Tag Archives: Bank

Is it “brilliant” to accumulate $185,000 of debt studying the humanities?

From the Des Moines Register, an article by Ms. Rehha Basu.

Excerpt:

Sixteen years ago, Patricia (P.J.) Johnston of Des Moines made the front page of this paper for collecting her diploma from Drake University at just 19. “Johnston was reading books on French existentialism while others her age were still buying comic books,” wrote reporter Tom Alex of the young woman who majored in religion and philosophy, dabbled in music and astronomy and found time to take part in online discussions on the Bible.

“I think I’m probably meant to be an academic,” Johnston was quoted as saying. And she has been, getting a master’s in one institution, going to seminary at another, doing field research in India in her area of interest — Indian Catholicism — and currently working toward a Ph.D in religious studies at the University of Iowa.

President Barack Obama came through Johnston’s university on Wednesday, where he said there is no greater predictor of success than a good education. “This country has always made a commitment to put a good education within the reach of everybody who’s willing to work for it,” Obama said. “That’s part of what made us special. … That’s a commitment that we need to reaffirm today.”

He talked about the untenable debt that’s limiting options for today’s college-goers — $25,000 on average — because tuition and fees have more than doubled since they were born.

Johnston didn’t get to hear him since she was teaching a class on Buddhism. But she knows a lot about educational debt. She has $185,000 in student loans to repay.

As it is, she sleeps on her office floor on the days she has to be in Iowa City, riding the Greyhound bus in from Des Moines. She helps support her mother with the approximately $16,000 she earns as a teaching assistant. But she is in danger of dropping out before getting her doctorate because she has hit her limit on loans, and most likely won’t be able to get a teaching assistant position next year because of cuts in undergraduate programs.

If that happens, she wrote me, she would be this far along, “facing the job market in my mid-30s with no marketable job skills of any kind.”

Johnston grew up on welfare and other forms of public assistance. Her divorced mother was unable to hold down a job for reasons that were never diagnosed. Johnston got through college with scholarships, grants, some help from her late grandmother, and only $18,000 in debt.

Student loans should not be connected to the government as they are now – they should be privatized. That way, taxpayers are not stuck with the bill if the person cannot make a career out of what they are studing. What is this person doing going abroad in India? What is she doing riding on Grayhounds? It makes no sense. If she had to go to a for-profit bank, then she would never get a student loan, because they know they would never get the money back. We have to have a system where people pay their own way, so that they can’t take risks with anyone else’s money but their own (or their loan guarantor’s). No taxpayer money should be available to them, and no taxpayer money should be given to subsidize universities, either – it just raises the cost of tuition. Once the number of students applying to the humanities is reduced because no loans are available, then tuition will come down for those who really intend to make a go of it.

I think a lot of the problem here comes from growing up without a father. Fathers teach their children to be practical because they worry more than mothers about the children not being able to be independent and fend for themselves.

UPDATE: The Captain comments on this story here.

UPDATE: This is from the woman’s Facebook page:

I have never asked anybody to pay my student loan debt for me, and I will pay it down someday, even if I have to eat ramen noodles for the rest of my life. I was willing to undertake my studies at any cost and at any degree of personal risk because I believe in God and I am convinced that I am doing what God is calling me to do. If you read the New Testament, you will find a great deal about how people are called to give up everything they own – houses and wealth and family and respectibility and everything else – to do whatever it is that God calls them to do. I am not brave and no longer optimistic, but I have tried to take God at his word.

I am not financing education entirely through student loan debt. I held work study jobs as an undergraduate, and have usually held some kind of on-campus employment. I have been a TA for the university for the last seven years. The fact is, government support of higher education is down and the cost of tuition has outpaced salaries to such a great degree in this country that virtually nobody is able to afford an education on their own wages without taking on a substantial burden of student loan debt. The vast majority of the anecdotes to the contrary concern degrees earned twenty or thirty years ago, before major structural changes in the financing of higher education – in the post-war years, government funding allowed the vast majority of expense for education to be met through Pell grants and scholarships, making it possible for many people to work themselves through school. That hasn’t been possible for most people in most degree programs for at least thirty years, and these nostalgic memories of an entirely different time and set of circumstances are not doing the debate on higher education financing in this country any good at all.

I am not a “professional student” nor am I taking an especially long time to pursue my degree – this is simply how long humanities education takes. http://chronicle.com/article/In-Humanities-10-Years-May/16231

If you only see value in STEM disciplines, I probably will not convince you that humanities education is valuable. There used to be a sense in this country that certain things had value and meaning in their own right, not simply because they produced nice technological gadgets or made bundles of money for businesses. Even conservatives such as Allan Bloom used to realize that it impoverishes us spiritually when we turn away from the humanities, the cultural legacy of Western society. Would that their political descendants had as much grace or wisdom.

She’s not being forced into this course of action. She’s choosing it deliberately, and she wants other people to pay to make her impractical flight from reality financially sound.

New housing bubble: Obama proposes lowering mortgage-lending requirements

I must have blogged a million times about how the Democrats caused the recession by forcing banks to make bad loans to people who couldn’t pay them back. Although the Republicans got blamed for the crisis, they were the ones who tried to regulate Fannie Mae and Freddie Mac, but they were shut down by Democrats. Well, guess what? The Democrats didn’t learn their lesson the first time, and they want to start another housing bubble, just like the first one that gave us the recession.

Take a look at this article in the leftist Washington Post. (H/T ECM)

Excerpt:

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

[…][A]dministration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.

Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars.

“If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.

And if that was not enough,the Democrats also have another bubble being inflated. They nationalized the student loan industry, and now taxpayers are going to have to bail out those risky unpaid student loans as well.

Excerpt:

America’s now-nationalized student loan industry just reached a value of $1 trillion, according to Citigroup, growing at a 20 percent-per-year pace. Since President Obama nationalized the industry (a tacked-on provision of the Obamacare bill), tuition has gone up 25 percent and the three-year default rate is at a record 13.4 percent.

[…]With many young people unable to pay their loans (average graduating debt is about $29,000), Citigroup and others are speculating that this industry might be ripe for a bailout.

To pay off all the current defaults, Citigroup says it would cost taxpayers $74 billion. However, this number doesn’t include those who will default in the coming years, and, when the government rewards the defaulters, it will encourage more borrowers not to pay their debts.

And liberals in Congress have proposed forgiving all student loans via “The Student Loan Forgiveness Act 2012,” costing taxpayers $1 trillion.

Adding another $1 trillion dollars to the national debt isn’t exactly “forgiveness” for young people—it’s prolonging the payoff. In fact, student loan bailouts are a catch-22 for young people because they’re going to be held accountable for paying off the national debt and interest payments.

At least the young people who voted for Obama are going to be the ones to get the bill for his socialist economic policies.

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Thomas Sowell: could a Cyprus-style confiscation of private savings happen here?

Thomas Sowell, an economist for the people
Thomas Sowell, an economist for the people

Surprise! It already is happening here. Thomas Sowell explains in the American Spectator.

Excerpt:

One of the big differences between the United States and Cyprus is that the U.S. government can simply print more money to get out of a financial crisis. But Cyprus cannot print more euros, which are controlled by international institutions.But could similar policies be imposed in other countries, including the United States?

Does that mean that Americans’ money is safe in banks? Yes and no.

The U.S. government is very unlikely to just seize money wholesale from people’s bank accounts, as is being done in Cyprus. But does that mean that your life savings are safe?

No. There are more sophisticated ways for governments to take what you have put aside for yourself and use it for whatever the politicians feel like using it for. If they do it slowly but steadily, they can take a big chunk of what you have sacrificed for years to save, before you are even aware, much less alarmed.

That is in fact already happening. When officials of the Federal Reserve System speak in vague and lofty terms about “quantitative easing,” what they are talking about is creating more money out of thin air, as the Federal Reserve is authorized to do — and has been doing in recent years, to the tune of tens of billions of dollars a month.

When the federal government spends far beyond the tax revenues it has, it gets the extra money by selling bonds. The Federal Reserve has become the biggest buyer of these bonds, since it costs them nothing to create more money.

This new money buys just as much as the money you sacrificed to save for years. More money in circulation, without a corresponding increase in output, means rising prices. Although the numbers in your bank book may remain the same, part of the purchasing power of your money is transferred to the government. Is that really different from what Cyprus has done?

I noticed that Brian Lilley had an article about whether Cyprus-style confiscations could happen in Canada. The short answer: yes – for amounts above $100,000 Canadian.