Five Reasons Why We Should Eliminate School Loans

May 19th, 2013
in Op Ed

by Rodger Malcolm Mitchell,

Elizabeth Warren may be the best senator in Congress — or at least the most honest. Expect to see her attacked from both sides of the aisle.

She continues to castigate the Obama adminsitration (and she’s a Democrat!) for not punishing the crooked banks (all the big banks are crooked) for criminally defrauding millions of Americans out of trillions of dollars, while continuing to stuff their own pockets.

Naturally, Obama avoids this subject (as do the Republicans) like it were poop in the punch bowl. For politicians, the banks are too big (i.e. too big as contributors) to jail.

Follow up:

Recently Senator Warren and the New York Times have talked about student loans. The Times said:

Student Debt Slows Growth as Young Spend Less
By ANNIE LOWREY, Published: May 10, 2013

The anemic economy has left millions of younger working Americans struggling to get ahead. The added millstone of student loan debt, which recently exceeded $1 trillion in total, is making it even harder for many of them, delaying purchases of things like homes, cars and other big-ticket items and acting as a drag on growth, economists said.

Senator Warren said:

Right now, a big bank can get a loan through the Federal Reserve discount window at a rate of about 0.75%. But this summer, a student who is trying to get a loan to go to college will pay almost 7%. In other words, the federal government is going to charge students interest rates that are nine times higher than the rates for the biggest banks — the same banks that destroyed millions of jobs and nearly broke this economy. Some may say that we can’t afford this proposal. I would remind them that the federal government currently makes 36 cents in profit on every dollar it lends to students. Add up all of those profits and you’ll find that student loans will bring in $34 billion next year.

She’s beating the drum, but with the wrong stick.

The big debate in Congress is how much interest to charge students. And there are several complex, convoluted plans afoot. But, the federal government, being sovereign over the dollar, neither needs nor uses profits. It never can run short of dollars. It never needs to ask anyone for dollars — not you, not me, not China, not our students.

It is the U.S. states that are monetarily non-sovereign, so can and do run short of dollars. Nevertheless, they spend billions to support schools, grades K through 12.

For reasons buried in history, no American government supports grades 13+ — at least not full support.

So college attendance — which benefits all of America — has become a widespread hardship. According to the National Memo:

Massachusetts’ senior senator points out that the American public saved the big banks, which Attorney General Eric Holder admitted are “too big to jail.” A Bloomberg report suggests taxpayers offer an implied $83 billion subsidy to the biggest banks, with an implied guarantee in case of another financial crisis.

America’s total student loan debt now totals well over $1 trillion, leading to record defaults. Students stricken by the worst of the financial crisis are now badly in need of a bailout. And Senator Warren is one politician who has a plan to do that responsibly: Just treat students with the same generosity we offer the big banks.

What a concept: Treat America’s future as generously as we treat America’s criminals! (If only those kids were bigger political contributors.)

Anyway, I have a better idea, and it’s much simpler than anything Congress has talked about, — and better for America. For exactly the same reasons public elementary and high schools are free, public college should be free. If the monetarily non-sovereign states can support grades K-12, surely our Monetarily Sovereign government can and should support grades 13+.

And here is how we could do it: Just as private K-12 schools exist alongside of public schools, private 13+ universities can exist alongside of public 13+ universities.

For example, Massachusetts schools like Harvard, Boston University et al could remain private and continue to charge their high-and-getting-higher tuitions, while the five UMass campuses all would be free to every student at every grade level — 100% supported by the federal government.

Just as with grades k-12, those who prefer a private university education could continue to pay for it. Those who prefer a free university education, would have that option.

This would be bad news / good news for the private universities. The bad news is they would have to compete against “free.” The good news is they could feel less obligation to provide scholarships; de facto scholarships for all would be offered at thousands of public universities.

The news for America would be all good:

  1. Less financial burden on the U.S. states, which currently provide partial support to state schools.
  2. In a world where there is less need for physical labor and more need for educated labor, college education makes America more competitive.
  3. Federal dollars, pumped into the economy, will stimulate economic growth.
  4. Less financial stress on middle- and lower-income families, to pay for college.
  5. Less financial stress on college students to pay for loans.

In the three posts titled, Salary for attending school, Salary for attending school: 2nd paper and Salary for attending school, III, we discussed the reasons for treating school attendance as a job that benefits America.

I suggest salaries would be the 2nd step, with the first step being federal financial support for public universities.

Given that monetarily non-sovereign city and county governments struggle to provide free K-12 education, I cannot imagine any good reason why our Monetarily Sovereign government, with no struggle at all, does not provide a free advanced education.

There is no magic line at grade 12, making it valuable to America while, grade 13 is not. Following food, shelter and health, the two most beneficial gifts we can give our children and our nation, are love and education.

It’s time to stop rationing either.

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Mitchell’s laws:

  • The more federal budgets are cut and taxes increased, the weaker an economy becomes.
  • Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
  • Until the 99% understand the need for federal deficits, the upper 1% will rule.
  • To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
  • Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
  • The penalty for ignorance is slavery.
  • Everything in economics devolves to motive.

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