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Monday, December 5, 2022

Don’t pity the lenders in the student loan fiasco

President Trump’s last Supreme Court nominee, Justice Amy Coney Barrett, recently rejected a petition from the Brown County Taxpayers Association of Wisconsin, asking the court to halt the Biden administration’s student loan forgiveness program. The motion was refused without comment.

Shortly after, a federal court in Missouri dismissed a case brought by six Republican states seeking comparable relief, stating that the states lacked standing since they failed to show any potential harm.

A federal appeals court, however, later ordered a temporary halt to the debt relief.

The party that has spent the last 30 years disparaging trial attorneys often appears to be aiming for trial attorney full employment based on the slew of lawsuits they have just filed.

Some lazy English major living in mom’s basement with purple hair, body piercings, and a part-time job at a coffee shop will have their college debt covered with “my tax money,” according to the quackers who believe “Let’s Go Brandon” is the pinnacle of political humor.

It significantly misrepresents the state of student loan debt.

Regardless of their subject of study, college students need federal student loans. Students at trade schools also utilize them. You know, carpenters, lineman, plumbers, electricians, and even programmers.

You may have utilized student loans to pay for training as a medical assistant, dental technician, or hair stylist. Federal student loans were used to pay for the trade school training of many new truck drivers.

Its main selling point is how simple it is to apply for a federal student loan. Interest rates are often lower than those on private loans, they are fixed, and the terms of repayment are more lenient.

What other parties have profited from student loans?

Lenders include banks and different thieves. the fictitious tuition consultants. Additionally, the institutes of higher learning have had great success using federal student loans. It’s difficult to envision how a public institution could afford to pay its athletic coaches seven figures if there was no federal funding pouring in via student loans.

The forgiveness of loan contracts unquestionably raises important moral hazard issues regarding money lenders and their clients (victims). Moral hazard is the term economists use to describe a situation in which people will take on excessive risk because they think they won’t have to bear the full consequences in the end. For instance, if they receive government bailout assistance or insurance.

To illustrate, the student loan industry has offered lenders a sweetheart arrangement that has pushed them to make risky loans since they knew they would eventually be reimbursed.

But rather than when Biden chose to assist at least one-third of Minnesotans with student debt eliminate them, these are the kinds of concerns that ought to have been posed years ago.

The Financial Crisis of 2008 and the ensuing bank rescue are the parent of all moral hazard scenarios. There were scarcely any repercussions for mortgage lenders and their Wall Street allies’ drunken pirate antics at the casino.

The moral puffed-up quackers are likewise quite picky: Where were they a few years ago when the federal government gave corporations, non-profits, and churches billions of taxpayer dollars in Paycheck Protection Program (PPP) loans? The loan was forgiven if the money was utilized for what it was intended—payroll costs. Most of the loans, many of which were in the six and seven figure range, have been forgiven. In other words, people borrowed money from the taxpayers with the knowledge that they wouldn’t be paying it back (corporations are persons, right?) That presents a moral danger, to put it mildly.

Banks and financial advisors, many of whom were involved in the sale of student loans, benefited greatly from the PPP bonanza by making substantial profits from the preparation and processing of the loans.

When we exempted credit card corporations from state usury regulations, those annoying limitations on interest rates that a lender might lawfully charge customers, we offered a huge gift to major banks. Where were the quackers at that time? Maximum usury in Minnesota is 8%. The average credit card interest rate now is above 16%, and only a small number of cardholders can access this rate. 20% or more is the average credit card fee. State laws don’t apply to them.

The saying “follow the money” first gained popularity during the Watergate scandal. And it appears to apply here. Follow the money if you’re more concerned about the industry that can’t lose in the student loan market than you are about the purple-haired English Lit major getting $10,000 in student debts forgiven.

Cedric Blackwater
Cedric Blackwater
Cedric is a journalist with over a decade of experience reporting on local US news, and touching on many global topics. He is currently the lead writer for Bulletin News.

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