Changes to Tax Code Affecting Student Borrowers Is A Distraction From The Real Pernicious Evil
A friend of mine posted some bitterness over on Facebook today about the proposed changes to our tax code working their way through Congress.
As with most Facebook complaints, it was riddled with misunderstandings.
This person thought that the amount she received in her student loan was going to be taxed as income. In reality, the only thing taxed as income would be tuition assistance offered by the university. Also, it would eliminate the tax deduction for student loan interest payments.
I've avoided college myself. I was just never able to consider a service that was that expensive could ever provide that much value to my life - while simultaneously robbing me of four to eight productive years. (And I made this decision when higher education costs were less than a third what they are today.)
Articles are proliferating online that bemoan these changes to the tax code, and other commenters chimed in with links. One which I found especially misleading came from Progressive.org.
Unfortunately, this quote from Progressive's article is 100% wrong:
"Reductions in the financial aid for eligible students has been a prime driver of the growing student loan debt crisis that now burdens 44 million Americans with nearly $1.5 trillion in debt."
No, no, no.
What's driven the debt crisis is the federal government loaning increasing amounts of money to kids while simultaneously withdrawing any bankruptcy protection for those kids to get out of debt if they're unable to pay the loans.
Student loans are the only type of loan you can't legally default on - if you can't earn the money, the only way out is suicide. If I ever decided to go back to school and needed to borrow money to do so, I'd insist on signing the loan documents in blood! (First, to make a point, and second, to remind myself just how much self-harm I was committing.)
But everyone keeps doing it. And that's the problem. Taking those loans out becomes an expected burden.
College has been sold as a rite of passage into what's an acceptable American life. So colleges raise tuition to vacuum up this windfall. Why is it surprising that tuitions should rise as fast as the government is willing to loan more money? It's a classic feedback loop, and it's led to exponentially rising costs for students.
This has to be the most pernicious redistribution of wealth from our most vulnerable citizens to some of the most connected and powerful organizations in the country. And at the same time - at least in the humanities - the quality of education universities provide is criminally laughable.
These tax changes are another twist of the knife for students. Perhaps taxing tuition assistance is worst of all, since any time a university marks their tuition down from their criminally inflated rates, it hurts the students they're attempting to "help." (This also seems callous and arbitrary. Like, if you bought a pair of $400 shoes on sale for $50, you'd suddenly be hit with an income tax levy on your $350 "profit.")
But I can't say I feel bad for the institutions seeing their endowments taxed just like any other assets - which is another part of the proposed changes. Especially since they've been using over 90% of that money to play the stock market, tax free.
The faster the higher-education bubble pops, the better it'll be for everyone.
Except, maybe, the professors.
As usual, Cracked hits the nail on the head with their satire, and keeps their sense of humor about it far better than I.
Higher education is essential. I understand that student debt in America is out of control and many postgrads have become disenfranchised because of their inability to find a job and repay these loans. I still see the value in a traditional education, with that being said a lot of it is up to the student to get as much out of the experience as possible. Know thy self. If you do not feel that college is the right fit for you then explore other opportunities.
Absolutely. College still has a role to play, but we need to take a close look at what that role is, and how (and how much) our children should be paying for it.
I also think a lot more parents should be encouraging their kids to go to trade school, rather than liberal arts school, if their kids don't have a clear direction in mind.
oddly enough I think that if someone takes a loan and says they will pay it back...they should do so.
I'm also opposed to 'deductions for state and local taxes"...i consider that to be stealing.
Stealing from the 'state and local municipalities' that don't HAVE those taxes. The people there have to pay a higher tax rate to make up for the ones taking the deductions.
While I agree that loans should be paid back, I don't think enough is being done to educate these students about the loans they're taking out. And that's because it would be impossible to sell them to a rational consumer, if they were being honest.
I mean, we have bankruptcy protections available for every other kind of loan out there. Should those be withdrawn too?
At 18, these kids don't have the credit history to get a credit card. And the only reason they're allowed to borrow $200,000+ is because they're denied the same basic protection other kinds of borrowers get. Without that protection, and with no incentive for the lenders to act ethically, there's a huge burden for parents, guidance counselors, hell - maybe their churches, to educate them on what they're getting into.
But teaching common sense is a forgotten art...
parents you say?
you mean those people who are supposed to mentor and guide their children and prevent them from destroying their lives?
those people?
when I went to college (and graduate school) I didn't take any loans.
I paid for it myself plus I had the GI Bill..which I MORE than paid for in blood sweat and tears.
When my grand daughter went to college (graduated last year, double major)..SHE had a full ride scholarship..
Somehow I'm not sympathetic with today's crybabies.
Yeah, I read that parenting was a thing once. It used to be done by the people who drop all those kids off at the mall.
so..they are irresponsible.
and now they expect the taxpayers to pay for it?
Isn't there a word for taking out a loan with no intent to repay?
what is it...right on the tip of my tongue...
oh yeah..
FRAUD.
Yeah, I know that until the laws changed 2005, it was common practice for law students to default on their student loans as a matter of course. Seven years of bad credit really isn't a big deal for someone in their early 20s. So clearly something had to be done about that.
But the unintended consequence was - lenders could now provide much larger loans secure in the knowledge students couldn't default. And this has driven up tuition costs exponentially.
To be honest my bigger beef is with the universities on this one. And the fraud they're committing by selling students useless degrees for amounts that leave them in debt for the rest of their lives.
Jerry Pournelle commented on that decades ago.
he said that the 'demand' from the incoming students determined what classes would be offered.
He also said that if our education system was imposed upon us by an outside power.
it would be considered and act of war.
regarding the lawyer thing.
why am I not surprised?
Great post, Winston. The robbing of our youth their lives is disgusting. Upvoted.
I believe you can file on your student loans if you can prove undue hardship. It’s not as cut and dry as a regular bankruptcy and imagine the standard of proof is extremely high. Bravo for saving yourself the heartache; higher education has become a scam.
Hmm... A google search shows that it's not unheard of - but it looks like you have to be a pretty hopeless case before they'll consider it. (Like maybe an art history degree?) Still, I guess that's something.
Haha. Or any liberal arts major…
I suspect 'gender studies' is going to be difficult.
If it's not STEM it's a hobby....let em pay for their own damn hobbies.
Really good job man carry on thanks