berkough.com

#politics #libertarian #liberatriansolutions #student #loans #studentloans #finance #debt #debts #bankruptcy #laws #postindustrialamericanmillieu #piam

Everyone keeps talking about how we should forgive all the student loan debt. I see a post about it on Reddit at least once a week, if not every couple of days. Not only would that be incredibly expensive, but it would also be incredibly inequitable. No need to give a parachute to someone who is flying around just fine. The more realistic option would be to simply amend the Federal Bankruptcy laws so that student loan debt can be discharged, or at least some of an individual's debt load proportionate to that debtor's ability to pay in accordance with appropriate revisions to the Means Test (Federal Forms: B 122A-1 / B-122C-1). In doing so you help the people who need it the most, as well as identify the real issues with our institutions of higher education.

TLDR: Let people discharge student loans in bankruptcy.

I'm definitely a “big L” Libertarian, and a Minarchist... so, in my opinion, the role that government best serves society is when it functions as an impartial repository for information and data, which is not antithetical to the ideas of a night-watchman state. In theory at least, we're using the information and data as a way to organize ourselves according to mutually agreed upon laws.

Bankruptcy is almost entirely a voluntary proceeding, with the exception of extreme cases, thus it lends itself to data collection because the information is not compulsory. So, if you choose not to use the system, you don't have to make any of your financial information public, or subject your non-exempt assets to valuation and liquidation or repayment. I might be personally biased from having worked in and around the Federal Courts here in Nevada, but in my opinion, the Bankruptcy Court is a rare instance in government where time and money isn't intentionally wasted. Trustees have proper incentive, and the staff required to run a trustee office isn't an unreasonable burden for a working attorney. As far as I'm aware all trustees appointed these days have separate firms or clients of their own, which is how they actually make their money. So it is more or less a civil service job for someone to take on the role. It's nice to have on a resume, and in the event someone you know happens to petition, the process to recuse yourself is relatively straight forward, simply an assertion that you believe you're prejudiced in some way—from what I recall anyway, I don't think that aspect of the job has changed much. If anyone has any recent experience with that sort of thing, or any opinions on the matter, I'm open to discussing that.

So why is the information captured by the court useful? Federal Bankruptcy already tracks income and expenses as well as occupation. While the major are of study that someone chooses in college is not entirely relevant or a direct correlate to how successful someone will be, one of the meme talking points asserts there IS a correlation between liberal arts degrees and low-paying jobs, or no employment at all. There's a concern that the debt we'd be wiping out as a nation wasn't necessarily incurred in good faith. One way we could measure the actual default rate of student loans—and the dollar amount in proportion to total debt of so-called “worthless” degrees—would be to simply ask those questions on the petition:

Does your student loan debt exceed over half of all the total unsecured debt included on this petition?

If yes, have you obtained a degree?

If you obtained a degree, where did you attend school and what was your declared major area of study?

Simple.

If there's a correlation between a certain types of degrees from specific universities or schools, it will show up in the data and policy can be informed from there. Ideally trade schools and universities can do as they please, but the information being public would also allow prospective students (or their parents) to do their own analysis of the amount they reasonably want to take out in student loans, proportionate to the success rate of their chosen major. Generally speaking this information is somewhat available through the US Dept. of Labor, it's the type of thing that high school guidance counselors pay attention to when advising students on prospective collegiate opportunities. But, the Department of Labor stats lack a success metric. Sure, the average 3D Animator makes nearly a hundred thousand a year, but we don't know how many of them aren't successful despite holding a bachelor's degree.

Since bankruptcy is often an option of last resort, dischargable student debt could be contingent upon completion of a degree, or maybe the inverse of that. There is some evidence to suggest that a significant portion of the overall student debt load is bore by individuals who took out money but never completed a degree. This could be due to a myriad of factors. If you've actually obtained a degree, it's possible you're more likely to be able to pay off your student loans (or at least not default on them), and therefore are a less risky investment for schools and financial institutions. Which brings me to the real crux of this issue; there are people out there lending money with relative impunity.

What about investors, lenders, or debt buyers? Bankruptcy is an adequate pressure valve for the free market. In both liquidation and repayment, you're recovering at predictable yields. If we're already resigned to selling our children's future to the banks by wiping away $1.8 Trillion anyway, we may as well try and recover some of that cost back in the process. There are a set of strict qualifications for bankruptcy in various different scenarios—known by their respective chapters (7, 11, 13, etc.)—simply including student loans as potentially dischargable would be relatively straight forward and pretty healthy for our country's financial situation. The real remedy is that Government needs to stop fucking spending. But, since I don't see that happening any time soon, why not slow it down a bit?

Honestly, I don't see how full forgiveness of student loan debt could ever be passed by congress. I get it. Eat the rich and all that, but Elon only has $240 Billion, he can't foot the bill alone. Assuming we could rob the top 10 wealthiest people on the planet, and take their entire combined net worth, it would still be around $70 Million short from wiping out ALL the debt. That's also ignoring the actual cash these people have, which is significantly less than what many people imagine. A “net worth” is comprised of a series of educated guesses and estimations.

I'm not defending anyone. I just find it frustrating when people suggest that billionaires need to arbitrarily pay for things. “Billionaire” is just a word, a concept wrapped around an imaginary number that is a best guest at unlocking 100% value from the mere existence of a person by way of liquidating their property. Which means that in order to unlock all of that capital (the whole net worth), anyone stepping in place of said billionaire NEEDS the same level of sophistication, knowledge, time, and ability to properly administer all of the assets while also not losing any value of those assests in the process. The reality is that quite a bit of value is lost through liquidation, which is why it isn't preferable for wealthy people to hold a bunch of liquid assets in a vault somewhere in New York. As is generally the case, only criminals are the ones walking around with suitcases full of cash. Moreover, the administration of liquidation is pretty straight forward, so you don't lose much in the management of it, all of the value is lost in the sale or transfer of the asset. Ergo your money is better off doing things rather than sitting in a bank. When we think of billionaires, it isn't that they're just sitting in a room wiring money or writing checks all day. A lot of the value tied to these individuals is directly related to their authority and personality. This is evidenced by the emotional response of the market when say, for example, Elon Musk smokes a joint on The Joe Rogan Experience.

Getting back to the student debt though... What kind of sociopath actually loans a teenager a hundred thousand dollars anyway? The type of sociopath that will get paid back on their investment regardless of how horrible the investment was.

Obviously, financially crippling an 18 year old because they want to study art history is simply not a good investment for a loan company... Don't get me wrong, in another timeline I probably would have pursued the acceptance letter I got from the Academy of Art College in San Francisco, but that's besides the point. We have this weird system where private companies lend money and the government just guarantees those loans, no questions asked... It's a recipe for negligence in the least, and an inevitable disaster at most, coincidentally that's exactly where we find ourselves today. Companies (including lenders) should absolutely be able to make stupid business decisions, but not at the cost or expense of the tax payer.

There's no need to irrationally penalize lenders, finding out how our tax money has already been spent on education is relatively straight forward through the minor reforms that I'm advocating, which would provide vital statistics for lending organizations to re-calibrate what educational sectors they need to loan money to, and where to provide incentive for people to take loans for degrees that will ensure they are financially successful. Private Aerospace is an industry that is about to take off (pun intended) here in Nevada. What is the default rate of a person who studied STEM? That's an important piece of knowledge, if we want our space companies to successfully get people to Mars and beyond, it's going to be because of people who genuinely want to dedicate their life to that type of work. Besides, if we're going to just blindly throw money at education, shouldn't it be for technical and trade schools? At least the people who become carpenters, electricians, welders, mechanics, plumbers, etc. have useful skills that are pretty universally needed.

Honestly, isn't that what the push back is REALLY about? There are a lot of us who would be bitter if we had to pay for someone else's education, and if that other person isn't successful on top of us footing the bill for their schooling, then it is perceived as just a waste of the money. Or—even more nihilistically—a waste of human life that isn't contributing in a meaningful way toward society or civilization.