Joe Biden, as king, has declared student loan forgiveness of up to $10,000 (or more) for those making under $125,000 (or $250,000 for couples); except it isn’t really forgiveness, because the lenders aren’t forgiving anything.  They are just being paid by other people.

While most debate the logic or illogic of such a move, there isn’t a lot of talk about where Biden gets the constitutional authority to do this.  Supposedly he is using COVID emergency powers as an excuse, but Congress is supposed to authorize spending.  And to be sure, this is spending and potentially inflationary.

College and student loans are just another area in life where the government has its hands all over the place and has made a disaster of things.  In a free market, the government wouldn’t be backing student loans.  This has served to drive up the price of education (if that’s what you want to call it) while sinking people into debt.

We hear about how we need government regulators to protect people from predatory lenders.  But in a free market, lenders have an incentive to not let people get in over their heads.

In the housing market, which has its share of government interference, at least there is collateral backing up the loans.  Even if someone takes out a loan for $190,000 for a $200,000 house, then the buyer has some stake in it.  As long as the price doesn’t drop, then there is $10,000 in equity, plus the closing costs that were put in.  If you default on the mortgage, then the lender gets the house.

With student loans, what is the collateral?  Even if your degree isn’t in gender studies, what is to stop someone from taking out a big loan and defaulting right after finishing school?  That is why the bankruptcy laws are different, and it is very hard to discharge student debt.

In a free market, lenders would be very careful to ensure they get their money back.  They also wouldn’t lend $200,000 for someone to get a degree in cultural studies.  Even a potential doctor would have to show some credentials of likely becoming a doctor.

So the whole thing is a mess created by government.  Still, people voluntarily made these decisions to take on student loans.  Maybe it’s unfair, but it is more unfair for someone else to pay for those bad decisions.

Irrational Anger?

I have been surprised how divisive this issue quickly became.  The more outspoken people in this case are those who oppose this move.  I’m sure someone who has student debt who will benefit is secretly cheering.  Maybe they even recognize that it isn’t fair, but they’ll take what they can get.  They know they are getting the short end of the stick with other government policies.

I completely agree with all of the people who are angry and many of the reasons being given.  It is unfair.  Some people gave up vacations and nice cars in order to do the responsible thing and pay off their loans.  Some people worked through college to minimize or eliminate the need for loans.  Some people chose not to go to college and now get to pay for those who did.

Even though there is an income cap, it is quite high.  I can imagine a couple making $200,000 per year combined who get this loan forgiveness (maybe for both of them), while the plumber down the street has to pay for part of it.

Still, with the amount of money Congress has wasted and committed this year alone, it is funny that people are so outraged.  I mean, at least here some people are getting some relief.  It is a transfer of wealth.  When $50 billion is spent on Ukraine, it is going to weapons manufacturers and corrupt politicians in Ukraine.  Yet, there is less outrage there.

I see this with my kids.  It is very important to both of them for everything to be fair between the two of them.  If one of them gets one cookie and the other gets two, then one of them will be yelling that it’s not fair.  I’m not sure if this ever changes, even as adults.

It wouldn’t matter if the kid down the street got three cookies.  It certainly doesn’t matter to them that there are starving children in Africa or Asia.  They compare everything against each other.

So it goes with Americans.  It is something in human nature.  If their money goes off to some corrupt country overseas, then everybody in America is seemingly getting screwed equally.  But when you favor one group over another, then all heck breaks loose.

Don’t get me wrong here.  I am glad that some people are really upset over the whole student loan bribe.  It isn’t even fully partisan.  There are some Democrats who are irritated who made good decisions in not taking on debt or paying it off responsibly.

If Joe Biden thinks this will favor his party in the midterm elections in November, I think he is mistaken.  It might have irritated as many or more people as it helped.