Thursday, January 1, 2009

Since We’re Bailing Out…

I suppose it’s somewhat symbolic that I have started writing this particular piece at 4 minutes to midnight on December 31. So as we leave what’s left of 2008, its hard not to reflect back on what has been a tumultuous year—something of a criminal understatement—in the financial world, culminating in scandals and bailouts.
In the coming year, not only can we anticipate more financial upheavals, but also attempts by state and local governments to stem this all-but-fated turmoil. But with all the talk bailouts, transfers of public funds intended to prop-up various failing institutions, and (possibly) embattled homeowners facing an avalanche of foreclosures, it seems that we are overlooking another possible candidate for a bailout: overburdened college graduates saddled with student loan debt.
Now before any of you Shelby Steele clones or Ayn Rand wannabes decide to slap me with the oh-so predictable label of “Socialist,” I am not talking about a wholesale bailout of everyone who’s ever taken out a student loan and failed to pay back this legal and moral obligation up to this point in time. What I’m suggesting is providing some relief to those who are being victimized by this current and unprecedented era of rapid changes in the marketplace that would have anyone hard-pressed to keep up as they struggle to survive.
Admittedly on the surface, this sounds like a ridiculous idea. But given the changing economic tides (and fortunes) of the nation, individuals—and families by extension—already fiscally fatigued from fighting the combined assault by the rising costs of consumer prices, loss of employment (due to off-shoring of labor/rapidly changing market trends), taxes, credit availability, and mortgage difficulties, are desperate for relief from just trying to stay in the shadow of the American Dream.
I’m not talking about helping to bail out irresponsible homeowners with risky credit ratings who shouldn't’t have been allowed anywhere near a mortgage application to begin with. What I’m suggesting is a morally sound level of financial assistance in the form of hardship-based debt forgiveness for those of us whom—it turns out—were sold a bill of goods insofar as the value of a college degree as it relates socioeconomic advancement. This is particularly true for those of us reared on the lower rungs of the socioeconomic ladder who find ourselves waiting tables, sweeping floors, substitute teaching, or similarly and/or chronically underemployed instead of benefiting from an education meant to move us past our humble beginnings.
What I’m talking about specifically is a case-by-case analysis of each student in debt. Any debt relief should be contingent upon the total amount owed, the average annual income of the student since graduating college in relation to expected earning potential (all things being equal, only those who've actually graduated would be eligible, and even then, dependent on the aforementioned requirements), and an assessment of any and all honest attempts to make regular payments.
One form of a bailout for student loans recipients could be a graduated schedule, similar to the type used in one of the various repayment plans already in use. The level of forgiveness could be based on anticipated overall employment trends in relation to the likelihood that the debtor could conceivably find employment on a level which would enable both repayment the loans as well as afford modest level of living. In extreme cases, such as a history of chronic unemployment/underemployment, cutting the unpaid balance would go a long way toward helping those already struggling to make ends meet.
Exempt from this plan would be those individuals who have been fortunate enough to parlay their college experiences and degrees into career success. Also exempt would be those in with specific degrees that lead to immediate professional and semi-professional careers, such as teachers, social workers, nurses, and the like.
Agreed bailouts are a slippery slope. But if we're going to talk about bailing out individuals with risky credit ratings being given loans on houses they couldn't afford in the first place, and lenders, many of who employ executives with salaries which afford them over-the-top lifestyles and—unwarranted in many instances—golden parachute severance packages routinely running in the multi millions of dollars from these same bad loans, then why not help those of us who were only trying to make an honest go of things?
The mostly ideologically-based arguments against bailing out institutions such as the automobile manufacturers and lenders (with financial implications for the nation as a whole) and of individuals (such as those struggling with failed mortgage and student loan recipients) are somewhat predictable. One such argument is that students irresponsibly borrow money for college knowing that these loans are backed by government guarantees and the assumption that it (the government) will never run out of money. This unlimited availability of funds is what is believed to contribute to rising college costs, and a resulting lack of cost controls.
This argument assumes that people are predictable, which like the marketplace, they are not. Every bit player throughout every institution along the chain of economic production is hard to predict. That includes bankers who may risk making bad loans to risky debtors, company executives making bad business decisions, and the lowly worker trying to obtain a semblance of some part of the American Dream. Somewhere along this chain, people decide they want to move up both socially and economically and enroll in college with the hopes of doing so. Most sensible people, knowing full well that they must work to earn a living, know that they have to work in the repayment of student debt with their aspirations of living better. But again, people are not predictable…from the fickle job interviewer to those making the decision to move their companies offshore to lessen their labor costs.
In recent years, this unpredictability in both people and shifting economic market/employment trends has reached critical mass, culminating in what a recent piece by CNN.com revealed as a “record number of unemployed college graduates seeking work” (See “Have Degree-And Pink Slip.” http://money.cnn.com/2008/12/05/news/economy/degreed_workers/index.htm?postversion=2008120514)
Harder to understand is why such a suggestion for debt relief, considering that it would benefit the Middle Class (the group whom politicians love to pander to) the most has not even been given the benefit of a trial balloon to test its receptiveness by the American public? Probably because, like the notion of universal health care, it would receive almost overwhelming support from all but the most ideologically intransigent of die hard Free-Marketeers. Harder still is why even staunch conservatives wouldn’t be receptive to this idea, since most are always quick to articulate how fair it is to “put money back into the pockets of hard-working Americans?
If you look at it logically, student loan debt relief for those whose academic success has failed to translate into socioeconomic upward mobility would benefit the nation as a whole. We wouldn’t have to lower taxes, and have services suffer as a result. And struggling student debtors not forced to cough up anywhere up to several hundred dollars a month in a likewise struggling economy would be freed to spend scarce dollars on more items of necessity, which would halt the anticipated bloodbath of retailers expected to close in 2009 due to record-setting abysmal sales of this past holiday season. Lastly, such a gesture would go a long ways toward eliminating the cynicism that the average American harbors toward the government’s seeming favor to help out Big Business and the well-heeled at the expense of the average hard-working Little Man.
As I look up at the clock, it’s now 1:01 am…America, do you know where you priorities are? Here’s to the possibility of a progressive 2009.

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