Another Cost For Us

In an earlier post I made the statement that banks and credit card companies do not absorb or pay for bad debt – that amount that is not paid by their borrowers and cardholders.  And that bad debt is actually paid for by us – those of us that pay our obligations. Now President Obama has increased another segment for us to handle in addition to the bad debt at banks and credit card companies.  The new student loan program that he announced reduces the minimum payment from 15% to10% of the student loan borrower’s discretionary income and the maximum amount of time the borrower must make those payments from 25 years to 20 years.  It does not take a mathematician to figure out that the unpaid balances on these student loans will go up, probably a lot. One guess as to who gets to absorb the rest.  If you guessed us, you and me, those that pay taxes, you win or maybe it is you lose.  Any way you look at it we lose.

I looked-up the definition of discretionary and this is how it is defined. Discretionary income is money you have after you’ve paid off all of your bills. Discretionary income is income after subtracting taxes and normal expenses (such as rent or mortgage, utilities, insurance, medical, transportation, property maintenance, child support, inflation, food and sundries, &c.) to maintain a certain standard of living. It is the amount of an individual’s income available for spending after the essentials (such as food, clothing, and shelter) have been taken care of. I suspect that in a lot of cases 10% of that amount might not be a large number.

Is college too expensive – no doubt.  But rather than letting those that incurred the debt off the hook, and placing the burden on the rest of us, maybe we should look at making higher education less expensive. While we have in place things like tenure and allowing professors to work ridiculously few hours per week there is little hope. Have you ever wondered why the cost of private colleges and universities is three, four and sometimes more times as expensive than the cost at public institutions?  I think that working on this end of the problem would be more productive that the one the President proposes. Let me have your thoughts on this issue.

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