Saturday, October 12, 2013

Student Loans Should Be Repaid

The Hunterdon County Democrat published Maggie D'Aversa's 8/8/13 letter (Student Loans) calling on Congress to essentially relieve college students and graduates from having to pay back their federal student loans.

The Democrat published my letter (A Terrible Lesson) responding to Ms. D'Aversa's letter:

In a letter critical of student loans in last week’s Hunterdon County Democrat, author Maggie D’Aversa wrote that rather than tinker with interest rates, federal lawmakers should “relieve or write off the student loans, [otherwise] once these loan-burdened students get jobs, they will be forced to pay off loans rather than contribute to the economy as consumers.”

This is not just bad economics, but morally wrong.

The money the student borrowed came out of the earnings of other people, either voluntarily as in the case of private loans, or by forcible confiscation as with government loans. Whether the loan balance is “written off” and spent by the borrower, or repaid to those who lent it to spend or re-invest as they choose, the same money will be recirculated into the economy. Relieving the student of his obligation to repay the loan will contribute nothing to the economy.

Flawed as the author’s understanding of economics is, her moral message is far worse. Borrowers have a moral obligation to pay back their loans. The money was advanced to them by others on good faith, via a legally binding contract which the borrower entered into of his own free will. To advocate that our government “relieve or write off the student loans” is to advocate that it is ok for student borrowers to dodge their legal and moral obligations, a terrible lesson to give to young people just starting out in life.

I also commented on D'Aversa's letter on the website:

"Another, more important reason is that the more the loans starve our youth, the less willing they will be to go after education. And this will leave our country in a terrible state of mind."

A loan is a legally and morally binding contract entered into voluntarily by the lender and borrower. The lender has every right to expect the borrower to fulfill his obligations to repay the loan. What Ms. D'Aversa is in effect arguing is that being morally upstanding is a discouragement to getting an education. 

I would say that following D'Aversa's advice would send a terrible moral message to young people, and further feed the entitlement mentality that has already put our country in a terrible state of mind.

Related Reading:

On "Nightmare" College Debt

End, Don't Reduce, Federal Student Higher Education Funding

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