Don't Bail Out People with Student Loans! Nick Gillespie on Freedom Watch with Judge Napolitano

On Tuesday, October 25, I was on Fox Business' Freedom Watch with Judge Napolitano. The topic was the call by many Occupy Wall Street protesters for the government to forgive student loans and President Obama's interest in doing something on the matter.

I argue that forgiving student borrowers is a bad idea and merely continues the cycle of bailout economics that has been disastrous for the country.

About 5 minutes.

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Check out Reason's Occupy Wall Street (and LA and DC and…) video playlist. First up is Peter Schiff representing the 1 Percent in New York's Zuccotti Park. Also in the mix: Remy's Occupy Wall Street Protest Song, Cop Punches OWS Protester, Anti-Semitic Protester at Occupy LA, and many other hits:

Comments

[Bill]

So nice, you had to post it twice.

[doomboy]

Ok, no bailouts, but how about changing the bankruptcy law back so student loans are dischargeable?

Why should student loans be treated different than other types of loans in bankruptcy?

[R C Dean]

I'm no expert, but I believe its because they are (were?) federally guaranteed.

[Strawman]

Yes. It is due to the federal guarantee.
When the GSL what put into place, this was part of the negotiation. As the government generally wants to be exempt from bankruptcy (i.e. student loans and taxes).

I agree with doomboy. It should be dischargeable in Chapter 7.

I also don't have a problem with the bailout.

[Publilius]

Originally student loans were dischargeable just like any other debts. The system was set up to provide low interest loans by having the Feds guarantee them. My loan back in the 1970s was 3% interest for seven years. The system actually worked well.

Then in the mid-1970s, some bright law student realized that when he graduated from law school, he had no assets, no house, no car, no anything. Then was the time to declare bankruptcy, before he started his career. He did this, and was freed of his student loans.

Other law students heard about this and decided they would do the same. A couple years later, medical students heard about it and did the same. The taxpayers ended up bailing out a lot of loans.

By the early 1980s, so many students were doing this that Congress had to do something. Either eliminate the student loan guarantees or make them non-dischargeable. And now you know the rest of the story.

[Apocalitarian]

They could have easily made them dis-chargeable only in a chapter 13 and added additional conditions such as they were only dischargable after 5 years of payments or lapse of 7-10-15 years from graduation. Hell, a common money judgment is not dischargeable in a chapter 7, but it is in chapter 13 after paying for about 3-5 years. But to say it is never dischargable, no matter how much time passes truly makes it a government authorized form of slavery.

[Pro Libertate]

I think that's right. If they had remained dischargeable, the government, not the borrower, would be on the hook for repayment defaults.

Of course, that helped create this mess in the first place. Shouldn't be any guarantees, and the loans should be treated like any other.

If help must be given, then it should be in the form of grants.

[Drake]

Yes - Get the Feds out of the loan business. Once students start declaring bankruptcy after graduation, no more loans.

Then it will be back to the (good) old days of parents co-signing student loans and putting their home equity on the line. (Assuming they aren't $100k underwater on their McMansion)

[Pro Libertate]

Better than the whole country subsidizing the business. Frankly, it's government intervention in the higher education market that drove the prices up astronomically in the first place.

It's one thing to provide grants and quite another to mess around with lending.

If tuition weren't so obscenely out of whack, a decent industry for students loans would still exist. Crap, lenders give unsecured money away even in today's economy in riskier situations than that.

[wareagle]

If tuition weren't so obscenely out of whack....
----------------------------
this is exactly why tuition is out of whack. To colleges, grants and loans are basically free money. Higher ed knows that both will be given out every year, so they can get away with jacking up tuition since most of higher ed is govt-run anyway.

[CatoTheElder]

Who in his right mind would loan his hard-earned money to a young, unrelated stranger who could not demonstrate a work history and an income history, or provide collateral that was worth significantly more than the principal of the loan?

[Pro Libertate]

Risk-based pricing and actually paying attention to scholastic performance and the marketability of the major. I bet there'd be a significant number of lenders who would be up for that.

[BigT]

Maybe, but at what interest rates? Not the super low rates of today. And co-signers would be required for lower rates.

- a co-signer

[free2booze]

Or, kids could work, and save up enough money to pay for tuition with ***gasp*** cash. Sure, that might mean working a part time, taking a semester off on occasion to work, or even living at home with mom and dad, but big picture, that's a much smaller price to pay than years of debt.

[Apocalitarian]

could also mean going stright into the workforce, there are sound arguments that the statistics about increased earning after college are fudged.

[Tim]

Is that the new animatronic Nick? The hair gives it away.

[WWNGD?]

Free __________ is a right!

[Fist of Etiquette]

"It has to stop somewhere because people seem to forget that when they're getting bailed out, it's coming out of somebody else's pocket and, in fact, it's coming out of taxpayers' pocket and it's coming out of the economy's pocket..."

Forgetting and ignoring aren't the same thing.

[Matt C]

Peter Schiff should always walk around with a microphone and a camera.

[poetry]

yup

[Glenn]

Please explain this duplicity to me. Occupy Wall Street protestor, "The government is wrong for bailing out banks. The banks spent our money frivolously and they don't deserve to be bailed out. I on the other hand, spent my student loan money on a Masters in English Poetry, which is not dumb at all, and I deserve to be bailed out." You're making it harder and harder for me to take you seriously OWS.

[Federal Dog]

"You're making it harder and harder for me to take you seriously OWS."

Out of curiosity, why in the world did you take it seriously to begin with?

The "Defecate On _______" movement contains nothing to respect.

[Mango Punch]

The judge is wrong is flat out wrong at 1:03 when he implies that renegotiating loans is at the expense of tax payers... renegotiating loans should lower the default rate and save taxpayers $$.

Also, it's complete bullshit that student loans cannot be whiped out in chapter 7.

[Mango Punch]

Nick:

HARP also decreases loss rates. Look at the redefault data. HARP also is only on GSE gauranteed loans, not on subprime crap from people who made a decision to "buy a house we couldn't afford".

[R C Dean]

Depends on how the loan is renegotiated.

Renegotiating is a zero-sum game. Any benefit to the borrower comes out of the lender's pocket.

The only way the lender can benefit is if the actual default rate is reduced. From hard experience in the Mortgage Wars, we have learned that people who fuck up a loan, will fuck up a renegotiated loan. Doesn't seem to reduce the default rate much.

[Federal Dog]

"From hard experience in the Mortgage Wars, we have learned that people who fuck up a loan, will fuck up a renegotiated loan."

We cannot pay for fuck ups period, including fuck ups who indentured themselves for a grievance studies diploma.

[CatoTheElder]

"Renegotiating is a zero-sum game."

Au contraire ... when the State is involved, it's a negative sum game.

[Strawman]

Take from a Chapter 7 Trustee, rarely, if ever, are they discharged in 7. I've never ever seen it.

[TrickyVic]

I'm opposed to a student loan bailout and I have one.

I'm not a fan of teaching people government will help them get out of their decisions. If someone is nice enough to loan you money, you should be nice enough to pay it back.

[Pro Libertate]

I have some last remnants of student loans to pay off (low rate, which is why I haven't bothered paying off the principal), and my wife has some left (not a ton, but not nothing, either). But that doesn't mean I think a bailout is a good idea. In fact, it's a completely stupid idea.

[rather]

Looks like Nick finally paid off his loans; sucker 😉

[TrickyVic]

I believe to have to do community work to qualify.

[rather]

OMG, you might have to take care of poor patient!

[TrickyVic]

Not I.

[Bugatti]

That's right, I forgot you are a libertarian. Don't worry the Libertarian Charity Fairy Solution? ? ? will swoop in and save the vaginas

[rectal wart]

So you wouldn't help the poor if you got to keep more of your money? What are you, some kind of greedy libertarian?

[poetry]

I went to a "worse" school in order to avoid taking out a loan.

So, can I just get a cash payout? Just average the student loan totals of all college graduates in my graduating year, and write me a check. Thanks.

[Tony]

We subsidized primary education when we were an agrarian society. When we became an industrial society we subsidized high school. Now a bachelor's degree is required to get a job in today's information/tech economy, so we should subsidize that. Only if you care about having a competitive workforce.

[Strawman]

This (the libertarians) is the party of "NO". The market will fix it.

[R C Dean]

Now a bachelor's degree is required to get a job in today's information/tech economy, so we should subsidize that.

Because there are no jobs, none at all, except "information/tech" jobs.

[Tony]

People without 4-year degrees have a very hard time finding work. But, by all means, let's ignore the reality of the situation so you can make sure everyone is punished appropriately. A healthy economy is less important than a proper accounting of moral condemnation!

[Copernicus]

People without 4-year degrees have a very hard time finding work.

Not true. Jobs I've had without 4-year degree.

Valet parking. Good pay.

Private swimming instructor. good pay.

Lifeguard. Not bad but other benefits.

Window washer. Good pay. Even better if you can move on to have your own business.

Airline Flight Attendant. Good Pay and awesome flight benefits.

Firefighter.

[Copernicus]

0 years, 1,2,3,4. It doesn't matter.

What people need are actual skills, knowledge, and experience doing something of actual value. Wherever or however they gain these is unimportant.

A University can be a place to gain such knowledge and skills.

A University can be a huge waste of time and money.

Choose which path you wish to follow, AND PAY FOR IT!

[BigT]

"A healthy economy is less important than a proper accounting of moral condemnation!"

A healthy economy is impossible without a proper accounting of moral Obligation.

FIFY

[anotheranon]

People with 4(5,6,7)-year degrees in Bullshit Studies have a very hard time finding work. Let's subsidize more of those!

[Double D]

I had no problem finding work. Never have, from age 13 on. And at around 70-80K a year (depends on what extras I'm eligible for in a year), I'm not rich but doing well as a single guy.

[another Kevin]

Bullshit. I work in "information/tech". I and many of my colleagues don't have a 4-year degree.

15 years ago when I got into software (and bailed out of a college I couldn't afford on a landscaper's wage); I got into the field because it was a place where a degree didn't matter - skills, hard work, and the desire to learn did.

Many promotions and job changes later, I'm happy with my $300K/yr takehome, and more often than not laughing at the incompetent MBA dipshits I have to work with who'd rather show a 200-page powerpoint than actually - you know - do something...

[Drake]

How does a degree in Art History help get a job in our "today's information/tech economy"?

[Tony]

How do you go through life dismissing everything you can't deal with by stereotyping people?

[Abersouth]

How do you do it?

[Abersouth]

How do you do it?

[Abersouth]

Do share how you do it.

[spencer]

its only a minority of people getting this education subsidy.

[Strawman]

Property Values would have not fallen to these levels had the people being foreclosed on been bailed out. That is, at least stay in the home and tack the deficiency to the principle and lower the rate. You don't the the tax payer to do this. The investor could have eaten it.

Instead, everyone's property value dropped. Refinancing became impossible. And the investor is STILL screwed...probably even worst than if the lender was helped out.

There is NOTHING u can do to bail out someone that is out of work.

[NAL]

You're making the assumption that home owners are the only people who matter. What about people who want to become home owners? (Who, incidentally, make up a larger portion of the population) The falling property values are good for them.

[Strawman]

Just as Bank of America can raise fees once the Government tries to control the madness (Atlas Shrugged), people can dump "free market" banks and go to "socialist" credit unions (Atlas Shrugs).

I wonder who will win? I know who loses...it's all of us.

Look, you don't have to bail out anyone. When you lose a job (quit, layoff, or fire), you automatically make less than median income and are eligible for the chapter 7. The real estate investors for your mortgage are screwed.

Any smart ideas of making all personal debt non-dischargeable will probably lead people to just pack up and go...and screw the investor anyway.

Atlas needs to shrug.

[mad libertarian guy]

The real estate investors for your mortgage are screwed.

And here's where your argument gets complicated.

These mythical "real estate investors" in our economy are taxpayers. They aren't banks or those eeeeeeeeeeeeevil bankers. It's me by virtue of F&F backing virtually every home loan made.

[mad libertarian guy]

The main reason why a bailout idea is very bad is because that is the first step to free college for everyone.

You're the one who took out $100k for your philosophy degree. Deal with it.

[Strawman]

And they will deal with it...with a default.

[mad libertarian guy]

Default and bailout are not the same.

There are consequences of default. OWSers just simply want to act like they were never given that money with the expectation of giving it back at some point.

[A fan]

Debtor's prisons - an idea whose time has returned.

[Alice Bowie]

Nobody would assume debt. That's why they got rid of debtor's prison. It wasn't because they were nice.

[Abersouth]

The idea never left. They still exist in six states and I would argue that they exist in everything except name in child support cases.

http://www.fathers4kids.com/ht.....icle_id=78

[Apocalitarian]

which leads to money judgment, which leads to receivership, which leads to economic slavery

[Alice Bowie]

Which you can file a chapter 7 bankruptcy for and be free.

Ask anyone that's done it.

[NAL]

I liked the Peter Schiff video. It looked like he may have actually gotten through to a few of them.

[Jeffersonian]

The message that the fatcats at irresponsible banks deserve to be living under bridges not only resonates with the OWS crowd, it also happens to be true. So does the message that universities have been using the government and loan programs to fuck over the student.

[Justanidiot]

Bankers bad. All.

[Polina]

We are giving away FREE anti-Obama stickers at nobamastickers.net. Let's not have 4 more years of the same.

[spencer]

25% of the adult population owns 100% of the college degrees! Occupy the Educated! End the Ed!

[wareagle]

oh, the inhumanity. Maybe the 75 percenters will be the next group to march.

[spencer]

what a loverly group that will be!

[heller]

99.9% the mass is concentrated in 0.01% of the volume!

Occupy the Atom!

[Apocalitarian]

I understand and agree with Nick's views of the principles. But as long as the US has bankruptcy laws it sounds incredibly sad that student loans are not dis-chargeable in bankruptcy except under the most absurd of circumstances. Now if you know anything about Chapter 11, there are numerous cases where the owners file for chapter 11 in some distant venue based on the absurdity of the bankruptcy law's venue laws (FUCK YOU JOE BIDEN) jam a fire sale through the court where the old owners using a new corporation buy the best assets at a discount using basically the profits earned on the creditor's good faith. I was the attorney in one such case, in the end every one but the bankers and the original owners got fucked.

[Alice Bowie]

Yes

[rac]

OK. Forgive their student loans. Then, pay me back for the loans I paid back, with fucking interest. Thank you.

[heller]

That's is fucking bullshit. How many of those "pro-capitalists" come to capitalism's defense when the other OWSers go on commie rants?

0%

[mer]

How about the loans are forgiven, but the borrower receives a 1099 for the amount as income that they have to pay income tax on?

[CashAdvancesUS]

Well,people take out student loans, then do not pay it off an expect for a bailout.Is it right?There are at least two aspects, one one hand for lots of people taking out a student loan is the only way to get an education, because they have no money to avoid making the debt.On other hand, when they apply for a loan, they know that sooner or later there will come a time to pay the debt off.That's why they should know the way they are going to pay off the debt.I think that U.S. government with $ 14 trillion of federal debt can not help all the students and forgive $ 1 trillion of student debt.In conditions of today's economy it's hard to expect for any bailouts.