Democrats’ Faux Plan to Relieve Borrowers from Crushing Student Debt

Posted on September 6, 2020 by Jim

During the primary season, various Democrats were pushing the idea of forgiving outstanding federal student loan debt. While this idea stuck in potential voters’ minds, this policy is not actually what the Democrats have put forward in their party platform. Reading the “Providing Borrowers Relief from Crushing Student Debt” section of the 2020 Democratic Party Platform, we find that they essential propose making the federal student loan program even more a welfare program combined with a tax targeting those who become successful.

These proposals are significant in that the Higher Education Act of 1965 remains up for reauthorization, which is Congress’ opportunity to review and fix the problems in the law that have harmed student borrowers. The platform details are often not supported by the College Affordability Act [HR4674], which provides statutory detail for implementing the Democrats’ preferred actions on HEA reauthorization.

The platform proposals begin with authorizing “up to $10,000 in student debt relief per borrower” related to the COVID crisis.  While not specified in the platform, but based upon existing Democratic proposals, this would have the Department of Education “make payments” for the borrower during the health crisis, so not a principal balance reduction but a monthly payment reduction.  Given that the COVID shutdown is of limited duration and Congress has not authorized these funds, this Democratic proposal is an empty promise. This proposal contrasts with President Trump’s order that temporarily suspended payments and interest accrual.

In the long term, the Democratic platform promises to “ease the burden of high monthly student loan payments through legislative and administration relief processes, including creating a simplified repayment process.” The College Affordability Act has detailed how the Democrats plan to address lowering payments [see SEC. 4101. TERMINATION OF CERTAIN REPAYMENT PLAN OPTIONS AND OPPORTUNITY TO CHANGE REPAYMENT PLANS in the bill] by limiting repayment plans to either the existing fixed or income-based plans.

The Democratic platform expands this concept with these income-based proposals:

  1. For those earning less than $25,000, “pause monthly billing and stop interest from accruing on federal student loans,”
  2. For those earning more than $25,000, “cap payments at no more than five percent of discretionary income,”
  3. “After 20 years, remaining federal student loan debt should be automatically forgiven without tax liability.”

Essentially, this converts the federal student program into an indentured tax plan. Borrowers will remain indentured for 20 years of repayment. Low-income borrowers do not pay the tax until their income increases. Meanwhile, the tax on higher-income borrowers is determined by an administrative definition of discretionary; fungibility in that definition could increase or decrease the tax amount subject to the winner of the next election while creating campaign contributions from industries that want to be counted as non-discretionary spending. In the end, these repayment terms would create a minor revenue stream to offset a fraction of large debt write-offs that will be the fiscal problem for future Congresses.

Related to principle reductions prosed earlier by various Democrats, the platform is less forgiving. It only targets tuition [not room & board, materials, living expenses, etc.] but only for selected types of schools,  “two- and four-year public colleges and universities, and…private HBCUs [Historically Black Colleges & Universities and MSIs [Minority Serving Institutions].” This follows the Democratic tendency to discriminate against private institutions and vocational education while favoring racially discriminatory policies.  Further, their proposal is means-tested for those earning less than $125,000 which suggests that the forgiven may be delayed decades while borrowers continue to pay interest on the higher principle.

The Democratic platform expands on the proposals in the College Affordability Act related to the existing Public Service Loan Forgiveness program [see SEC. 4303. AMENDMENTS TO TERMS AND CONDITIONS OF PUBLIC SERVICE LOAN FORGIVENESS of the bill].  Given that the House has not included them in the Higher Education Act reauthorization, these may be empty campaign promises by the Democrats. Currently, a qualified public servant has to make payments for 10 years before being eligible for forgiveness of their remaining balance. The Democratic platform proposes “forgiving up to $10,000 in student debt per year for up to five years, and apply this action to people who have already dedicated 5 years or less of service to working in our schools, government agencies, and non-profit organizations.” This follows the Democratic policy pattern of loan forgiveness being delayed and highly qualified.

The treatment of student loans in bankruptcy is an often-discussed topic. In the Democratic platform, it supports allowing “student debt to be discharged during bankruptcy,” but no such proposal exists in the College Affordability Act, so likely another empty promise to solicit votes.  Meanwhile, student loans are already dischargeable in bankruptcy in cases of undue hardship.  Given income-based repayment options and insurance for permanent total disability claims, there is not a strong case to be made for increasing taxpayer liability by allowing lower standards for discharges through bankruptcy.

Why do the Democrats make it all so complicated when some proposed simply to forgive the debt? This debt is a patronage trap that indentures debtors to politicians. College is unaffordable [due to federal financing]; if you vote for these politicians, then they will “help” you pay for school, but instead you mortgaged your life to them. Now if you will vote for these politicians, then they will promise to make your burden easier to bear; however, if you do not vote for them, then your debt will crush you. But those politicians will not free you from your debt, because it is how they hold you in obedience. The politicians create the problem, sell you a solution, and then hold you with the consequence of that solution.

The Democrats have been lying to you. They do not want to forgive your student loan debt. They want you dependent upon them to temporarily protect you from the debt that they sold you into.

Is there an alternative to being an indentured servant to politicians as the Democrats propose while also not crushing your life with unpayable student loans? Yes.  For details, see “How to Fix Federal Student Loan Debt without the Democrats’ Debt Forgiveness Promises.”

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Democrats Ally with Sociopaths to Cause Violent Riots

Posted on September 3, 2020 by Jim
Attorney Robert Barnes had an interesting observation the other day related to his youthful research into the waxing and waning of Klan violence over time, which relates to today’s violent rioters.
 
He observed the political permission escalates the violence of sociopaths; yes, I realize that is a colloquial and not a clinical term. Essentially, that the population of sociopaths is relatively stable over time, but that when they are granted political protection then their mayhem runs wild in the street or the back roads.
 
Back when I was researching organizational incentive systems in terrorism organization, I observed that a terrorist organization was dependent upon three critical components, which included the recruitment of a criminal element that provides the drive to violence. I think that Barnes’ observations about the historical Klan are parallel to my own observations.
 
Related to today’s violence, the Democrats are recruiting sociopaths to commit violence upon the urban residents of Democratically controlled jurisdictions. Black lives matter so much to the Democrats that they inflict them with the targetted violence of sociopaths.
 
While Democratic prosecutors play catch-and-release with these sociopaths, I wonder if these thugs are also victims of the Democrats. Their arrests demonstrate that they are a danger to self or other, but before releasing these thugs are they evaluated for an untreated psychological disorder so they can be involuntarily committed and treated instead of used by Democratic politicians to sacrifice their constituents with violence to the mythos of Orange-Man bad?
 
Our excessively high prison population is a consequence of deinstitutionalizing the mentally ill. Instead of treatment in a mental hospital, those who cannot care for themselves are committed to the rape culture of prison life unless their violent tendencies are useful to the ephemeral aspirations of Democratic politicians.
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Democrats’ Claim Check on the Lives of Student Loan Borrowers

Posted on September 2, 2020 by Jim

I was reminded this morning that I left the student loan industry 12 years ago immediately before the financial collapse related to Fannie and Freddie.

I choose based on the consequences of statutory changes by Pelosi after her elevation to Speaker less than 2 years before.  There was no longer any reasonable chance to be successful in my goals, privatization, and improving the lives of student borrowers. I recognized that the collapse of the industry was inevitable under those rules and that students would end up indentured by debt to serve politicians.

In a committee hearing last year, Rep. Maxine Waters scolded bankers about their greedy fleecing of student borrowers and the bankers replied was that they had left that business a decade before. Now it is the greedy government that is fleecing the lives of student borrowers to put them into the service of politicians; when one stops trading in dollars, then the trade in human lives begins again.

Now Democratic politicians have presented their claim check upon the lives of those they indebted…vote for us in November if you want relief from the debt you owe the government.  See the “Providing Borrowers Relief from Crushing Student Debt” section on page 70 of the 2020 Democratic Platform, which demonstrates that their actual pie-in-the-sky offer is less than the earlier marketing slogan of debt forgiveness.  Through federal student debt, those politicians own those debtors [who were previously citizens] and they will give their debtors scraps not freedom.

Back when I was working in the student loan industry, before it was nationalized, my specialties included rehabilitation of non-performing debt and risk management. I know how to fix this indebtedness problem for existing student loans and how to prevent student borrowers from being saddled with unproductive borrowing. However, no one wants to solve these problems. Schools want an unlimited supply of government cash. Politicians want to have control over others. Students want something for nothing. So shouldn’t everybody be happy because they got it?

Yet those students who abdicated their responsibility to the schools and politicians are not happy in their stifling debt.

I have previously written two pieces on simple means to solve the student loan debt crisis for your consideration:

 

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The Talented Tenth Betrayed the Black Community

Posted on November 25, 2019 by Jim

The Collectivist Left has propagated a narrative that blames the problems in the black community on racism in America.  While race is an illegitimate standard by which to assess such political questions in a country which has proven equal protection before the law, let’s talk in terms of racial distinctions for the purpose of relating the Collectivist Left’s narrative to WEB DuBois’ 1903 essay “The Talented Tenth.”   In looking for a cause to contemporary concrete problems of racial self-segregation, economic lagging, educational gaps, et al, it is correct to look for the ideas that are the root cause of these consequences.  That cause was the shift of black intellectual thought from the American individualism of Booker T Washington to the Germanic collectivism of WEB DuBois as exemplified by DuBois’ “The Talented Tenth” essay.

A hundred plus years ago, there was a leadership transition amongst American black intellectuals from Booker T Washington to WEB DuBois, who had fundamental differences at the root of their intellectual contributions.

Born a slave, Washington was educated at Hampton Normal School, which had the purpose of educating freedmen after the Civil War, and he went on to create the Tuskegee Institute in Alabama.  Washington emphasized the improvement of individuals through practical education for the purpose of skills development to support an independent and productive life.

In contrast, DuBois was born in the North to a family that had immigrated from the Caribbean and had been free before the Civil War; he was educated at Harvard, studied in Germany, and founded the NAACP.  DuBois emphasized collective political action by the black community led by an educated elite to achieve broad political rights.

Thus, in the context of the then Jim Crow South, their disagreement was concretely over whether it was more important to educate the masses and secure economic freedoms [Washington] or educate an elite who would negotiate with the power structure to secure political rights.  Today, DuBois’ emphasis has been achieved by the black elites who continue to hold on to their personal position and power while lamenting that Washington’s emphasis was not achieved and DuBois’ achievements are insufficient while developing of a dependent fatherless underclass.  By examining DuBois’ “The Talented Tenth” essay, we can identify ideas that are at the root of these negative consequences in order to identify necessary ideological corrections.

In his 1903 essay, DuBois’ fundamental thesis, in contrast to Washington, was that the primary emphasis must be placed on the development and education of an elite, the exceptional 10%, who would lead the black community “away from the contamination and death of the Worst, in their own and other races.” Further, DuBois derided education focused on technical skill and making money.  After the foundation of an educated black elite had been achieved, then the black community would develop skills and talents necessary for bread winning. DuBois identified that historically “the sole obstacles that nullified and retarded their efforts were slavery and race prejudice;” given the current prevalence after more than 100 years of this same claim, one may question the effectiveness of today’s black political elites at achieving meaningful change.

For DuBois, the development of these few black elites would be done by colleges and universities where these superior individuals “are not so mystified and befuddled by the hard and necessary toil of earning a living, as to have no aims higher than their bellies, and no God greater than Gold.” As they had been, DuBois expected that the educated elite would be “the group leader, the man who sets the ideals of the community where he lives, directs its thoughts and heads its social movements;” yet at that time, he found that the black community was deficient in such social leadership. For DuBois, it was particularly important that the ignorant masses be taught by “teachers of their own race and blood” as a demonstration for those masses of “an attainable ideal” through the representation of a black teacher.  Further, that the work of such teachers not be focused “simply for bread winning, but also for human culture,” which I add would be informed by an alien German collectivist philosophy of Kant, Hegel, Marx, et al as a basis for DuBois’ new culture. DuBois acknowledged the importance of industrial education for the masses, but prioritized developing institutions and spending money so that a limited number of college educated black elites could be trained in order “to inspire the masses, to raise the Talented Tenth to leadership.”

Overall, DuBois is a skilled reporter of facts, but his analysis of those facts is corrupted by flawed collectivist premises.  The point now is not to reargue the correct policy to be followed after 1903, but to look at the consequences of those ideas applied to reality over decades and to assess the need to change old thinking.  Now in Current Year, Jim Crow and legal segregation has been abolished for a few generations. For that, much credit is owed to the NAACP’s legal work in overturning racial discrimination through the courts and later legislatures.  Yet today, despite the creation and empowerment of the Talented Tenth, many of the concrete points cited by DuBois in his essay still are a problem today, such as fatherlessness, a lack of qualified teachers, and the negative social influence of degrading cultural forces.

Today, there isn’t actually a uniform black community as was mostly true in the segregated South familiar to Washington and DuBois. Instead of a shared history of slavery, segregation, legal abuse, and alienation, the black “community” today contains a diversity of those who integrated, those who immigrated from other countries in order to live the American dream, urban descendants of the Great Migration to the North, and an underclass of government dependents.  Frankly, the black “community” is full of individuals who live the American promise with the exception of that intergenerational underclass of government dependents, who also exist in all other races as well.

Political rhetoric today focuses on the intergenerational underclass who are essentially shepherded by DuBois’ Talented Tenth as the basis for their privileged careers and political power.  In exchange for political patronage [government jobs, contract set asides, welfare spending and subsidies], the Talented Tenth delivers the black vote to the Democratic Party machine at a rate higher than any other constituency.  In exchange, the Talented Tenth agree to policies that harm the black community such as:

  • restrictive labor and business laws that sacrifice jobs,
  • professional certification and licensing requirements that expensively block opportunities,
  • gun disarmament that prevents self-defense from criminals,
  • financial inducements to block the formation of intact families,
  • political attacks on private trade schools that offer vocational training in high paying job sectors, and
  • financial regulations that obstruct access to credit.

Of the above, the most pernicious are the urban public schools that utterly fail in the education of urban youth while operating for the benefit of the employees utilizing such misbegotten educational theories that it amounts to crippling the children. This was the big failed promise of DuBois in the Talented Tenth…the investment in educating the elite did not translate into black students developing life skills under the guidance of inspiring black teachers.  Instead, the Talented Tenth through their political influence in the Democratic Party made efforts to block all efforts to improve the education of urban black students by:

  • testing teacher qualifications,
  • firing ineffective teachers,
  • incentivizing teachers through merit pay and performance bonuses,
  • allowing for competition of private education management through charter schools,
  • reassignment of students with disruptive discipline issues,
  • abandoning Progressive educational methods that fail to educate, and
  • a commitment to funding and promoting vocational course options.

Beyond just the underclass and urban communities, DuBois’ prioritization has had a broader negative outcome over cultural norms related to what it means to be black in America.  Earnings gaps are still being reported by race; such gaps are attributable to the ideas in DuBois’ Talent Tenth essay as it has influenced education and career choices.  Consistent with DuBois’ direction, American blacks tend to gain higher education degrees in less lucrative fields, seek employment in the lower paid public instead of the private sector, and opt less often for employment in business leadership and entrepreneurship.  Of course, each individual makes their own choices about their education and career, yet broader trends are consistent with DuBois’ themes of anti-capitalism and community development in his Talented Tenth essay.

The gap between the promises of DuBois’ Talented Tenth and actual outcomes impacting individual lives has fostered more recriminations and complaints of betrayal than an actual conversation about whether the correct ideas are being used to achieve the correct goals.  Several generations after segregation and Jim Crow ended now is the time to seriously have that conversation.  Politically the #Blexit rhetoric and energy of new black conservatives promise a broader discussion than has been had, but that is not fundamental enough and has not seriously engaged black intellectuals who broadly speaking are happy to personally benefit in the status quo from their Talented Tenth pedestals.

While DuBois was correct to say fundamental educational and moral reform was necessary, he was utterly mistaken in his anti-capitalism and degradation of productive work in all but a few fields.  Related to education reform today, public control of education and financing is the primary obstacle to better education outcomes for students.  Without K-12 privatization, the best option for parents, especially fathers, is to invest more time and money in actively developing their own children as the public schools will not do so.  DuBois and many of today’s new black conservatives would agree that moral reform would be led by Christian churches; however, I suggest a more radical and individual approach to moral reform through Ayn Rand’s Objectivist ethics, a rational selfishness rooted in purpose, the practice of virtues, and a fundamental understanding of the role of choice in each of our lives.

In general, contrary to DuBois, we need to focus on American solutions and not black solutions; further, these changes need to be rooted in ideas from American individualism and not DuBois’ Germanic collectivism.  Such change does not require everyone to agree, as each individual is at liberty to choose paths that primarily advance their own life and that of their loved ones while possibly having a secondary positive influence in their acquaintances.  Fundamentally, this is accomplished by individuals independently identifying the values that they seek in their own life, including in their productive work, without subordinating themselves to someone else’s expectations or direction.  Each of us needs to recognize that our lives are fundamentally the consequences of our choices, and not the influence of external forces such as racism, while we each take responsibility for our own choices.

Within the context of politics, each of us must also think independently instead of following a racially assigned script or be obedient to the choices of a political party. Personally, I recommend everyone consider that the protection of each of our individual rights is the only legitimate basis for government action and that government restraints on each of our ability to act on our own moral judgment should be repealed so that we are free to pursue our opportunities without violating the rights of anyone else.

Within the context of this post, I don’t intend to be prescriptive of what the reader must think on these issues but emphasize instead that they must think and do so fundamentally.  The lives of too many of our fellow Americans are circling the drain of DuBois’ impotent ideas. Many of the same problems that he identified not only still exist but are worse in many ways.  It is time for each of us to learn from past mistakes and make new choices wisely.

 

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How to Fix Federal Student Loan Debt without the Democrats’ Debt Forgiveness Promises

Posted on November 22, 2019 by Jim

On the campaign trail, Democratic candidates fall over themselves to promise broad federal student loan forgiveness for votes; but when it comes to reauthorization of the Higher Education Act, which governs the federal student loan program and is before Congress right now, the Democrats offer no such large scale forgiveness because words are wind and keeping such promises will endanger the financing of the Pell Grant entitlement and burden the federal taxpayers with that debt as US Treasury borrowed the money that financed those federal student loans.

Student loan indebtedness is a real problem for many young people across the country, because of prior Democratic efforts in the Bush and Obama Administrations to nationalize the federal student loan program and expand it by raising federal student loan limits, especially for graduate school.  Journalist Tim Pool has opined that this is an issue that can’t be ignored as the young’s debt to the federal government makes them more open to sacrifice everyone else to Socialism in order to get from under their own personal unmanageable federal student loan debt.

Pool’s point is why I left the education finance industry in 2008 after 20+ years of experience solving problems, especially related to delinquency and loan default, that risked financially ruining the system.  The straw that broke my back was when my company gave up its almost successful effort to privatize the system and instead sold its federal student loan portfolio to the government before the 2008 US financial crisis.  At the time, I said that I may return when the system fails and people become open to actual solutions, which is the spirit in which my below suggestion is made.  Systemic failure has taken longer than I expected because I did not account for the Federal Reserve conjuring money to finance unsustainable federal borrowing.

Let us begin by correctly defining the situation. The vast majority of student loan debtors both owe the federal government money now and on an ongoing basis to pay off student loans that are owned by the federal government and at the same time, these debtors are making on-going payments for a future benefit through the Social Security Retirement Benefit program.  Let me restate that: at the same time as young Americans are not able to make ongoing payments for past education benefits, the government forces them first to pay for future retirement benefits before paying for past education benefits. How does that make any sense? It doesn’t make sense and it is the Welfare State cross that is breaking the back of America’s young workers.

How do we fix this legislatively created contradiction in which the same individual both owes money to the government immediately that they can’t pay and is owned money from the government in the future based upon payments that they continue to make? The simple solution is to redirect a student loan debtor’s past, current, and future contributions from the Social Security old-age retirement benefit program to repay their student loan debt.

While this will benefit the student loan debtor by accelerating the repayment of their student loans, what will it cost them?  Social Security retirement benefits require earning quarterly work credits in order to qualify for retirement benefits, so that employee old-age FICA contributions redirected to federal student loan repayment will not earn work credits towards Social Security retirements benefit, thus they will have to retire later in order to receive full Social Security retirement benefits [thus a targeted raising of the retirement age for those who didn’t work as long and borrowed from the federal government to attend a post-secondary school].  Further, the employer’s portion of the old-age FICA contribution will be added to the Social Security Trust Fund without the worker accruing any quarterly work credits towards retirement benefits.

Does this plan weaken the Social Security retirement program with its already existing unfunded liability? No.  Matching employer contributions still go to fund Social Security retirement benefits for other retirees while not incurring any additional future liability for retirement benefits until that debtor’s federal student loan has been repaid.  If previously paid employee contributions to the Social Security Retirement Benefit are redirected to federally owned student loan repayment, then such is offset by a reduction in the future benefit liabilities for the entire retirement program.  Overall, the reduction in the present value of future liabilities to the Social Security retirement program plus the retention of employer contributions will result in a reduction in the unfunded liability for the Social Security retirement program while employees who borrowed from the federal government will be able to repay their federal student loans earlier but will retire later so that future federal outlays overall for retirement are either reduced or neutral in particular instances.

In sum, student loan debtors have their federal student loans paid off sooner, the unfunded liability of the Social Security retirement program is reduced, and college-educated debtors can volunteer to retire later in life in order to alleviate their near-term cash flow deficiencies related to youthful student loan repayment.

Does this cover everyone with student loan debt? No, as public employees often do not pay FICA taxes nor do the self-employed.  Yet, this plan does cover most employed young people burdened with student loan debt.  There are already forgiveness programs for public employees so this issue is partially covered but may require an additional plan.  Related to the self-employed, Congress could change statutes to allow them to redirect retirement funds to federal student loan debt without a penalty.  Further, it is important to remember that the majority of federal student loan borrowers repay their debt, but this plan does give them options to be able to repay this debt earlier so that it is not a mortgage on their entire work life.

There is another category of student loan borrower that this suggested program does not cover and they may need to make different choices in their life.  I did not suggest that a man should be able to redirect his Social Security contributions to repay his wife’s federal student loans.  Given the number of men who are rewarded with divorce papers after repaying his wife’s student loans, I would not suggest the transfer of future retirement benefits from husbands to wives as such would be sexist in favor of the wife.  Instead, when a woman is burdened with federal student loan debt, she will likely need to continue to work with her retirement funds repaying her student loan while her husband may stay home temporarily with their young kids, which would be a great benefit to the children as #MenAreGood.

How does this look to the typical student loan borrower? They will continue to make some monthly payments to their student loan, possibly one set by income-contingent repayment; however, they will repay their student loan debt closer to the 10-year repayment term of prior generations instead of 25 to 30 years for the most indebted student.  Further, the federal government will have a tool to reduce the liability of defaulted student loans by offsetting their student loan debt with previous and on-going employee contributions to the Social Security Retirement Trust Fund.  Overall, it allows the student loan debtor and the federal government to offset liabilities immediately now in a way that benefits the potential of the individual federal student loan debtor.

Without any rational sense, federal student loan borrowers both owe for past student loan benefits that they cannot immediately repay while paying for future Social Security retirement benefits that they will not see for decades.  Frankly, the individual owes themselves and can’t repay themselves as the government programs are contradictory and self-defeating while grinding up the individual in that contradiction.  Instead of chewing up the lives of these federal student loan borrowers in these contradictions, we should alter the terms of these programs so that we can protect our children from these contradictions.  After all, do we love our children and want grandkids more than we are beholden to these contradictory federal government programs?

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