CONLEY COMMENTARY (WSAU) – It’s a curse to have a good memory.
I remember the Obamacare debate in 2010. The administration was scrambling to find ways to make their takeover of healthcare budget neutral. One of the funding mechanisms would be a federal takeover of the student loan industry. If you needed to borrow money for college, you’d no longer go to a bank. You’d apply to the federal government. The interest on student loans, about 7% at the time, would fund Obamacare.
Well, that doesn’t work now that we’re forgiving student loans. That’s about $220-billion in borrowed money that won’t be repaid.
Republicans, if they have long memories, should immediately ask for an audit of the Obamacare accounts. Let’s open the books and see how much of it is no longer funded.
This is a lesson in keeping government small. Loan forgiveness would have been impossible if private banks were taking the loss. But now that the federal government is the lender, the money can simply be added to the nation’s debt. Taxpayers will cover it. More likely, the grandchildren of current taxpayers.
Moral hazard is the biggest reason that loan forgiveness is a bad idea. Knowing that money has to be paid back is what encourages people to borrow responsibly. I need a roof over my head. But I took out a $100,000 mortgage instead of a half-million dollars because I’d need to pay it back. I need a car; but I drive a used car instead of a limousine because car-loan forgiveness seems unlikely. And so it should be with college loans. Students should be willing to borrow money to better themselves. If they earn degrees to become lawyers and architects and teachers they’ll be productively employed to pay back what they borrowed. In the world of student-loan forgiveness we have people enrolled who shouldn’t even be in college. They’ll study interpretive dance and ethnic studies. These are not productive career paths.
They’re borrowing money on a bet – you and me – will cover their debts.
Chris Conley.
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