Student loan payments to be garnished from wages?

As a lender, the federal government has powers of collection that would make Guido the Mafia Loan Shark blush. For example, they are asking to take your money before you ever see it.

Student Loan debt in the U.S. recently crossed the $1 trillion mark, with a good chunk of that owed to the U.S. government. In an attempt to streamline the whole process, a soon-to-be-introduced bill would replace the current system of debt collection with automatic payroll deductions tied to the borrower’s income.

Similar systems are already in place in the U.K., Australia, and New Zealand, and Wisconsin Representative Tom Petri plans to introduce the idea to Congress as soon as this week, reports Bloomberg.
Rather than paying huge fees to third-party bill collectors, the government would debit borrowers’ paychecks at an amount capped at 15% of income after basic living expenses.

Don’t borrow money from organized crime or the government.

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12 Responses to Student loan payments to be garnished from wages?

  1. Rockheim says:

    At least when you borrow money from the Mob you have fair terms, easy negotiation of repayment options and a caring, honest lender in comparison…

  2. Van-a-gram says:

    You know what? I’m fine with this. maybe knowing that the $150K loan you took out to attend Oberlin and get your degree in African Dance Theory WILL be paid back one way or another will give people pause. “How am I going to pay back my student loan?” will be replaced with “I better get a job that can pay back my student loan”.

    The alternative, folks, is for the rest of us to bail out the student loan program. The government is going to take their money one way or another — from the student via garnishing or us via taxes– I’d just as soon let it be through garnishing.

  3. AW Mens says:

    The Mafia at least offers intellectually honest and clear terms regarding repayment.
    Don’t pay on time in full….it will be a painful experience.
    The government doesn’t disclose that fact.

  4. R.D. Walker says:

    I hear you Van and I don’t want a bail out of student loan debt either. Especially when I have made sacrifices to avoid it in my life and in the lives of my children. To bail out the debt would be to reward irresponsible behavior and punish the thrifty, judicious and responsible.

    My complaint has more to do with the very idea. Where else can an 18 year old take out tens of thousands of dollars of unsecured debt and use it for an investment that has a proven net negative rate of return?

    Where else can an 18 year old take out tens of thousands of debt that can’t be discharged in bankruptcy and can be collected from wages without a court order?

    Easy credit and government grants are the reason higher education is stupidly expensive and getting more expensive all the time.

    Easy credit and government grants are driving down the value of a college degree.

    Easy credit and government grants are sending people to college and into debt who don’t have the intellectual capability to be there.

    The government loan program is practically designed to destroy the futures of a non trivial portion of the people take part in it.

    So yeah, if you took a loan from the federal loan shark you should have to repay it. I am saying you should take a loan from Guido in the first place.

  5. James says:

    Once this system is in place, it will be abused to pay for other programs. It will be rationalized that the National Debt is owned by all of us, and forced garnishing will happen for that.

  6. Van-a-gram says:

    RD– Violent Agreement. But its more systemic than that. The culture of the 20-something set is to borrow up to your eyeballs, then file bankruptcy. See? All my debt went away.

    I WANT the government to be a loan shark for all the reasons you listed. I want it to be painful and highly risky for those who borrow and do not think about how they are going to repay it. All those Occutards are perfect examples.

    “The loan we are making to you historically has a negative rate of return. Your ability to voluntarily repay the loan is highly suspect, thus your wages will be garnished in perpetuity.”

    “You will be unable to discharge your loan in bankruptcy — this loan will follow you your entire life.”

    Your other option, and one we would highly recommend, is to pick up a copy of “Shop Class as Soulcraft”. It costs about $8.95 on Amazon and may provide you with the direction in life that you need (see Vanagram’s Reading List post).

    At 18, if you do not have the ability to sort this out in your head and realize that perhaps college is not for everyone — and that fact is perfectly fine–then you will not have a critical thinking skills needed to succeed in college OR pay of the loan for the same.

  7. James says:

    Van, you have to use Albert Jay Nock’s principle:
    Does it transfer social power to State power? Social power is what individuals in society are free to do.

    It won’t happen, but a much better solution is to privatize the debt, and allow existing mechanisms banks have in place to recover borrowed money. Of course, bankruptcy would still not be allowed for student debt.

  8. R.D. Walker says:

    I want the government to get out of the student loan business completely. I want them to stop inflating the cost of education, depressing its value and destroying lives. The feds are like pushers of heroin to the hopelessly addicted.

  9. fubar says:

    >Rather than paying huge fees to third-party bill collectors, the government would debit borrowers’ paychecks at an amount capped at 15% of income after basic living expenses.

    so. is the ‘debit’ going to come out of the borrower’s account? or the employers?

    this sounds like a ginormous new bureacracy in the making.

    >Rather than paying huge fees to third-party bill collectors

    since when does gvt care about shaving expenses? this is Lol-able

  10. fubar says:

    as an employer, if I have to deal with another agency or deduction to send to at the end of the quarter, i will just decide not to hire. or a pre-employment question will be “do you have any student debt?”

  11. Van-a-gram says:

    Fubar — taking the garnish out of the employers account = no employer would hire anyone with student loans which would make the unemployment rate increase 10x.

    So clearly this is what Team Obama has in mind. (I joke, but crazier shit has happened)

  12. notamobster says:

    I see this from a completely different angle. I have an unfortunate tendency of seeing everything the government does these days through the lens of increasing the entitlement state.

    If they don’t preclude the individual from receiving government ‘benefits’, this act will serve NO OTHER PURPOSE than to greatly increase the number of lifetime “beneficiaries”.

    That’s right. It will force these mindless fools to not work – and just go on the dole instead. It creates prisoners. More slaves for the liberal plantation.

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