They’ve been tricked into defending the worst big-government lending scam in U.S. History.
While many conservatives point to election fraud to explain why republicans lost both the Presidency and the Senate in the recent election, there is one issue that would have turned these close losses into landslide victories for them, even despite alleged vote tampering at the margins: Student Loans.
Student loan debt in more than a third of U.S. States now exceeds their entire state budgets. The majority of these states are “red states”, and 87% of this debt is owed directly to the federal government. Interestingly, Georgia is the worst, owing $81.5 Billion in student loan debt vs. a $48 Billion state budget. On November 3rd, there were 1.4 million voters in the state- the majority being either republican (43%) or independent (12%)- who were never going to be able to repay their student loans even before the pandemic. Trump and the republicans offered them nothing, while Biden and the democrats called for both widespread loan cancellation and the return of bankruptcy protections to the loans (even if insincerely).
The student loan issue certainly provided the democrats with the margin necessary to win the Georgia elections, and is likely why the races in the state were even close to begin with. While Georgia is the worst student loan debtor-state in the country (as a percentage of the state budget), North/South Carolina, Florida, Texas, Ohio, Alabama, Indiana, Tennessee, and Missouri aren’t far behind. This will only get worse for the republicans.
Make no mistake: the federal student loan system has become something that no conservative should support. In the absence of constitutionally enshrined bankruptcy protections, statutes of limitations, and other fundamental consumer protections (removed by Congress), The entire lending industry- especially the Department of Education- has essentially been given a license to steal from the citizens. The Department has been booking upwards of $50 Billion per year in profits annually from the lending system, and interestingly, some of these profits are earmarked to pay for Obamacare. What is most disturbing: White House Budget data going back decades show that the government has managed to make a profit, even, on defaulted loans- a claim that no other lender can make, and a defining characteristic of a predatory lending system.
There are 45 million voters in the country carrying about $1.6 Trillion in federal student loan debt. According to Education Secretary Betsy DeVos in December 2019, 75% of these people were either unable to make payments on their loans, or were paying, but their balances were going up. Trump appointee Wayne Johnson, who ran the federal lending system until recently, said that this was closer to 80% just before COVID-19 hit. Also, we now know that the class of 2004 are defaulting on their loans 40% of the time, but they were only borrowing a third of what is being borrowed today. It is no stretch to say that we are now looking at a default rate of 75% or higher for more recent borrowers. That is about four times higher than the default rate of sub-prime home mortgage loans.
By every reasonable metric, this was a catastrophically failed lending system even before the pandemic and the election. Most borrowers were unable to make payments before Covid, almost no one is paying currently, and very few will resume when the current payment suspension expires.
A majority of these 45 million, largely distressed borrowers identify as being politically independent or republican. More than 40% never graduated. Many attended community colleges, and even vocational schools to learn a trade. All of them are losing sleep over their student loans, and they span the political spectrum. Interestingly, traditionally “red states” are being hurt significantly worse by these loans than “blue states”. Despite popular misconceptions, there are more people over 50 years old with student loans than there are people under the age of 25, and they owe triple what the younger generation owes. This is the largest emerging voting block in American politics today.
Incidentally, the most successful federal student loan borrowers that conservative media is so concerned will benefit from student loan cancellation tend to refinance their loans at lower interest rates out of the federal program!
The democrats got this. Candidates like Bernie Sanders, Elizabeth Warren, and others not only included the return of bankruptcy protections in their presidential platforms, they went a step further and called for broad student loan cancellation. Biden endorsed Elizabeth Warren’s bankruptcy agenda, and by the time the election happened, was pledging to “eliminate” student loans for public college students who earn less than $125,000.
Trump and the republicans, meanwhile, had nothing. In fact, the republican response to all of this was essentially to wag their fingers at the borrowers, and declare loan cancellation to be unfair to those who had paid off their student loans, or who had paid for college without loans.
By demonizing the 45 million people being wrecked by these loans, instead of the big-government lending beast and the colleges who are benefitting from them, they sealed their fate in Georgia, and nationally.
In one fell swoop, the republicans have managed to both abandon tens of millions of their constituents, and betray their conservative principles. This is the height of elitism, arrogance, hypocrisy, and stupidity.
President Trump could have lived up to his pledge to “drain the swamp”, stood up to big-government and the colleges, and cancelled all federally owned student loans. Unlike the trillions in PPP loans (that don’t need to be repaid), and other stimulus measures being thrown into the economy, Trump could have done this without needing congressional approval, appropriation, and without adding a penny to the national debt.
By taking the lending system “to the bath, and drowning it in the tub” (Grover Norquist’s words, not mine), Trump would have massively stimulated the economy, jettisoned a broken and threatening lending scam, and paved the way for a complete re-build of higher education financing in this country. The republicans would have won both the presidential election, and also the two close Senate races in Georgia.
He didn’t. They lost. The republican party is now falling apart, all because they chose to defend a lending system that is vanishing into a mist of illegitimacy as we speak. If the republicans wish to avoid vanishing along with it, they had better figure this one out.
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