A student walks into a Bank

A student goes into a bank. He tells the personal loan banker “I want to borrow $7500 each year for the next 4 or 5 years.”

“That’s $30,000” the banker says. “Personal loans have a 10% interest factor.”

“For my loan,” says the student, “and I want interest rate close to the one used for Home mortgages, and I don’t want to be charged interest for the first four or five years of the loan”

The banker asks, “how long is this loan for?”

“20-year payoff after graduation, more or less” replies the student.

Banker asks, “Do you have any collateral assets to secure the loan?”

The student says, “No collateral but a promise to pay it off when I get a job.”

The banker is incredulous, asking “anything else you want with this loan?

The student says “yes, there is a 10% chance I’ll default in the first year, and a 30% chance I won’t finish my degree, and be a slow pay during the loan.”

The banker looks Ready to pass out. But the student is not finished “in case I have low earnings I want you to adjust the payment amount and if I qualify, I want a loan forgiveness option”

The banker is unable to speak. Finally, banker recovers his voice, “anything else?”

Student replies, “well I may not be able to get a job that has a first-year salary more than my total student loan”

The banker asks “what will your degree be?

“I’ll know more for sure after two years.” The student admits and adds “Theres a 50% chance my job won’t be in my major and I may be underemployed.”

Banker says, “I cannot loan you a dime you’ll need to use Federal Student loans.”

We forget to take the historical profile of the loan program into account when we discuss “eliminating student debt.” This story brings the past profiles and program into a current view. The phrasing of the topic leads to discussing amounts and not why after all the financial considerations in the loan as it exists, would we want to forgive the debt and remove the payment from the Government income stream?   

 

Do student loans need a bailout, really?

Abstract

·         Recalls the National defense reason for student loans.

·         Deconstructs the current “debt bubble”.

·         Challenges the terms “debt erasure” and “average” used to confuse discussions.

·         Restates average student debt, employment preferences and wage differentials used to justify college attendance.  

·         Reviews the NPV of student loans in light of existing forgiveness plans and inflation.

                        *             *             *             *             *             *             *

The National Defence Education Act (NDEA) was passed in 1958 in response to Soviet acceleration of the space race with Sputnik. The bill funded programs to “ensure trained manpower of sufficient quality and quantity to meet the national defence needs of the United States.” The legislation bolstered education in the areas of science, mathematics, and modern foreign languages.[i]

Our Student loan debt is close to exploding claim many politicians. A Ukrainian folk story, “the Mitten” illustrates how Stem based loans drifted to any-degree-at-all loans.

In the story a young boys lost mitten is found by a mole who climbs in to stay warm. Successively larger animals seek room in the Mitten. Each animal is larger, a rabbit, a badger and finally a Bear.   The ever-stretching Mitten explosively unwinds when the last animal, a mouse seeks to enter, and all animals run away in the cold. (60 words)

April 7 Consumer Credit shows there are 1.747 trillion in student debt. DC has a myopic view of the problem, seeing one large debt. Within this sum are variations of loans, public and private, payment histories, degrees, and payment plans.

Taxpayers are not responsible for private debt held by banks. Signing for a loan to achieve an advanced degree by a twenty-two-year-old isn’t done in ignorance and is not our responsibility.

Once private loans and graduate student loans are deducted from the total, The federal program is roughly 1.47 trillion. This tracks with a March Liberty Street survey of student debt that estimated the cost at 1.49 trillion. The results correlate. Other reports will differ depending on the age of the data and the editorial intent.

This is a debt that can be erased with a “flick of the pen”, says Chuck Schumer.[ii] The reasoning is faulty. The Federal budget expects repayment, debt is not increased but revenues are choked. The impact is immediate and the payment expected.

The complexities of the Student Debt are simplified for the news writers and readers by moving details into the aggregate average abyss. “Average Student debt”, “Average Unemployment” and “Average wages” are headlined without context. Taking from this “average”  misery well are tragicomic stories emotionally illustrating individuals’ plights.

In 2011 at Occupy Wall Street, married grad students with an Ivy League Masters in Sociology expressed their fears to a reporter. ‘Do we eat beans for the rest of their lives to pay off $100,000?’  In 2022 a TikTok posting showed a Woman behind a sign “B.A. in Fine arts, 29,000 in debt and no job”.

“The average student debt is $28,000 to 31,000.” [iii]Students may need to borrow low six figures for a Veterinary or Law degree, low five figures for a bachelor’s or master’s or a modest 4 figure sum to complete a  Community College Associates degree. They all contribute to the total debt from which the “average” debt is calculated.

Assessing the value for the price of a college degree is difficult. Nationally only 62% of students enrolled in college finish in six years. Ten percent remain enrolled, and 28% leave and never return.[iv] Dropouts keep the debt. Roughly ten percent are default when they begin payment. [v]    

Workers with college degrees have lower unemployment rates. True in the aggregate. Within all BA degrees, there is higher unemployment and underemployment. Inside Higher Education Summarized the New York Fed report “about 41 percent of recent college graduates -- and 33.8 percent of all college graduates -- are underemployed in that they are working in jobs that don't require a college degree”[vi].

A February 2021 chart from the NYFED identified the employment and underemployment for seventy-two studies. Civil Engineering, Elementary education, Nursing, and Computer engineering had the lowest underemployment highest employment and salaries. Degrees in Fine Arts, Performing Arts, General Social Sciences and Anthropology had the highest unemployment, underemployment, and lowest wages.

With data current to October 2020, Think Impact reports ‘those who are between the ages of 22 and 27, bachelor’s degree holders earn an average median income of $44,000. In contrast, high school diploma holders only earn an average of $33,000 ($15 per hour) annually.[vii] Contrast that with a current Zip Recruiters 2022 report that national average for diploma holders is 41,000 ($21 per hour) annually.[viii]

Fact, High school graduates after 4 years will earn more than the General Social Sciences BA, without the same debt. Does a college degree increase human capital, or signal employers a worker’s maturity? The wage difference between degrees answers the value question. Clearly the intent of the originating act was to build human and therefore national capital for solving future problems. It was not to “find your passion”  or more “fully develop your person” as colleges suggest.  

There are multiple loan plans, and payment schemes.[ix] Perkins loans for a 10-year payout at 5% which expired in 2017 are still in the debt totals. Subsidized and Unsubsidized Direct loan program and Parent Plus loans follow Federal Student Loan Rates for loans first [x]disbursed July 1, 2021, through June 30, 2022

Direct Loan Undergraduate                         3.73%

Direct Loan Graduate                                     5.28%

Parent PLUS Loans                                           6.28%[xi]

The average student loan is paid off after 20 years. Interest on loans do not accrue while in school. Preferred loan rates benefit by a loan balance decreasing in a present value by inflation whether it is the Federal reserve goal of 2% or current levels. The college graduate of 2022 has the first dollar of their 2018-2022 loan package worth $.94 due to inflation compounding for four years. What will the inflation versus interest spread be for 2023? 

Forgiveness Programs include Both the Income Driven Debt (IDR), and Income Based Repayment plan (IBR) allow debtors to pay based on discretionary income. The 10% or 15% plans. These fold into the Public Service Loan Forgiveness Pan (PSFL) which expunges the debt while paying for 10 years in a not for profit or other approved employments. Less than 10% of eligible students applied for these programs.

The student loan program is untethered form the reality of price and value. The Administration of the Student Loan Program as a social Program created the student Debt problem. Private gains are paid for by the public. Debtors already receive preferential financial terms. The biggest benefactor of a Bailout is the Federal government to wipe out the mess they have created

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[i] National Defense Education act. US House of Representatives: History, Art & Archives. (n.d.). Retrieved April 27, 2022, from https://history.house.gov/HouseRecord/Detail/15032436195

[ii] Schumer, C. (2022, February 28). With the flick of a pen, president Biden could #cancelstudentdebt-a burden that falls especially hard on black borrowers.from me and @DERRICKNAACP:https://t.co/i4mbtfz8ym. Twitter. Retrieved April 27, 2022, from https://twitter.com/senschumer/status/1498336892458315785?lang=en

[iii] Hanson, M., & Checked, F. (2022, April 11). Student Loan Debt Statistics [2022]: Average + total debt. Education Data Initiative. Retrieved April 27, 2022, from https://educationdata.org/student-loan-debt-statistics

[iv] Schaeffer, K. (2022, April 12). 10 facts about today's college graduates. Pew Research Center. Retrieved April 27, 2022, from https://www.pewresearch.org/fact-tank/2022/04/12/10-facts-about-todays-college-graduates/

[v] Hanson, M., & Checked, F. (2021, December 19). National Student Loan Default Rate [2022]: Delinquency data. Education Data Initiative. Retrieved April 27, 2022, from https://educationdata.org/student-loan-default-rate

 

[vi]. The labor market for recent college graduates –

Federal Reserve Bank of New York. (n.d.). Retrieved April 27, 2022, from - https://www.newyorkfed.org/research/college-labor-market/college-labor-market_unemployment.html

[vii] College graduates statistics. ThinkImpact.com. (2021, September 22). Retrieved April 27, 2022, from https://www.thinkimpact.com/college-graduates-statistics/#3-college-graduate-statistics-breakdown

 

[viii] High School Diploma Salary - ZipRecruiter. High School Diploma salaries. (n.d.). Retrieved April 27, 2022, from https://www.ziprecruiter.com/Salaries/High-School-Diploma-Salary https://www.ziprecruiter.com/Salaries/High-School-Diploma-Salary

[ix] What are federal parent plus loans and how to apply?

Edvisors. (n.d.). Retrieved April 27, 2022, from https://www.edvisors.com/student-loans/parent-student-loans/introduction-to-federal-student-loans-parent-plus-loans/?google=amp

 

 

 

 

 

 

SUPPLY CREATES DEMAND

 

Snow Entreprenuers

During the recent shock snowfalls have entrepreneurs made their way to your door? The basics of free action and entrepreneurship can gel in the cold.

I spent 12 years in Pennsylvania where we had predictable snowfalls, one after the other requiring we shovel. At times, the snow was wet and heavy, heart attack snow. Other times it was white drifting snow not difficult to shovel. Municipal rules about clearing sidewalks in twenty-four hours were deemed to apply to our recently completed housing development.

On the first heavy snowfall in 2014 our doorbell rang with two young teens offering to clear our steps, sidewalk, and short alley driveway. They were unsure on how to respond to my question of the cost. I offered twenty for the task, they accepted, and our snow was cleared. On a subsequent snowfall two different young teens rang our doorbell offering to shovel the snow. I said I paid the last pair 20 dollars and they accepted saying that is what my neighbour across the street paid. Perhaps my neighbour and I freely established the value of the service. Some manageable snow and lighter snow followed which I shovelled.

On the following winters next heavy snowfall, the doorbell rang once more. At the door was a young teen who I recognized from offering to shovel the first year. One friend stood at the sidewalk. The price was still 20 dollars, but he added, proudly, that they had a snowblower to do the driveway. Now there were four of them, two in the back and two in the front. They were done in record time. When the leader came to collect their pay, he asked if I was a teacher at school. He explained they would get to these employees first after the snowfall. I had to ask more questions.

There were two teams that bumped into each other who decided to split the homes into two-block sections that each team could work exclusively and efficiently. Twenty dollars was a fair price for them.  After a few snowfalls they combined their territory and pooled their money to buy a used beat-up low capacity snowblower, for the driveways so the snow did not need to be carried to either side.

This service arrangement continued through the next two winters, one with abetter snowblower. I understand the enterprize fell apart when one of the workers found a girlfriend and another made varsity Basketball. Snow removal by young laborers reverted to scattered, inconsistent work, from within the development.  

None of these students had read Hayek, or been in AP economics but they realized significant, almost a priori essences of business entrepreneurship. There were no laws requiring a licence from the municipal government, no suggested pay rate and no mandatory rest or warm up period.  The market was free.

The snow existed, as did the need to remove it. Two young entrepreneurs ventured into the creation of a service. The production of that service created demand, which grew only when this service became available.

The homeowners acting independently, were the market that signalled a price. Competitors were drawn into this business. Rather than compete on price the two teams recognized that the market needed order. I am speculating that they realized cutting their price was not reasonable since no two could clear the snow fast enough to increase the number of houses served. Finally, the two teams recognized that combining their labour and investing in technology gave them a monopoly of sorts, and the ability to organically grow.

The entrepreneurs offering this service created the demand. There was no demand before there was this service, just kinetic potential.  It is the kinetic potential of an opportunity unshaped by a product that some mistakenly call demand. In this example it is erroneous to say that demand created the product or service.   

 

Second Childrens Crusade

This blog post was updated on 12/02/2019.

Greta has now made Climate Change a childhood fear, the young Norwegian Girl, suffering from autism and selective mutism, issues well thought out press releases and speaks in front of nations, all on her own, without adult manipulation, script writers, coaches, press managers and stylists, really. Her boat and 5-7 crew's air travel from and to New York added immeasurable CO2 to the environment. Meanwhile US C02 production falls due to the use of natural gas, while China and India plan more coal plants, obviously they are not impressed with her "fear" that she wants us to "feel", and neither should we be.  

She is being used, manipulated by breathless media as the next big story (they want to be part of).  Frommer/Malthus pessimism about life continues, while population growth rates slow. Putting fear into children's lives so they can have a national student strike for the environment is irresponsible. Makes me wish for the return of the Nuclear Bomb drills we had in grammar school, a nuke would have been quicker, or we would survive huddled next to the brick schools walls and survived. With today's predictions everybody dies.   

Acting responsibly to not pollute the environment is critical. Natural gas, and eventually nuclear power when all the electric vehicle needs materialize is important. But virtue signalling, isn't respected by two larger economies to incorporate it in their growth plans. 30 years ago, June 1989 a "senior" UN environmental official predicted that if the trend is not reversed (worldwide it hasn't) by 2000 that entire nations could disappear. Meanwhile as the ice disappears in greenland we find Viking bones and artifacts. We've had global warming trends before when there was no C02.    

This entire scenario is reminiscent of two hypes.

1. The Y2K calamity at December 31st 1999

2. Plastic straws. Scant scientific evidence that plastic straws are an issue and unless all the plastic straws in the US are thrown in the Ocean no impact. It is the Pacific Rim nations that dump their garbage in the ocean, it is unreasonable to expect them to change.

We still have 18 years left to become extinct according to Al Gore. And 12 left  according to  Congresswoman Cortez. That averages to 15 years left in my life. Honestly, I'm not worried 

   
The Second Children’s Crusade... more zealous piety on parade. 


The Second Children’s Crusade led in part by the SunriseMvmt, dawned in Diane Feinstein’s office on February 23^rd, 2019. In that meeting Children pled with Feinstein to adopt new green ideas so they would still be alive 12 years later. The children were mobilizing to prevent a climate catastrophe. Then, to add an ageist twist to the gathering, they demanded Feinstein look at their faces, the future victims (not you Diane, you’re old) of climate/global change/warming.   


The “first” Children’s Crusade assembled in 1212 under pre-teen leadership of two boys countries apart. Stephen of Cloyes in France and Nicholas of Cologne, one having seen Visions and another receiving a letter from Jesus Christ initiated a movement to retake Jerusalem. Their preaching and zealous piety created what some historians have called mass hysteria. 


It was not a crusade authorized or called for by the Pope as all previous and post crusades were. Official records and accounts are fuzzy and at times open to contrasting interpretations. Historians agree the Crusade totalled between 15,000 and 30,000 people including many of the marginalized people of the time who had neither the skill, money or weapons to recapture Jerusalem. Children had the largest representation. 


Thousands were led across the Alps to Italy dying along the way. Those surviving the trek expected the Mediterranean to part like the red sea. Muslim Armies would be convinced by sermons and witness to give up the city and return a relic of the true cross. Other members were lost at sea or sold into slavery. It was a disaster.


The populace of that time was ripe for naïve solutions. The prior crusades had failed. The believers knew the relic of the true cross would bring blessings, and Jerusalem would be wrested from the infidels pleasing God. The significance of these two events had been taught to the citizenry from the crib. Crusaders were heroes. Anyone losing their life in the process would be rewarded in heaven. Lacking prospects in the nasty brutish and short life of the underclass, these crusaders may have just been desperate.  
   
The second Children’s Crusade mirrors the first in many ways. There is a frustration with the lack of progress to address climate change, and a fear heading to desperation to consider how short their life on earth will be. The environmental green strategies have been taught in 21^st century schools since kindergarten. The fear is fuelled in many ways and carried by the media, to the children. 


In a landing page headline for a popular ISP, TIME Kidz articles appeared about vanishing polar bears in a threatened environment. This is the practice of the Media running old stories to fit a current narrative. The TIME Kidz pictures of cute white Polar Bears drifting on ICE flows was proof positive we were losing our polar ice and would lose our polar bear population. The text was from the 12-year-old April 2006 edition of Time boasting “Be afraid be very afraid” of global warming.   


The Globe in February 2007 carried a worried heading on the stunning photographs of polar bears, well, just being bears. This coincided with the Nobel Prize winner AL Gore’s predictions in the 2006 Washington Post that in ten years the Earth could be a “frying plan” and humans could be extinct in 30 years. Recycling of old beliefs with no data makes the timing of the article, a twelve-year-old nugget suspicious.  


Into this frustration of inaction, and propaganda preparation steps a charismatic Cortez, a child herself, like a “cool” older sister who punctuated the children’s fear of imminent death, claiming ‘we have 12 years left’ and ‘we’re screwed’ before the planet becomes inhospitable or even dangerous. The first Children’s Crusade was moved by a zealous piety of hope, the second children’s crusade is moved by a zealous piety of fear. 
  
1212 parents locked their children at home to prevent them from being caught up in the Crusades and its speciousness. 2019 parents need to take their children aside and teach them to at least be suspicious. Since Malthus 220 years ago and Global Cooling alarmists of the early 70’s doomsayers to the 21^st Century’s Global Climate Change (we can’t say warming anymore) panic have not been challenged adequately. 


I’m supposed to have already died of the Cold, and died of the Warming earlier but been given another 12 years by the Brooklyn Savant.


“I’m not dead yet’.