Monday, March 4, 2024

Why Student Loans Are Immoral

My previous post links to VD, and he, in his turn, links to another blog which goes into great length to discuss what usury is and what is a traditional Catholic position on the issue. I'm not sure how many people would really bother to read the whole of it, but since I found the topic very interesting myself, I decided to do a sort of summary of it plus add my own thoughts on one of the most contentious modern issues, student loans. 

So here comes. There are basically 2 different kinds of loans, usurious and non-usurious. Usury nowadays is often understood as charging an unreasonable amount of interest on the loan, but it's not correct. It's the type of loan itself, not the amount of interest you have to pay, which creates usury.

Here are 2 examples to illustrate the point I'm trying to make.

Situation 1. My friend Jane needs 20 euros. She asks me to lend her money. I make her sign the contract which states that if Jane doesn't pay me 20 euros within 1 month, I'm entitled to her hammer which cost about the same. I then can sell it online and get my money back. This type of loan is non-usurious because it's tied to property with real market value.

Situation 2. Jane wants to borrow 20 euros from me. We sign the contract which stipulates that if she doesn't pay within a month, then I can sue her in court for a portion of her future earnings. This type of loan is always usurious, because it's tied to a person, and something which doesn't really exist at this moment. It could be very well that in 1 month Jane loses her job and has no salary at all. Her "future earnings" are non-existent.

Usury is considered immoral because it is akin to slavery, since it lays claims on a person, and not a thing/property. Hence the term "debt slave". By this definition, all student loans are usury and sinful. Even if the chance exists, like in my country, that they are forgiven if you get your diploma. Since it's tied to the possibility of you passing your exams in future, which may or may not happen. This "diploma thing"" doesn't even exist at this point.

Traditionally, the magisterium taught that the sinner was the one who lends, and not the one who borrows. So a student who feels his only chance in life is to borrow money to get a degree is misguided at best, and a victim at worst, while the system which allows for it is wicked and immoral.

Conservatives naturally side with the usurious banker in the case. Sorry, couldn't help it. But there is really a nuance to the whole situation. There should be some sort of a debt jubilee for student loans after which the system should be reformed. However, the proper way to handle it is, imo, not to give those people free money, but simply cancel all the debt. Let the usurer bear the costs. Simple as that:)


  1. The bigger issue though is nothing used for money these days when dealing with most businesses or paying the government their take is the money system itself. It's not commodity money anywhere in the world. Ironically, many central banks hold tons of gold and continue to accumulate more. Yet I'm told by the braindead economists that gold was a stupid way to do things yet none of these establishment whore economists advocate for central banks to divest their precious metal holdings or give them to the people.

    The money issue is another big one where Christian "conservatards" have failed their alleged beliefs and society. Their God would be proud of a money system that impoverishes people and becomes more worthless every passing year.

    My magnificent beneficious government wanted to make US citizens a criminal for owning this very legitimate product. God forbid us Americans actually get some of that damn freedom we are told we have from our military bombing Muslims and brown people overseas who hate us for said freedom.

  2. Thank you Sanne, interesting post. I have never before really thought about what usury means.

  3. Texan, those people have religion all right. But, it's not Christian...

  4. Blanka, you are welcome! It was new for me, too, that's why I found it so interesting:)

  5. I agree that the usury connected to student loans is immoral. I agree that the typical conservative pol is corrupt and that monetary policy has undermined the stability of the dollar in irreparable ways.

    Where I disagree with VD (and you perhaps) is where most of us who paid our own loans or our kids' loans back disagree. There is (to borrow from an iron clad law of economics) "no such thing as a free lunch". If the loans are forgiven, someone really IS going to have to pay for it. It really IS going to cost us even more than it is costing us now.

    Is there a way to abolish the system so that if we're going to all be punished for the ignorance of young adults and their parents, at least we don't have to see our kids in the same boat we are in 25 years from now, with the loan debt as a major issue?

  6. Since usury is compared to slavery, here is a hypothetical situation to consider. To make it politically neutral, let's say it happens in ancient Rome. There is a guy called Titus who is sold as a slave for his debts. His master Marius says that if Titus pays him 10 000 coins, he will free him. So Titus works hard and saves 10 000 coins and buys his freedom. Then the province where Titus lives gets a Christian governor who thinks that slavery is immoral so he issues a decree freeing all the slaves. Titus gets very upset. Since he has paid for his freedom, why shouldn't other slaves as well?

    What would one say to in response to Titus? Do you think his behaviour is Christian?

    If the government just cancels the student debt (as opposed to distributing free money) then the one who pays is the predatory banker. The system obviously should be reformed after it happens so that it doesn't become an issue again.

    1. And your point would be well made. Except that if in Roman time that governor thinks slavery is immoral would means he would probably also end slavery in his area, or at the very least stomp down hard on it. Here in the US, Biden is trying to wipe out student loans to buy votes. He doesn't particularly care about the issue as can be noted by the lack of the spotlight placed on the college administrations who have ramped their prices to ludicrousness levels. Not to mention the lack of the spotlight on the Federal government policies pushing new programs for students to borrow money thereby incentivizing the college administrations to raise their prices yet again.

      Generally speaking if either or both of those were the case, then the correct answer to those who had already paid their loans off is. "Tough luck, life's not fair." However neither of them is the case. The case in question is that person (A) who already paid back his loans will be charged a second time in the form of higher taxes to pay back the loans of person (B). Person (B) will be promised his loans removed if he will vote for the guy stealing from citizen (A). This is not the case of turn the other cheek, nor the case of a jubilee, which I do believe we need. In this case, this money doesn't magically go away because the government says so. Rather the government will use the tax money to pay off the loans taken out. This will both encourage more people to get student loans, as well as encourage the colleges to raise their prices yet again. Plus set a precedent where a certain political party can steal more money to buy more votes. Impoverishing us even more to gain more power for themselves.

      So my two cent is this. If the government wants to do something, they can declare a jubilee in which all debts are erased. Shut down fanny-Mai and the other programs ones like it. Lean heavily on the college administrations to lower their prices to what they should be. And for goodness sake explain to kids before they sign up for college how liberal arts degrees both don't pay well, nor are in great demand. That wont fix everything, but it will go a long way towards helping. - W

    2. Yeah, I know. I'm not trying to defend the current US administration by any means;)

  7. W is correct. This will not be a case of "cancel the debt and the predatory lenders get the shaft as punishment for their evil usury". This will be a case of "cancel the debt, and in order to stay in the good graces of the financial corporatocracy who funds our campaigns and lifestyles, the US government will pay off the loans."

    I think VD and people who think like him are woefully naive if they think the the Democrats are going to just let the banks take the hit. NO! They would never. do. that. The taxpayers are going to take the hit. I think a better example of what this looks like, rather than the slavery example, is the one offered by 19th century French economist Frederic Bastiat:

    "We will suppose that there is but one plow in the world, and that two farmers apply for it.

    Peter is the possessor of the only plow which is to be had in France; John and James wish to borrow it. John, by his honesty, his property, and good reputation, offers security. He inspires confidence; he has credit. James inspires little or no confidence. It naturally happens that Peter lends his plow to John.

    But now, according to the Socialist plan, the State interferes, and says to Peter, "Lend your plow to James, I will be security for its return, and this security will be better than that of John, for he has no one to be responsible for him but himself; and I, although it is true that I have nothing, dispose of the fortune of the tax-payers, and it is with their money that, in case of need, I shall pay you the principal and interest." Consequently, Peter lends his plow to James: this is what is seen.

    And the Socialists rub their hands, and say, "See how well our plan has answered. Thanks to the intervention of the State, poor James has a plow. He will no longer be obliged to dig the ground; he is on the road to make a fortune. It is a good thing for him, and an advantage to the nation as a whole."

    Indeed, it is no such thing; it is no advantage to the nation, for there is something behind which is not seen.

    It is not seen, that the plow is in the hands of James, only because it is not in those of John.

    It is not seen, that if James farms instead of digging, John will be reduced to the necessity of digging instead of farming.

    That, consequently, what was considered an increase of loan, is nothing but a displacement of loan. Besides, it is not seen that this displacement implies two acts of deep injustice."

    Again, if the loans are not going to be transferred to the American people, and the predatory system abolished, then okay. I can get on board. But my cynicism, which has been richly rewarded after years of seeing how our government behaves, cannot believe that this is even remotely on these people's radar screens.

  8. I should amend my comment. I said the the Democrats wouldn't let the banks take the hit. I retract that. No one among the DC elite and political operatives, Democrat OR Republicans, are going to let the banks take the hit. They care far more about the bankers than they do about the citizenry and they will act accordingly.

  9. Going back to the slavery analogy, it would be the equivalent of the Roman government paying ransom to slave-owners to free their slaves, while still allowing both slave trade and slavery, i.e. while some slaves would get free and it's a good thing, it would just subsidise more slavery in the wrong run. Hence, the whole system of usury should be dismantled.

    I agree that neither of your parties are going to do it;)

    However, at this stage I don't even believe it's taxpayers' money they are trying to redistribute. They don't even print it any more, it's just created out of thin air through debt. I think this was VD's original point, but let him speak for himself.