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You might lose your retirement savings through the hidden cost of inflation if we monetize debt left and right.
I know. Run-away inflation is a killer, especially in the early years of retirement. (A hedge might be to buy an inflation-protected annuity with some of my IRA money. Between that an inflation-adjusted SS, I could manage. But....more a topic for the investment forum.)
It is a big issue in DC is how to get more money velocity running through the economy and Warren's idea is just one. Americans received 1200 stimulus checks and increased UE beni's at 600 a month and of course the measures increased money velocity. Their ideas of increasing the min wage in increments to 15 bucks a hour is another way to get there.
So essentially these people are claiming a large transfer of taxpayer dollars will prop up our economy. I agree that 1 trillion dollars suddenly dumped into the economy would in fact "stimulate" the economy.
Ignoring the devaluation of our currency and the additional burden on tax payers I have other issues with it.
1) These people are picking winners and losers. Those that unwisely burdened themselves with debt would be the big winners. Those that met their student debt obligations, served in our military for the GI bill, decided to enter the trades or opted not to attend college would be the losers.
2) If student loan debt is forgiven there would be an expectation that it would be a continuing "program" which would encourage students to continue to borrow.
3) This would do nothing to encourage colleges to reduce tuition and fees.
If the goal is to "Goose" our economy money should be given to everyone. Instead of 50,000 to the "winners" why not give 2000 dollars to everyone? Surely that would stimulate the economy and it would do so on a wider basis. Rather than concentrate the "stimulus" in one sector (lenders) it would go into all sectors of the economy.
To your item #3, not only would this do nothing to encourage colleges to reduce tuition, it would actually encourage them to raise prices. After all, the first $50,000 is being paid for by OPM (other people’s money).
Outstanding student debt in the U.S. has more than tripled since 2006, surpassing $1.6 trillion. Student debt started at 4% of gross domestic product in 2006, rose drastically throughout the Great Recession and stabilized at nearly 8% of GDP in 2016.
UGH Granny Warren. She is or was part of the problem. When she taught at Harvard and several other law schools she willingly accepted the highly paid salary. It is all over the internet that she was handed $400,000 for teaching one class as she was lauded for being the first professor of color at Harvard when she claimed she was Native American. If it is true that she earned that much then she is part of the problem because that is why it costs so much money to go to college and why kids are drowning in debt.
I agree with the OP, what kind of lesson is it going to teach people if the Government will pick up the tab? During the recession the Feds bailed out big business. Why did the over extend themselves in the first place? During the riots this Summer who has been left to pick up the tab from the destruction?
I have 2 degrees and paid my way by working through school and overtime in the Summers. I did not go to a big university where "Party 101" was on the curriculum.
Why is the Government even considering cancelling the debt when they could just reduce the interest rate? Loans fluctuate between 4.6 and 7.2% so knock off a point. That could really help people that bit off more than they can chew.
Then again, I don't carry credit card debt but my biggest drain is my mortgage so maybe Granny Warren can pay that off for me?
I'd be for this incredibly stupid and expensive plan IF the government steps in and:
1. Puts a cap on salaries of professors and employees
2. Puts a cap on tuition
3. Can fire professors and employees that break the law, any law, especially with regards to rioting
4. Puts a cap on the number of different types of degrees that can be earned
As the "persons in charge" of the spending the money, it's only fair that the taxpayers have some say over how that money is spent.
One of my solutions: guarantee a loan up to the cost of in-state tuition at the public university in the state in which the college is located. If you want to study at NYU, you'll need to secure grants, scholarships, or other private financing that you wouldn't need to pursue a similar course of study at SUNY Geneseo. Big ticket universities would lower tuition, expand scholarships and endowments, or fail when they couldn't attract students.
Cancelling student loan debt makes absolutely no sense at all. Those are the people who will benefit the most with their degrees. They should be paying back what they agreed to when they made the choice to finance their education costs and that will then allow future students to have access to funding.
Not everyone decides to finance their education costs and this would not be fair to them and it certainly is not fair to low to middle income tax payers who had nothing to do with the choice of someone to take put a loan for college rather than working for it.
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