Tuesday, June 25, 2019

Student Loans: A Libertarian Take

By Robert Wenzel

Sen. Bernie Sanders (I-Vt.) proposed on Monday the elimination of all $1.6 trillion of student debt held in the United States. Almost all of this debt, $1.56 trillion, is in some way guaranteed or funded by the government.

It is this overwhelming portion of student loan debt that I will be discussing here.

Specifically, Sanders is proposing the federal government wipe clean the student debt held by 45 million Americans.

What is a libertarian to make of this?

Some consider it an outrage. (See Michael Rozeff: American Commies (Democrats) Want to Cancel Student Debt). Rozeff argues that the plans, such as those of Bernie Sanders and Elizabeth Warren, "make a mockery of contracts."

But I would argue that no contracts should be recognized when one party to a transaction is the state, the state itself has no legitimacy. The state is an animal of coercion. If we are to adopt Murray Rothbard's dictum to "Hate the state!" then there is absolutely nothing wrong with supporting the stiffing of the government to the tune of $1.56 trillion!

And although I would be in favor of stiffing the government if it provided something of value, I hasten to point out that outside hard degrees, say in accounting and the physical sciences, the true value of these government-funded college educations is probably about one roll of the type of toilet paper you can find most frequently in a Greyhound bus station restroom.

Of course, Sanders goes well beyond the elimination of this debt and to be fair to Rozeff, he does mention the above when he attacks the Sanders plan:
Some of our home-grown socialists/communists (like Sanders and Warren) want taxpayers to assume the debts of students. Others want taxpayers to pay for 4 years of college for everyone else.
There should be no taxpayer assumption of the debt. The government should simply be stiffed. We want a smaller role for government, not a shifting focus of the government financial squeeze to keep the government unharmed. As libertarians, we should want government involvement in education to collapse.

Via a mass uprising resulting in the default on student loans, we should spread fear into government and the cronies at the banks and in higher education that plot education scams with the government. They should fear for decades that the populous will rise again and stiff them all again.

This is the type of populist revolt I can support.

And there should be none of this horrific Sanders plan of free education for all. This is simply a call for the continuation of creepy state worship skewed education as an alternative to creativity, entrepreneurship and freedom when it comes to education.

The government propaganda in the school setting, that government offers positive solutions, is what caused the students to be suckered into the government-skewed college education trap in the first place. It must stop! No government involvement in education in any manner, no government funding of education in any manner. No government vouchers, no local government public schools. Government out!

The government by its very nature will only promote love of the state. A key ingredient to active hating of the state is to demand the end to the government role in education. Government-connected education is a primary evil. It is an attempt to grow young brains into tools of the state.

Stiff the state! Free the students!

Robert Wenzel is editor and publisher of EconomicPolicyJournal.com. Follow Wenzel here.


  1. Let's not forget also that the government, around 2006 I think, changed the bankruptcy laws so that student loans were exempted, i.e. they changed the rules in mid-game. So for those hapless students who signed-up to the student-loan scam prior to 2006 (like me!), there is even more rationale and argument for the voiding of these ersatz contracts.

  2. In my humble opinion, the Student Loan crisis could be solved with one word. Bankruptcy. Allow those unfortunate souls who bought the Big Education scam to file bankruptcy on their student loans and the market would work itself out. Who would loan money to someone who is studying worthless degrees like gender studies and underwater basket-weaving unless the State is guaranteeing the loans? Since student load debt is specifically removed from bankruptcy protection, debtors have no choice but to pay for them, sometimes as long as 30 years with nothing to show for it.

    The only reason student loans are still in existence is people with guns forcing you to pay... or else.

  3. If not paying your loans back means that the taxpayer will be additionally burdened and you are aware that this is the consequence, then you are aiding and abetting the government in their theft against the taxpayer. Pay back the loan that you voluntarily borrowed, otherwise you're a commie.

    1. So you are in favor of expanding government taxation if students stiff the state?

    2. It is known that if students stiff the state, that the state responds by increasing taxes -- which means that stiffing the state increases aggression and therefore the stiffer is aiding and abetting the violation of the NAP.

    3. "It is known," so you see no use in advocating for libertarian positions?

      You should spend your time watching televised baseball games.

    4. The state tells you their position and they have a long track record. So yes, it is known. Advocating keeping "free stuff" will result in more aggression.

  4. How about advocating the pro-libertarian stance, which would be for the borrowers to return their money back to the taxpayers, instead of taking the commie position?

    1. So you want students to pay reparations? Does this stop with students? Who else do you want to have pay reparations, the little old lady who still gets magazines delivered by the Post Office?

    2. I want everyone who received welfare and food stamps to pay reparations. I also want all corporations who received the benefit of regulatory capture to pay reparations as well. This is the libertarian position -- to return all unearned benefits and property, back to their proper owner (as best as reasonably possible).

    3. See now Lime you have gone off the rails now. You cant remotely hope to accost the monopolies of the Oligarchy! That isnt an achievable objective.

      I rarely agree with RW completely but in this his vision is a true one not only to spank the elite but one of their largest institutions - higher education.
      When valueless colleges and universities are faced with extinction or a more realistic business model that bursts this bubble like the real estate one in 2008 there will be a wide range of benefits to a large section of the population that will send ripples across the economy at large and punish those that deserve it ... Not those trying to advance in life but those that will prey on them to for doing so.

      Bring on the great revolt default!

  5. "There should be no taxpayer assumption of the debt. The government should simply be stiffed."

    So they'll create more currency units and steal it through inflation instead.

    One way or another the productive, prudent, responsible people will end up paying for it if the loans are forgiven. It's not like the government is going to not buy a new aircraft carrier to cover the loan forgiveness.

    Unless the money comes out of another real but wasteful expenditure such as war then stiffing the government is a taxapayer assumption of the debt. To be stiffed the government has to actually spend less to account for the loss but they won't. The student loan debt will just be added to the yearly deficit in amounts equal to the annual payments from now until the loans would have been paid off.

    The college administrators, professors, and more that sold these economically useless degrees all got paid already, so no stiffing them. The only way government is stiffed if some other cronies or special interests do without.

  6. RW, you started this essay by noting the politicians proposal for student debt forgiveness and asking what is a "libertarian take of this?". Proposals of this sort by politicians always mean stealing from some to give to others and that is always wrong. And if its implemented by a politician it will simply be another government program. It is true that the government guarantees were wrong to begin with but endorsing another government program which doesn't really solve the problem is a mistake. The problem being government involvement in education. So I don't think a libertarian take is to endorse the politicians student debt forgiveness program.

    Nor do I think libertarians should propose students simply "stiff the state" with regard to student loans. This is not a blanket solution as each case must be decided on its own merits. But I believe each student decided to take the handout in order to attend a school they thought would be beneficial. Now its time to pay for that choice.

    40 years ago I went to college and accumulated debt that would equal $40 or $50 thousand in todays inflated dollar. I paid it back in ten years. It wasn't easy and as time went by I realized that the schooling wasn't as valuable as I thought it would be. But I paid off the debt and went on to a successful career. Take responsibility for your own decisions and its more likely good things will happen.

    1. They have to pay for their loans? They should have thought about that before they put their applications in, should have kept their applications in their pants...

      Let us be honest here, the ONLY reason Sanders is talking of forgiving the debts is because for so long education has been so pro-female and anti-male that 2/3 of the debt is held by women. So NOW it's a problem and should be forgiven?

      No, if it were men holding 2/3 of this debt then forgiveness would never be an option, indeed they specially blocked the bankrupt route when they realized so many women would default.

      They knew the risk they might have to pay back the loans when they inserted their applications into a university. Let them pay. As Clinton said about men forced into fatherhood - "We will find you. We will make you pay".

      Right back atcha sister.

  7. I really lol when people act like taxes are their money. And it’s mind boggling how people get mad at the recipients of tax dollars, rather than getting enraged at the ONES STEALING IT!
    Those dirty immigrants, those dirty welfare moms, those dirty students, on and on. It’s ridiculous. Unless of course they don’t really see it as theft, and actually see taxes as legitimate. Come on guys, it’s stolen money, at gun point. You do not have a right to how it’s spent, you don’t have ownership in the government, people who get some of the loot don’t owe you anything. The ones taking it are the evil ones. Hate the State. All these arguments are whacking at the branches. Turning our eyes off the prize.
    “There are a thousand hacking at the branches of evil to one who is striking at the root.”
    Henry David Thoreau

    1. Who petitions the government? Who agitates for it? It is the immigrants, the welfare moms, the students, and much more and their advocates. They vote, they protest, they march, they accept it as payment for their votes, etc and so on.

      Whenever I publicly advocate that this institution of government be diminished outside of forums like this one the public of tax receivers and their virtue signalling supporters howl. They often become rather nasty about it. How dare it be suggested that wealth not be stolen and transferred!

      Yes, the root cause is the power of government to steal but let's not pretend that the receivers are not by and large co-conspirators. They very much are. There are few people here and there that won't accept the government's stolen filthy money but they are few and far between.

      The government is but a tool to many who receive the wealth stolen through taxation, much like a gun would be if they did it themselves. The government gives an illusion of washing their hands of the theft morally, and you seem to agree with that. It's not stolen if I have the government take it from you for me?

      Let's take the New London decision. If I sufficiently convince the elected office holders where you live to take your property and transfer it to me then you're saying I am not guilty of theft? Hardly. If the people were moral and didn't agitate for things like student loan forgiveness or didn't sell their vote to the politician who delivered them the most plunder then it wouldn't happen.

  8. I agree with the spirit, and also as maybe a reminder to loan originators that government guarantees aren't necessarily bulletproof. Not sure that they wouldn't find a way to offset the loss though...

  9. What about those that limited or avoided borrowing to attend college by worked their way through college and attending less expensive facilities of higher education? What about those that lived up to their obligations by paying back the loans and other debts incurred to attend university? What about those that wanted to go to college but decided the financial burden was too much? What about those that decided a bachelor’s degree in fashion design wasn’t worth $36,000 a year for four years of partying? Some of these people will be the subject of Bernie’s taxes on the “rich”.

    I realize this is not how the tax will be applied but for a little perspective: Roughly 50% of American families own stocks, down from about 65% in the roaring 2000’s. Only a little over 1% own bonds, down from 5% in the late 80’s. Using 50% of the 128 million households in the USA, 64 million households would each pay $24,375 to pay off the $1.56 trillion in student loans.

  10. I say forgive the debts. Why not? That's less interest going to the rent seeking banks and quasi-government entities. It's a loss for Leviathan.

  11. 'Why not"? Because forgiving the student loans makes the students accomplices in the theft to a greater degree than would otherwise be the case. And of course all those "voting" in favor of forgiveness also become accomplices. Exactly what politicians want. Unfortunately there is no perfect answer, forgive or pay it back, the transaction is illegitimate. But at least if you pay it back you are less indebted to crooks. You will be on stronger grounds to object to future give-aways. But most importantly you will have taken responsibility for your own action and made some repayment for the mistake of accepting the handout to begin with.

    Liberty can only be gained one individual at a time. And it will require rational psychologically healthy individuals. People who can accept responsibility for their actions not those who constantly grovel for forgiveness.