President Barack Obama wants to forgive another batch of debt, this time owed by America’s youth. This is another of those tidbits buried in his latest pseudo-budget proposal.
Obama wants to
increase the number of borrowers eligible for a program known casually as income-based repayment, which aims to help low-income workers stay current on federal student debt.
Borrowers in the program make monthly payments equivalent to 10% of their income after taxes and basic living expenses, regardless of how much they owe. After 20 years of on-time payments—10 years for those who work in public or nonprofit jobs—the balance is forgiven.
Noticed that: “stay current.” Not “pay off.”
That this would cost American taxpayers billions of dollars, in the middle of a very long failed recovery, doesn’t bother Obama at all. After all, it’s only MonopolyFed money.
This would make all lending riskier. This precedent would let every group of borrowers with a “good reason” (and they all will have good reasons) to be allowed to walk away from their debts. There’d be no incentive left at all to borrow carefully and responsibly. Dishonoring a promise would be destigmatized.
It also ignores the morality of the thing. It removes all incentive to honor commitments solemnly made—indeed, it would condone “commitments” made for the most frivolous reasons, by eliminating the consequences of failing to satisfy them.