President Obama announced yesterday his initiative to reduce student loan debt. The plan is an admirable one. Attending a university is expensive, and the cost of which keeps going up. All these kids who go to school mount up huge amounts of debt while trying to prepare themselves for the future. Now they’re all graduating during the recession only to find no jobs. It’s like a sick joke. We tell them how important education is, politicians, teachers, parents, guidance counselors, and they do exactly as they’re supposed to by finding a way to go to college. Now conservatives turn on them and blame the students who did what conservatives told them to do. Either they blame the students for being so stupid to go into so much debt, or they blame them for being so lazy for not finding a job(which is hard when there’s more than four workers for every open job).
So on the one hand, I think the President’s goal to try and reduce the student debt burden is admirable. On the other, I think it’s solving the wrong problem because he’s trying to do government “on the cheap”. The problem is that they can’t pay their loans because they can’t get a decent job. If instead of trying to micro-manage student loans, he and congress concentrated on fixing the economy, the student debt burden wouldn’t be such a burden because the kids would now have jobs in their chosen fields. If the President could get congress to institute something like Warren Mosler’s 3 point plan to increase Aggregate Demand in the economy, then jobs would appear for those kids. The problem though, is that plan is fiscally expensive and would add to the debt. Since he thinks the deficit is a real problem, he tries to “do government on the cheap”, by just concentrating on student loans.
There’s still the argument about the long term problem of college costing so much now. I acknowledge that is a problem. However, this is not the way to deal with it. Conservatives have a point when they snarl about helping some with loans and not others. A better long term plan would be to make college cheaper so that people can work their way through college without accumulating very much debt. That would be a more equatable plan going forward without a moral hazard.
In short, I empathize with students who graduate with thousands of dollars in debt, but then can’t find a job in their chosen field. However, the fair and equitable solution is to get them a job, not the “government on the cheap plan” of reducing student loan debt. If our politicians understood how the monetary system worked, we could do this.