Federal Student Loans

[adrock3215]

Do you think it is proper for one to receive a federal student loan?

At one point I remember reading that Rand said something like: "If the program is already there, use it." She was not speaking of student loans, but some other type of government welfare I believe. I think I may have seen this in one of her Q&A's after a lecture. It seems to me that taking a federal loan encourages their use and sanctions the existence of the Department of Education.

I do realize that the the money being used to sponsor these programs is taxpayer money and that one will probably pay more in taxes than one takes in benefits over the course of his/her life. However, if everyone thought like that and took advantage of federally subsidized student loans, how would this problem ever be corrected? Morever, how would one be able to argue for the abolition of the DOE if it can be shown that he/she had benefited from its existence?

[DragonMaci]

Two members of this forum once told me in chat that Ayn Rand said that if you are a student and you don't take a student loan you are making a martyr of yourself and so should take one. Now, I am not saying I agree with that. I am not sure I do. I haven't decided yet. But you seemed to want to know her view, so I thought I would help by telling you that they said that.

Oh, and sorry but I cannot recall what her reasoning behind that was (I think those two mentioned it).

[DavidOdden]

Do you think it is proper for one to receive a federal student loan?

This is the topic of "The question of scholrships", The Objectivist June 1966. The question there is "Is it morally proper to accept scholarships, private or public?" and: "Is it morally proper for an advocate of capitalism to accept a government research grant or a government job?" The answer is "Yes", and there is subsequent discussion. One point of discussion reflects changing facts, where she implies that scholarships are offers to assist ability. The context has changes substantially in 40 years so that "social-justice" scholarships must be distinguished from merit scholarships (whereas, in the day, the concept of "scholarship" was much more closely tied to the concept "ability").

At no point does Rand say that a person has an obligation to seek such funds, or to accept them. She states (p. 93) "The recipient of a public scholarship is morally justified only so long as he regards it as restitution and opposes all forms of welfare statism. Those who advocate public scholarships, have no right to them; those who oppose them, have." It is not self-sacrificial to live without governmentally-paid scholarships, but it is to reject them solely on the grounds that they derive from tax money. On the third hand, if you actually know that restitution has already been made, then perhaps a principled rejection of government scholarships is not self-sacrificial, but it's hard to do that level of detailed accounting, in my opinion.

However, if everyone thought like that and took advantage of federally subsidized student loans, how would this problem ever be corrected?

The problem doesn't exist simply because some people are using tax money to go to school; the problem arises because in general, people hold that it's okay for the government to tax, in order to spread the wealth around so that everybody can get their needs and wants taken care of. One person declining to take a scholarship will not have an effect on that big-picture problem. A wholesale change in philosophy is necessary.

One possible way for people to realize that taxation and universal welfare is not the solution is the living reductio ad absurdum approach -- increase expenditures to ridiculous levels, raise taxes, which raises costs and makes people poorer overall, necessitating more welfare payments and higher taxes until someone shrugs. I don't want to be around for that, but it might be what it takes. Another way is to focus on something specific to eliminate. Many people especially of the libertarian persuasion like to go for the big ticket items, the things that a lot of money is spent on. I personally think the better approach is to focus on the idea "The government should be providing this" -- denying that the government should be providing it. One real-world example is internet access, because in a number of communities, there is talk of universal "free" wireless access. Well, that is not a proper government service, and I think the battle should focus on stopping the expansion of government boons which gives you the opportunity to make the point "This is not what government should be doing". Need I mention health care as another example?

[adrock3215]

It is not self-sacrificial to live without governmentally-paid scholarships, but it is to reject them solely on the grounds that they derive from tax money. On the third hand, if you actually know that restitution has already been made, then perhaps a principled rejection of government scholarships is not self-sacrificial, but it's hard to do that level of detailed accounting, in my opinion.

Thanks for the responses. I went and read this article you were talking about. However, I don't see how it is self-sacrifice to reject them on the grounds that they derive from tax money and one is philosophically opposed to them. Could you elucidate on this a bit more?

The problem doesn't exist simply because some people are using tax money to go to school; the problem arises because in general, people hold that it's okay for the government to tax, in order to spread the wealth around so that everybody can get their needs and wants taken care of. One person declining to take a scholarship will not have an effect on that big-picture problem. A wholesale change in philosophy is necessary.

You're right about this and I totally agree with you. One person declining a loan will have no effect. Sorry I expressed myself poorly. My line of thinking is that if students continually use federally provided loans, people will continue to accept them as "necessary" for higher education. I understand that a wholesale change in philosophy is needed, but I am still having trouble with this issue.

If, for example, a politician believes in the abolishment of the DOE and advocates privately provided loans yet it can be shown that he or his kids have been educated using some sort of subsidized loan, would that not present a problem? How could he introduce legislation favoring abolishment? His opponents and the public would never accept his arguments. It seems that for these unjust programs to end we need a wholesale change in philosophy and somebody advocating ideas that he or she has actually accepted and practiced in his or her own life.

[DavidOdden]

However, I don't see how it is self-sacrifice to reject them on the grounds that they derive from tax money and one is philosophically opposed to them. Could you elucidate on this a bit more?

I was referring to a neo-puritanical (inconsistent) and almost knee-jerk reaction that some people have to receiving any aid from the government. This is the ethos where touching any government money, directly or indirectly, is instant poison. The problem is that you cannot avoid being touched by government money unless you escape to the mountains and live off the land. Because the government built and maintains the roads with tax money, you can't get to the grocery store without benefitting from tax dollars. If your principle is that you will absolutely never do anything that benefits from taxation, you can't go to the store, you have to generate your own electricity using home-grown whatever for fuel, and so on. That, frankly, is an irrational basis for life. (Although, as a personal challenge to see how independent you can be, it's not insane).

Although man does not by nature function properly when coerced, that does not mean that man should stop functioning qua man when coerced. The fact of being coerced should not be the driving force in your life -- living should be. That means, if you wish to expand your mind and receive an education, you should do that. If you can manage to do so without a scholarship, or a loan, that is excellent; if the scholarship by nature represents a repugnant idea (one of those social justice scholarships) then maintaining that level of intellectual integrity is not a self-sacrifice. It just makes no sense to reject a goal that is more in line with what you need in your life simply because the means of achieving it have been "tainted" via taxation, since that's a fact about most stuff.

[4reason]

I myself did take out Federal loans to fill in what my scholarships would not cover for my undergraduate degree. While I cannot absolutely say "it is proper" to take out these loans (or that it is proper for the government to offer the program in the first place), I can say that I do not feel too guilty for having done so. There is no way I could have attended a university without the loans. I was always a top-noth student in school, and applied for many scholarships, but didn't receive any of the big ones. One scholarship office even told me, outright, that I would have gotten the scholarship without question had I not been white. My non-causcasian friend from high school did win that same "academic"scholarship... even though academically I was miles ahead of her. But enough of my tantrum regarding forced-diversity in upper education. The point is I had all the grades, and was more likely to succeed in college than most, but I could not find the money to pay for it without loans. And the federal loans just happened to have the best offer, with the least requirements. There are private lenders out there, but naturally (as they should be) they're a little more restrictive about who they give money to and at what rate.

Now that I am out of college (and paying back all that money with interest) I do wonder if I somehow perpetuated the whole system of big government by accepting these loans. I cringe everytime I look at how much of my paychecks are going toward Federal programs with "compassionate" interests, and I hope I see the day that that sort of taxation ends in my lifetime. But even if I don't see the end, I still do not feel too guilty for having accepted the loans. I've only been working in the career-world for four years now, and I've already paid in taxes more than twice the loan amount I took out. In a way then, I'm sort of getting back some of my money. And while I hope to see the end of all tax-sponsored government programs, I can find some moral comfort in the fact that I do have to pay the money back, with interest, which is more than the recipients of nearly all other government benefits can say. It is not free money, in any way shape or from -- neither in source nor reception.

So how, then, will programs like this go away if people like me (and Rand, apparently) cannot say that it is unethical to benefit from them? If the program never existed in the first place, I have no doubt that there would be more free-market lenders out there who would compete to such a degree that one probably could receive approximately the same rates and terms that one presently gets from Federal loans. Had I had the choice, I would have certainly taken a competitive private loan anyday over one that comes out the taxpayers' pockets ( and I did do just that when I needed to take out additional loans for my Montessori certification). But the federal program is there, and because it is there the variety of private lenders that could be available simply are not. Yes, I did "use" someone else's (and my own eventual) tax dollars for my own benefit but unlike welfare or other such programs, there was a productive, educational purpose involved. I used that money to educate myself in order to become a more productive member of society; not to sit on my butt and live off of other people's effort. My effort earns my paychecks now, and my taxes have paid back those loans already and then some. I make my payments on time and look forward to the day when I no longer have that little bit of government on my back. In the end, between what I now pay in taxes as a single, young, educated member of society, plus the formal payments, they'll get back what they (or, you an I, the taxpayers) lent me more than 5x over. It's probably the only government program that actually earns a profit! They will get "their" money back and then some, but you will get the educated anti-big government teacher that they do not yet realize they helped to create. Ha!

Edited November 17, 2007 by 4reason

[adrock3215]

So how, then, will programs like this go away if people like me (and Rand, apparently) cannot say that it is unethical to benefit from them? If the program never existed in the first place, I have no doubt that there would be more free-market lenders out there who would compete to such a degree that one probably could receive approximately the same rates and terms that one presently gets from Federal loans. Had I had the choice, I would have certainly taken a competitive private loan anyday over one that comes out the taxpayers' pockets ( and I did do just that when I needed to take out additional loans for my Montessori certification). But the federal program is there, and because it is there the variety of private lenders that could be available simply are not. Yes, I did "use" someone else's (and my own eventual) tax dollars for my own benefit but unlike welfare or other such programs, there was a productive, educational purpose involved. I used that money to educate myself in order to become a more productive member of society; not to sit on my butt and live off of other people's effort. My effort earns my paychecks now, and my taxes have paid back those loans already and then some. I make my payments on time and look forward to the day when I no longer have that little bit of government on my back. In the end, between what I now pay in taxes as a single, young, educated member of society, plus the formal payments, they'll get back what they (or, you an I, the taxpayers) lent me more than 5x over. It's probably the only government program that actually earns a profit! They will get "their" money back and then some, but you will get the educated anti-big government teacher that they do not yet realize they helped to create. Ha!

Thank you for the reply. Very good information.

Although I don't accept the fact you had no choice. You could have taken a private loan with a more unfavorable rate.

But you never answered the question that you started this paragraph with. If people don't say that it is unethical to benefit from them, the vicious circle will never end. Now, I understand one person won't make a difference by not taking a loan. But if that one person goes on to become a groundbreaking politician who advocates the demise of the federal loan program, and the overall philosophy of the country had changed a bit, then he actually would make a difference and his decision would be seen in hindsight by the public to be one of exceptional moral character.

I believe I don't agree with Rand in this instance but I'm still not decided on this one yet....

[DavidOdden]

If people don't say that it is unethical to benefit from them, the vicious circle will never end.

I disagree: what more and more people should be saying is "I don't need them".

[4reason]

I disagree: what more and more people should be saying is "I don't need them".

I think this is a nice, concise answer to that question I seemed to leave unanswered in my last post. Perhaps if people weren't so overtaxed as it is, we could all afford to make better plans for college, there would be more payment plans available and the overall price of upper education might actually have to adjust itself to free-market demands (gasp!) without all that government money heading their way. If it weren't so easy to get government money and have all those dollars heading into upper-education, school might become more affordable and there would (I would like to think) a sudden growth of private lenders willing to finance you.

I suppose technically I did have a choice, but in regard to my undergrad education I did not have the option to take out private loans. Why? I was not earning a real income (just working part time at the time), my family did not earn enough, and I had no collateral. I did not qualify for any private loans until AFTER I had my undergrad and was pursuing my Montessori credentials. Then I at least had a little income history to show them. So my choice was not federal or private loans ( thoughI hope that does become the choice for ALL entering students someday...); my choice was college now or college many years later. Morally, I guess I could have waited to apply for private loans, but it is hard to work low-paying jobs for the "prize" of a higher rate loan to go to college someday. I know there are people out there who have been able to do that to keep their slates morally clean, but I am not one of those types. My dreams are too big to put on hold, especially when I consider what those loans will end up costing me in the end. Did I benefit? Yes, I got a degree which is helping me pursue my current teaching career, and better yet, I have the education to make myself eligible to receive more scholarships and private loans when I hopefully return to school to pursue a PhD. I have a little more choice now than I did then, so I will, of course, pursue private loans when possible.