Friday, April 06, 2012
Students don't need a bailout
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From the RoundTable blog
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The Student Loan Forgiveness Act of 2012 (H.R. 4170), introduced by Rep. Hansen Clarke of Michigan, is otherwise known as "the bailout for college students." I recently came across a petition being spearheaded by Robert Applebaum, founder of a grassroots movement that has led to this popular petition now touting more than 450,000 signatures in support of a loan forgiveness measure.
This measure is intended to be a stimulus plan that would pump millions of dollars back into the economy. This would be accomplished by increasing the purchasing power of students by alleviating them of their monthly payment toward their loans. Students and individuals could buy houses, start a business or make purchases with their new disposable income. Ideally, it would translate into job creation and stimulate the economy.
It all sounds fantastic, does it not? But ultimately, for all the good it may do in terms of spurring the economy, there are negative impacts that could result from such a measure.
As we saw with the financial collapse, when we facilitate a mentality of a third-party payer (taxpayer bailouts), we further reinforce risky behaviors that are a result of a free-riding mentality, that is self-interested, opportunistic individuals.
The large banks were free-riders in that they did not mitigate risk, and instead engaged in credit swap derivative markets and high-risk investments. These behaviors created a third-party payer, that payer being "us," the American taxpayer, as we were forced to bail out these institutions and save them even though they had acted in a way that constituted a moral hazard to society. We could either save them, or watch the economy spiral into a second depression.
Students attend higher education for noble and academic pursuits; however, some enter education with less than noble intentions. Instead of going to class, they go to keggers, party it up for four or five years and major in a "social" degree, not social science.
Students take study abroad trips for a year or major in a field of study that has low job opportunities available. These students eventually graduate, but with a heavy burden of loans. After graduation and the parties, then come the bills and the monthly payments, and with a tough job market you have a recipe for disaster.
There are those students who work hard, do very well in school, but are faced with a tough job market and looming loan repayments.
Regardless of the two types of students described, we as students need to realize we must take responsibility for our actions and our decisions. We must accept the risk we take when we sign up for loans to pay for our education, accept the risk we take when we decide to major in modern pottery design and accept the decisions we chose to make while we were in school. Every time we make a decision, we cannot expect to be bailed out if it goes sour. We have to think and contemplate the decisions we make and accept the consequences of those decisions.
We as students should not punish our fellow Americans by having them bail us out of our student loans. My decisions are my own, and the consequences that may or may not result from them will be my responsibility to bear. While I applaud the proposed measure in bringing attention to the rising costs of higher education, I fundamentally disagree with the actions that it seeks to take.
Instead of looking for a Band-Aid to fix higher education, we should be looking at the operating table and begin surgery on the open wound — that wound being higher education's rising costs. Instead of looking for a bailout, perhaps we should be looking for a "responsibility-out." Students need to look at the decisions they have made. In the end, we have only ourselves to blame for the actions we take.