I was taught that if you take out a loan, you repay it.
And you break your back to repay it in a timely fashion because loan agreements involve interest payments and penalties that make you pay even more money.
People who lend you money might actually take your house and your car.
I mention this because somewhere along the line I was misled.
Take student loans, for example.
Many Democratic candidates for president are saying that student loan debt is crushing people and destroying the economy. They are proposing debt relief plans or forgiving debt of as much as $50,000 completely.
I don’t hear anyone saying that the people who took out the loans, who graduated college, ought to repay their debt. Or that their parents, who co-signed, pay up.
There is $1.5 trillion in student college loans outstanding. Much of this money was given out by the federal government. People need student loans because a college education has become so expensive that most Americans can’t afford it. We’re talking around $20,000 a year on average for a public university, and $46,000 for a private school, The University of Chicago just announced a plan to go to $80,000 next year, becoming the most expensive college in the nation.
The way I see things, student loans are good. They allow people to go to college who otherwise could not. But I am apparently mistaken. People who took out those student loans can’t repay them, or simply refuse to repay them, and the national economy may collapse as a result.
How could this happen?
Well, you may remember the Great Recession, which was caused because people couldn’t repay their housing loans.
Banks gave people massive home loans knowing those folks could never repay them. The banks weren’t worried about this because those terrible loans were bundled together and sold on the stock market.
In addition, you may recall, as interest rates skyrocketed, banks put together balloon mortgage loans that offered low interest rates for the first few years and then ballooned way beyond anyone’s ability to pay them off.
Smart people decided to refinance their existing mortgages to get the lower rates, knowing they could refinance later before the balloon payments kicked in.
But then the recession hit. People lost their jobs. Pay raises were replaced by pay cuts. The housing market collapsed. Banks began foreclosing on homes but couldn’t sell them, and pretty soon there were boarded-up buildings everywhere. The stock market collapsed.
The national economy was teetering on the brink of ruin when a miracle happened.
You and I, the American taxpayer, decided to bail out the banks and the stock market firms. We even provided some money to refinance the homes of people who had gotten those balloon mortgages.
As a result, President Donald Trump today can brag that he is responsible for the stock market reaching record highs. And Democrats can now unveil plans to eliminate outstanding college debt with tax money.
In the future, they may even provide college free of charge to everyone. I don’t know how the people who took out college loans and repaid them feel about any of this. I would like to know that people have made an honest effort to repay their college debt.
Are they driving beaters or new Corvettes? Are they living in trailer parks or expensive condos? Are they working nights at White Castle, or spending thousands of dollars on the newest iPhone and gaming tech?
I don’t want to reward people who are irresponsible.
Yet, our nation has $1 trillion in outstanding credit card debt. People are charged 20 percent interest if they don’t pay on time. Shouldn’t we limit credit card interest rates to eight percent? Shouldn’t we pay off all their debt?
Maybe people could just live within their means. Forget it. The economy would collapse.
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