Why Should I Pay Off My Debts?
Why should I pay off my student debts if there's a chance that Obama will institute a policy of student loan forgiveness?
I can either pay off my debts early and have a chance of being punished for my responsibility by paying for everyone else's debts through my taxes while getting nothing for myself; or,
I can not pay my debts at all and continue accumulating 6% interest per year on the chance that Obama might make the taxpayers cover my costs.
In other words, just by remaining in power and making promises, Obama has created an economic incentive for me (and every other student) to engage in irresponsible financial behavior on the hope that we'll win the bailout lottery. This is one of the many ways a bad leader can cause economic damage without actually succeeding at passing anything, just by having the wrong philosophy.
In other words, suppose there's a 30% chance Obama could find a way to implement student debt forgiveness through executive powers, without going through Congress. If I have $30,000 in debt at a 6% interest rate, then at the end of Obama's term, I'd owe about $38,000 if nothing got paid off.
So If I choose to pay off nothing, I'd have a 70% chance of a -$38,000 value, and a 30% chance of a $0 value. That's an expected value of -$26,600.
If I choose to pay off everything ahead of time, I'd have a 100% chance of something between -$30,000 and -$38,000.
If the predicted chances are correct, I'm better off taking the irresponsible route, leaving me with a cost of $26,000, rather than a cost of $30,000-$38,000. Obama's presence in the White House gives me and plenty of other members of this economy good reason to be financially irresponsible and harm the country as a whole.
I can either pay off my debts early and have a chance of being punished for my responsibility by paying for everyone else's debts through my taxes while getting nothing for myself; or,
I can not pay my debts at all and continue accumulating 6% interest per year on the chance that Obama might make the taxpayers cover my costs.
In other words, just by remaining in power and making promises, Obama has created an economic incentive for me (and every other student) to engage in irresponsible financial behavior on the hope that we'll win the bailout lottery. This is one of the many ways a bad leader can cause economic damage without actually succeeding at passing anything, just by having the wrong philosophy.
In other words, suppose there's a 30% chance Obama could find a way to implement student debt forgiveness through executive powers, without going through Congress. If I have $30,000 in debt at a 6% interest rate, then at the end of Obama's term, I'd owe about $38,000 if nothing got paid off.
So If I choose to pay off nothing, I'd have a 70% chance of a -$38,000 value, and a 30% chance of a $0 value. That's an expected value of -$26,600.
If I choose to pay off everything ahead of time, I'd have a 100% chance of something between -$30,000 and -$38,000.
If the predicted chances are correct, I'm better off taking the irresponsible route, leaving me with a cost of $26,000, rather than a cost of $30,000-$38,000. Obama's presence in the White House gives me and plenty of other members of this economy good reason to be financially irresponsible and harm the country as a whole.
Comments242
Join the community to add your comment. Already a deviant? Log In
Actually there are already several programs that will allow you to have your debt forgiven. Most require some kind of service like working at under serviced inner-city schools. But they ALL require you to be current on your student loans. Not staying current, disqualifies you for possible forgiveness (basically it proves that your an untrustworthy little shit). I'm sure any further programs will have similar clauses.
Of course, my loans are in deferral thanks to grad school. So, just to stay current, I don't have to pay a cent until 2016.
My biggest problem is interest accumulation.
My biggest problem is interest accumulation.
It's naive to believe that loan forgiveness is incentive to be fiscally irresponsible. The bureacracy involved in these policies, not to mention the requirements for eligibility, are stringent, and only a small percentage of the people who are eligible will actually receive the go-ahead. By that point their credit rating will be shot to hell and back, putting credit-dependent goals such as owning a home, personal business or working in certain industries/companies on hold for at least a decade.
On the contrary, it's naive to believe that these programs will be so perfectly designed as to avoid incentivizing fiscal irresponsibility. I mean, it was exactly that sort of government-incentivized irresponsibility that caused the 2008 financial crash. Why should we believe that the new government programs will be perfect and incapable of causing unwanted side-effects?
I never said it would be perfect. In fact it is always the opposite. The past decade has shown just how much damage these forgiveness policies can cause to a national economy. Lenient credit policies paved the way to the cliff, but the introduction of forgiveness policies is what shoved us into a recession. Regardless of how you look at it, though, abusing social programs only screws yourself in the end.
I'd be fine with debt forgiveness or other increases in financial support for education so long as it was accompanied by a MASSIVE increase in the academic admission standards. It's bad enough that all the dumb rich kids can get in. It's even worse with all the dumb poor kids dragging things down.
If you want higher admissions standards, then we need to stop giving out such easy loans.
Giving out funding for an education based on a person's level of income is pretty fuckin' discriminatory dude. I'm of the school of thought that education is a right, and not a privilege. It's why I favor tuition free college, similar to certain European countries. Some fund the first 2 years, others fund the entire trip. We, as a country, have dropped in educational rankings. Education first. Books, not bombs! <3
Plus logic dictates that if fewer people could afford to go to college, standards would drop even further, as colleges literally couldn't afford to turn away or flunk out the few people that could afford to go.
Yeah, that's pretty much how I've figured it works. Government starts tossing around free money for students, the universities lower their standards in response to pack in more students, many of whom have no business being there and just ruin the experience for everyone else.
I've personally seen professors go to extraordinary lengths to fudge the numbers so that students don't fail. I'll never forget the absurdly easy class where the professor nevertheless ended up putting 100 percentage points of extra credit on the final. The extra credit section consisted of all the questions from the previously graded, corrected, and returned tests from earlier in the semester, so the students were basically being handed a free pass on the course.
In all fairness, I'm sure the professor was under pressure from the administration to make sure all the stragglers passed. Failing students don't bring in more of that sweet federal money next year. Better to keep them coming back rather than let them suffer the consequences of their own choices.
This was at a reasonably prestigious private university known for having higher academic standards than the other local universities. My family and friends tell me that it was even worse at the big "standard" public university that most people around here go to.
I've personally seen professors go to extraordinary lengths to fudge the numbers so that students don't fail. I'll never forget the absurdly easy class where the professor nevertheless ended up putting 100 percentage points of extra credit on the final. The extra credit section consisted of all the questions from the previously graded, corrected, and returned tests from earlier in the semester, so the students were basically being handed a free pass on the course.
In all fairness, I'm sure the professor was under pressure from the administration to make sure all the stragglers passed. Failing students don't bring in more of that sweet federal money next year. Better to keep them coming back rather than let them suffer the consequences of their own choices.
This was at a reasonably prestigious private university known for having higher academic standards than the other local universities. My family and friends tell me that it was even worse at the big "standard" public university that most people around here go to.
Actually, by your logic, if fewer students could afford to go to college, then colleges would drop their standards even further to compensate. Because if only the rich can afford to go to college, thus vastly reducing the numbers and your income, you sure as hell don't want to drop any of them because you'll really be out of money then.
Whereas with more students able to go, you can afford to lose a few without going out of business financially.
Whereas with more students able to go, you can afford to lose a few without going out of business financially.
i think yur seeing the glass half empty here.
the biggest problem about politics isnt the fact we don't agree but theres no one looking into how it could be done, people always argue over how it could happen as if they see the future and say its a bad idea and then there the others who say what should happen but are always shot down because of the problems that idea would cause.
never does it occour to them to ask a professional how to improve the idea, this could work, but we need people who actually know the system and have a willing ness to change it to do so
the biggest problem about politics isnt the fact we don't agree but theres no one looking into how it could be done, people always argue over how it could happen as if they see the future and say its a bad idea and then there the others who say what should happen but are always shot down because of the problems that idea would cause.
never does it occour to them to ask a professional how to improve the idea, this could work, but we need people who actually know the system and have a willing ness to change it to do so
You're thinking like a technocrat. We already have countless "experts" studying these problems, and their advice has gotten us into this mess in the first place.
Think of how Christina Romer predicted that if Obama's $1 trillion stimulus plan was passed, unemployment would never go above 8%. Where did it end up? 11%? And GDP growth didn't end up anywhere near where she predicted.
See, the thing you need to learn is that for any given "solution" or prediction, you can find so-called experts to support it. And that's what politicians will always do. They'll find an expert who uses assumptions that match their political philosophy, and that expert will design a plan that's predicted to give good results under those assumptions.
The problems arise when those predictions are wrong, yet our society fails to question the original assumptions. That's what happened with Obama. Everything he and his "experts" have predicted economically has been wrong, yet the media still fell in line for his views and convinced the public to reelect him.
What we need is a new set of assumptions. Keynesianism has failed. Socialism has failed. Libertarianism offers a better shot at working, and deserves a chance.
Think of how Christina Romer predicted that if Obama's $1 trillion stimulus plan was passed, unemployment would never go above 8%. Where did it end up? 11%? And GDP growth didn't end up anywhere near where she predicted.
See, the thing you need to learn is that for any given "solution" or prediction, you can find so-called experts to support it. And that's what politicians will always do. They'll find an expert who uses assumptions that match their political philosophy, and that expert will design a plan that's predicted to give good results under those assumptions.
The problems arise when those predictions are wrong, yet our society fails to question the original assumptions. That's what happened with Obama. Everything he and his "experts" have predicted economically has been wrong, yet the media still fell in line for his views and convinced the public to reelect him.
What we need is a new set of assumptions. Keynesianism has failed. Socialism has failed. Libertarianism offers a better shot at working, and deserves a chance.
There are special rules right now, which prevent student loans from bankruptcy protection like the type you run up purchasing shit you don't need.
Student loans are singled out in this regard, they need to be singled out.
Student loans are singled out in this regard, they need to be singled out.
I meant to say "un-singled out".
gah,
gah,
(Ironically the majority of personal bankruptcies are due to medical bills.)
nice point, but irrelevant.
I know I made a typo, but my argument is that student debt shouldn't have special rules baring people from protection against bankruptcy filing.
Especially when out of control spending on shit you don't need is not singled out.
I know I made a typo, but my argument is that student debt shouldn't have special rules baring people from protection against bankruptcy filing.
Especially when out of control spending on shit you don't need is not singled out.
Ah, OK. I misunderstood what point you were making. Sorry about that.
its ok, I also made a typo.
You're the person who keeps whining about the government and Obama taking away freedoms and removing liberty from the American people.
And right here, in an instance where you've been given extra choices, you whine about being given more freedom to act however you want
And right here, in an instance where you've been given extra choices, you whine about being given more freedom to act however you want
You're missing the point. Should I even have this choice? Why should I have the opportunity to just dump my debt on the rest of you?
Wow. Just wow.
Implying that Obama actually intends to forgive student loans, and wasn't just using it as cheap campaign bait.
Yeah, I honestly will not bet on the generosity of government for my well-being. I think a lot of students who voted for Obama are going to be severely disappointed.