The problem I have with this argument against forgiving student loan debt is rather simple. It’s the only debt you can have that cannot be wiped clean by bankruptcy. And you gotta wonder why that is.
Bjurasz,
The reason that student debt is not dischargeable is because the megabanks, 4 years before they brought down the world economy, convinced their bought and paid for congresscritters that the megabanks would have more money available to support the politicians and their campaigns if the banks didn’t have to write off any private student loan losses due to bankruptcy.
The federally guaranteed low-interest student loans were always guaranteed by the government (banks had no risk of loss for defaults), but the banks wanted to make the high-interest private student loans also free from risk of loss. In other words, the banks wanted to have their cake and eat it, too.
No risk of loss for low-interest loans and no risk of loss for high-interest loans - if Congress would only do them the teeny tiny favor of making ALL student loans non-dischargeable.
The new “bankrtupcy discharge-proof” high-interest loan was a child from the perfect marriage of the corrupt bankers with the corrupt politicians.
Unfortunately, the risk-free returns bankers received via non-dischargeable student loans just made the banks more willing to take on other types of risk.
For instance, profits from non-dischargeable student loans helped to encourage banks to grant more and more high-interest mortgage loans to homeowners - including high yield “no doc” NINJA mortgage loans (no income, no job, no equity, no problem).
Before long, the real estate market soured and trillions of homeowner’s equity and taxpayer dollars were lost, but fortunately for the banks, Congress granted to banks taxpayer-funded TARP bailouts, and even better - since they made student debt non-dischargeable.
It was the perfect crime. Millions of newly-unemployed workers were willing to take out high-interest student loans from the megabanks - providing a limitless supply of millstones around their neck.
After all, the students would have to pay for the rest of their natural lives and even beyond - thanks to a few nice little favors courtesy of Congress and underwritten by the US taxpayers.
</end of ersatz history lecture>
