the country’s largest student loan servicing companies, reached a $1.85 billion deal with 39 states to settle claims that it had made predatory student loans that saddled millions of borrowers with billions of dollars in debt that they were highly unlikely to repay.

The deal, announced Thursday, requires Navient to cancel $1.7 billion in private student loan debts for nearly 66,000 borrowers and pay $95 million in restitution.

The private loans were crucial to Navient’s ability to make a large volume of lucrative federal loans, prosecutors said.

“Navient repeatedly and deliberately put profits ahead of its borrowers,” said Josh Shapiro, the attorney general of Pennsylvania, one of several states that had sued Navient.

Most of those who took out the private loans attended for-profit schools, often ones with low graduation rates and poor job-placement records.

The private loans Navient made were — in the company’s own words, according to legal filings — a “baited hook” that the lender used to reel in more federally guaranteed loans.

At some schools, it anticipated that more than 90% of the loans would default.

Rather than helping lower- and middle-income students succeed, and narrow the Gap between the rich and the rest, student loans do exactly the opposite.

Student loans doom students to lifetimes of debt and low credit ratings.

Imagine lending money when you know 90% of the borrowers would be forced into default. It is yet another clever scam by the rich (who control the U.S. government), to widen that Gap, while not-so-incidentally, putting dollars in their own pockets.

Navient, which did not admit any fault in the settlement, said it did not act illegally.

“The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” said Mark Heleen, Navient’s chief legal officer.

Oh sure. All innocent companies settle lawsuits for $1.7 billion + $95 million.

Several state attorneys general also filed state lawsuits claiming that Sallie Mae — Navient’s predecessor company, from which it split off in 2014 — made private, subprime loans to borrowers it knew were likely to default.

Under Education Department rules, no more than 90% of a school’s tuition payments can come from federal funding. The private loans were intended, according to court filings, to fill that gap and lure in students, who would then take out the lucrative federal loans that the schools — and Navient — relied on.

The settlement calls for payments of around $260 per person to be distributed to 350,000 federal loan borrowers.

That $260 is a pittance compared to what the students owe or have paid.

To maintain America’s competitiveness in the world, a college education has become more necessary for America’s young people. To increase America’s wealth and to decrease poverty, the Gap between the rich and the rest should be narrowed.

If the government truly wished to encourage America’s competitiveness, and to narrow the Gap, rather than merely feeding the rich, it would fund free education for all.

Consider that the states, counties, and cities, none of which have unlimited dollars, already fund free K-12, and you can see what a scam the federal student loan system is.

The federal government should adopt Step 4, Free education for everyone, and Step  5, Salary for attending school  of the Ten Steps to Prosperity (below).

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
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The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.