Dear Friends,
It seems to me… student loan debt will be the economic millstone around the necks of this generation. The debt was made government, (and debt to the government cannot be forgiven by bankruptcy), and so it must eventually be paid off, either by the person or their heirs when they pass, therefore, no matter the situation, everyone must pay it off, in contradiction to the very idea of why borrowed debt is forgivable by bankruptcy. Even as the debt itself was made unforgivable the cost of university education has exploded, the cost per year of college today in real economic terms, considering inflation, is much higher. So the amount of debt a student need take on has increased exponentially. Meanwhile the value of that asset, a college degree, has dropped precipitously. Rather than teach students how to be successful in the world, universities now teach them to be Marxist warriors, striving for the utopia that can never exist.
The value of a college education is directly tied to it’s utility. If it costs say one hundred grand, then it’s value should be weighed against something else that could have been purchased with the money. Put into stock that pays a five percent dividend on a monthly basis, that money could theoretically pay the investor four hundred fifteen dollars a month, for the rest of their lives. Invested in a business, one hundred grand could easily be leveraged to start anything, from a manufacturing firm to a corner store with a cache of largess in case of an emergency. That path would probably lead to a high income even if the original business failed. This is because the education in the real world that one gets from starting a firm, is more suited to understanding how to succeed in the same, real world. Yet with so many people having so many degrees in this and that, the utility of that degree to open a door is decreased as the cost of it increases.
The easier it is to go into debt for university expenses, the more people will go into debt, driving up the demand and thus the cost of a college education. Government taking over the student loan system drove down the cost on interest of those loans and at the same time made them easy peesy to get. This led to a large uptick in the number of people seeking a college degree. That increased demand led to increased cost. The extra money has gone into administration, wages and plant. The cost of college goes up at a healthy six percent a year, and has done so for decades, which exceeds the consumer price inflation (CPI) by a wide margin. It is shocking, the absurd amount of money universities have in endowments, endowments that pay absurd rates of return. What s truly laughable though, is that until this year and the GOP tax plan…endowments have been tax free! So when government took over the student loan system, it made student loans very easy to get into, and impossible to get out of, like a spider web.
The reason we have bankruptcy laws is to give risk takers a way out if their plan goes awry. Otherwise innovation would grind to a halt. It is just that means of getting out from under, that levels the playing field so that entrepreneurs can invent cars, phones, lap tops, wind mills and I pads. Take away the ability of the individual who seeks to start a business and many will not be started. Since the ratio of failures to startups doesn’t change the less startups there are, the number of firms that succeed will also go down. Lowering the demand for labor, thus wages and producing fewer goods and services reducing overall GDP. Yet that is exactly what the government has done by taking over the student loan system. They have created a system whereby, the entire concept of bankruptcy is overturned, making every student a slave to student loan debt. Unable to take the chance to star a business and so those new inventions may never be built, lowering GDP.
The student today is paying far more for a product that is of much lower quality then someone did only a few decades ago, and rather than complain about the absurd cost, students demand government pay for more of it. Today students graduate university and cannot hold down a job, are an emotional train wreck, have to be retrained how the world works and with egos the size of a planet. Even as the real cost in terms of unforgivable debt is increased, the quality of a degree decreases and therefore it’s utility as well, the negative effect on the culture, economy and drive to tyranny cannot be understated. Education is critical in any society that purports to be enlightened. Reason and discourse have to be the arbiter of what is right, not authority. Universities today teach authority and students lap it up without thinking. The result is that many colleges today have become the enemy of our civilization, prosperity and peace.. because they are placing millstones around the necks of our youth as they wade into the troubled waters of life.
Sincerely,
John Pepin
