June 11, 2014

HIGHER EDUCATION BUBBLE UPDATE: Megan McArdle On Student Loan Bailouts:

How could I be against helping these students, groaning as they are under the weight of student loans? I’m so glad you asked.

Before we go any further, however, let me establish my bona fides on huge student loans. I am familiar with the problem. Intimately familiar. Almost-six-figures-worth-of-student-loan-debt-on-a-$40,000-a-year-salary familiar. Which is to say, I lived in a subterranean 435-square-foot apartment for years, eating ramen and Cheez Doodles and heartily regretting my decisions regarding education loans. Oh, and I was 30, not 22. This is what happens if you get an MBA expecting to use it to do something lucrative, such as management consulting, and instead use it to do something fun, such as journalism. I am now happily debt-free, but every check written to clear those loans is seared — seared! — into my memory. . . .

It’s not that the horror stories about people with low earnings and huge debts are imaginary — I have not only read those stories, but have also been one of them. However, that group is relatively small. And in order to give them an extra break on their payments, the president and Elizabeth Warren are proposing that we should also give a whole lot of money to folks who don’t really need it. That’s bad public policy; moreover, it’s not particularly progressive public policy.

That said, I do think we should do something to help people who are genuinely stuck with debt that they will never realistically be able to pay. We should end the exemption of student loans from bankruptcy so that anyone who is overwhelmed by debt can go to court and get a genuinely fresh start. The special treatment of student loans is an outrageous bit of self-dealing by the government, which appears to be fine with debt slavery as long as Uncle Sam gets to be the master. It should stop.

Yes, and schools should be on the hook for some of the discharged debt.