The U.S. Department of Education on Wednesday released new rules for income-based repayment of student loans, in what amounts to nothing less than a new socialism of higher education.
The scheme will cause a massive inflow of loans into the new system and cost taxpayers hundreds of billions of dollars.
Income-based repayment is affordable by definition. Currently, borrowers pay about 10% of their discretionary income over about 20 years, and whatever’s left—including all accrued interest—is forgiven.
Such a plan should be reserved only for people who have no other way to pay a larger amount, because it keeps them from defaulting and therefore maximizes loan payments in an affordable way.
But the new rules dramatically change the calculus:
- Payments are generally cut in half from 10% to 5% of income.
- The number of payments is generally cut in half from 20 years to 10 years.
- Income under which payments are $0 is raised from 150% to 225% of the poverty line.
- All payments, including “payments” of $0, trigger cancellation of that month’s interest.
In other words, borrowers will get more than 75% off of their total payments.
Which borrowers will choose that option? Almost everyone.
The Department of Education argues, arbitrarily, that there should be “greater parity between graduate and undergraduate borrowers, in terms of their incentives to choose an [income-driven repayment] plan.” Since graduate borrowers generally owe twice as much money ($41,000 vs. $20,000), they benefit much more from such a plan.
The department’s solution is to take graduate debt as the norm—which is the opposite of reality—and make undergraduate debt operate similarly.
As a result, the department estimates that the point at which this scheme breaks even—the point at which income is too high for even a 5% payment to benefit a borrower—is $75,500 for undergraduate borrowers.
Putting that in context, “An income of $75,500 for ages 22 to 25 ranks at the 98.21” percentile, according to the Personal Finance Data calculator. And 225% of the poverty line—$30,600—is at the 78th percentile for ages 22-25, so a huge majority of borrowers will pay nothing.
That means only about the top 2% of young earners are likely to stick with their current loan-repayment plan. Everybody else will take the payment cuts. The department could easily—but appears not to—admit that this will happen.
Who’s paying the bill for 98% of tens of millions of borrowers to get this windfall? America’s 100 million taxpayers, of course, yet again.
With this latest forgiveness scheme, the Education Department transfers hundreds of billions of dollars to college-educated people at the expense of taxpaying blue-collar workers and those who already met their responsibilities and paid their debts.
Think of it this way: For every $100 billion of debt forgiveness or payment reductions, that’s another $1,000 out of each taxpayer’s pocket.
Furthermore, it is well documented that colleges raise tuition when loans are made easier and more lenient.
That’s basic economics: Consumers can afford to pay more, so producers charge more for their unique products. For example, according to the Federal Reserve Bank of New York, each dollar of federal loan subsidy has led to 60 cents of tuition increases.
The Department of Education’s moves over the past two years are just extending an unsustainable cycle we’ll never escape until Congress fundamentally overhauls student loans, such as by returning them to the private market.
It should not seem counterintuitive to observe that if the government stops throwing trillions of dollars into higher education tuition, tuition will stop rising at unsustainable rates.
Colleges might then finally have to stop the administrative bloat that enables many of them to have dozens, if not hundreds, of administrators who divide and alienate students from each other in the name of diversity.
The Department of Education can’t make college free, but it’s making strides in bringing socialism to higher education. Congress shouldn’t stand for that.
Article cross-posted from The Daily Signal.
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Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
