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Through his seminal interview with Charlie Rose last month, and speeches he has given since, Steve Bannon has demonstrated that his Economic Populism is to be taken very seriously. I doubt Bannon has looked closely at the student loan problem. If he does, he would see a massive opportunity for strengthening his movement.
I don’t think Bannon knows that this right, along with statutes of limitations, and a host of other fundamental consumer protections have been stripped, uniquely, from student loans. I also doubt that Bannon has noticed the predatory, hyper-inflationary, big-government monstrosity that has resulted, or the tens of millions of people—both democrats and republicans—who are being crushed by it.
Bannon may know that as a country, we now owe an astonishing $1.5 Trillion in student loan debt, but I doubt he realizes that the federal government is profiting well in excess of $50 Billion per year on the program. I know he doesn’t know that the government is actually turning a profit on defaulted student loans- this is a defining hallmark of a predatory lending system, and the government sits atop the hornet’s nest.
Make no mistake: The swamp caused this. Congress removed bankruptcy rights, statutes of limitations, and other core consumer protections under lobbying pressure from the banks, and the Department of Education, and perhaps even the colleges. The predatory lending system that has resulted is free to run roughshod through the borrowers, and turn small loans into big balances, big loans into financial catastrophes. This is exactly what the Founders were worried about when they demanded bankruptcy rights.
I realize that the people around Bannon take great pleasure in attacking “snowflakes” (ie soft, liberal college students who have been indoctrinated by liberal institutions of higher learning), and I can appreciate that. However, Bannon and his colleagues at Breitbart and elsewhere would do well to separate the colleges from the students they teach. The students are largely impressionable kids…our kids…and to throw them all under the bus with this “snowflake” nonsense is to dumb down the debate, and alienate tens of millions of decent people who have been crushed by a big-government, predatory lending system that Adam Smith himself would criticize strongly.
My research indicates strongly that the lending system has crossed the threshold of stability. In 2014, the number of defaulted borrowers jumped by 400,000. Last year this number skyrocketed by 1.1 million borrowers to a reported total of about 8 million people. But this total is wrong—The Department of Education has said that about 20% of defaulters rehabilitate their loans (a hugely harmful process where the borrowers sign for a new, much larger loan, and default again about 80% of the time). So the true number of defaulters at the end of the year was likely closer to 9.6 million, and by the end of this year we will likely be close to 11 million people, or a quarter of all borrowers. Moreover, my best estimate is that something like 27 million of the 44 million borrowers in the country are unable to make payments on their loans, or at least aren’t making a dent in them.j That is a lot of voters. They were all grossly neglected in the last election.
Bannon and his friends can and should come after the colleges. I suspect they do know about the astonishing rise in tuition that has happened since the consumer protections I mentioned were taken away. I think they are aware of the skyrocketing salaries of university presidents and their administrations. But I don’t think they know that the colleges have managed to stockpile huge mountains of cash– over and above their endowments- since roughly 2008.
The student loan issue is the wild west of politics, and neither party has addressed it meaningfully yet. The numbers are huge. If Bannon is serious about adding to his base in keeping with his philosophy, he will heed these words.
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