Indentured Servants: Student Loans Defraud Millenials

Indentured Servants: Student Loans Defraud Millennials

By

Martin Cowen

                        No one reading this essay can obtain a signature loan for $100,000 on the free market. Yet over one million people are burdened with student loans in excess of this amount. The only reason that people, who are financially unqualified to receive free market signature loans, get student loans anyway is government interference in the free market.

                        The specific statute that is the core of the interference is Federal bankruptcy law that forbids discharge of student loan debt, 11 U.S.C. § 523 (a)(8):

(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for

(A) (i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or

     (ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or

(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;

                        Why on earth should one be able to bankrupt medical bills and credit card debt and not student loan debt?

                        Government programs have a reason and a rationale. The reason for the program is the truth. The rationale for the program is a lie. We are only told the rationale for government programs. In the case of student loans, the rationale (the lie) is to help young people obtain higher education and thus be able to earn more during their working lives. The reason (the truth) is to benefit moneyed constituencies, in this case by subsidizing student loan lenders, colleges, universities, other “schools,” administrators, professors, teacher assistants, researchers, and unions working for these institutions (hereafter called “Leviathan Education”). The government subsidy supports these preferred groups by turning our young people into indentured servants. An online definition of indentured servant is: “A person under contract to work for another person for a definite period of time, usually without pay but in exchange for free passage to a new country.” Studenloanhero.com reveals that about 43.3 million Americans hold student loans. The total student loan debt is about $1.26 trillion. The delinquency rate is 11.6%.

                        Some people believe that people ought to pay their debts. (The author is a lawyer who has never practiced bankruptcy law for this very reason.) But when a person is defrauded, the legal system ought to provide a remedy to the victim.

                        Our young people are being defrauded by the Federal student loan subsidy program. The subsidy is designed solely to benefit Leviathan Education and to turn the poor, gullible students into indentured servants. Here is the fraud: The young people are led to believe that if they will agree a decade or more of indentured servitude, then, after 4 years of higher education, they will get a well-paying job and easily pay their student loan debt. A $100,000 10-year fixed loan at 5% interest requires monthly payments of $1,060.66. A mature, financially astute Libertarian can see through this fraud immediately. Trained from youth to trust her government, the state-educated teenager is not so insightful. She signs her young life away to a bank on the fraudulent representations of her greedy, lying government-paid advisors.

                        Any truthful person within the bowels of a university will have many anecdotes about the negative effects of government education subsidies. One common theme is the employment of people who are biased in favor of the Socialist policies of our government. One source claims that Liberal (i.e. Socialist) professors outnumber Conservative (i.e. liberty leaning) professors 5 to 1. There are hundreds of thousands of highly educated people who will argue in favor of government subsidies for Leviathan Education precisely because they are paid from those subsidies.

                        A few of the systemic horrors of government subsidized higher education are these: the pervasive political correctness movement, the presence among the faculty of teachers like the raging, red-faced University of Missouri professor who called for “muscle” to remove a journalist on a public sidewalk photo-documenting an incident, and the uproar on the Emory University campus when someone wrote “Trump2016” in chalk on a sidewalk prompting Emory’s President James W. Wagner to vow to review security camera footage and prosecute those responsible for the chalking! The Emory incident resulted in the invention of the appellation “snowflakes” for the students “traumatized” by such scribblings. One can imagine the enthusiasm of business people when considering Emory snowflakes for employment.

                        One hopes that many taxpayers would resent subsidizing higher education in its present state, if not under any circumstances as a matter of laissez faire principles.

                        One might ask—other than raising the salaries of the academic shills who argue in favor of government subsidies for Leviathan Education—what are we getting by subsidizing Leviathan Education and thus, as a matter of economic law, raising the tuition. The University of Alabama has aquatic facilities that include multiple swimming, a water slide, and a lazy river. Louisiana State University (LSU), Notre Dame, and Rutgers have climbing walls. High Point University as a first-run movie theater with free popcorn, drinks, and snacks. The University of Maryland has a recreation center with two large gyms, an indoor track, a ropes course, and a beach volleyball court.

                        No one reading this essay dislikes luxury facilities. Few reading this essay can afford luxury facilities on demand. No one should mortgage the rest of her life in order to enjoy luxury facilities for the four years immediately following high school (or ever for that matter). Those of us who very occasionally enjoy luxury facilities save for decades to do so. The enjoyment of luxury facilities should be the result of years of an individual’s work, planning, and savings, not the result of a government fraud perpetrated upon trusting, naïve teenagers.

                        The simplest solution to the student loan crises would be to repeal the Federal law disallowing the bankruptcy of student loan debt. There is no difference in principle between a debt for consumer goods, medical care, and education. With student loan debt bankruptable, lenders would be more careful in their lending practices and victims of the current student loan fraud could escape from their unfair burdens.

                       What about higher education? A lazy river, a climbing wall, and free snacks at the movie theater having nothing to do with higher education. Socialist professors indoctrinating teenagers in the ways of Marx have nothing to do with higher education. Emory snowflakes are not educational ideals at which to aim.

                       A classical education in the Great Books is the core of higher education. For those who insist upon STEM (science, technology, engineering, math), a free market in higher education would have thousands of options for everyone. In the absence of government interference, a higher education could be had by all for less than $5,000 per year. (The actual in-state tuition at public universities is $9,410 in 2016.) Thirty students paying $5,000 per year is $150,000 which would be more than enough to employ and house a professor. A college with 300 students would have 10 professors with a student/teacher ratio of 30 to 1.

                        The simple free market principle that should not be forgotten is that subsidies increase the price of the good subsidized whether the good is corn, sugar, consumer goods generally, healthcare, or education. Government subsidies are always bad, morally and practically. They are bad morally because government takes money by force from people and gives it, against the will of the consumers who are spending their money otherwise, to a favored constituency for political reasons (power and more power). They are bad practically because they do not achieve the end sought. For example, in the case of education, the stated goal (the stated rationale is always a lie) is to help high school students achieve a higher education, yet the result has been to create a large number of unemployed and underemployed indentured servants.

                        The Federal Government should get out of the business of subsidizing higher education and stick to its only proper business which is national defense. (According to Libertarian theory the three functions of government are national defense, the police, and the courts. State and local governments can provide all the police and courts that we need. National defense is the sole proper function of the Federal Government.)