Fair criticism aside, however, if there was one sensible request from that movement it would have been that banks should go easy on the interest rates for graduates. Congress is now considering if they will allow interest rates to go up in the near future on college loans.
The economy is coming back, no matter what malcontents say, but that does not mean that graduates are going to have it any easier. Did these people take out loans? Yes. Should they pay them back? Yes. But remember, if you stifle them too much, it damages the entire economy.
People spend less when they have less. That might mean more graduates living home with their folks instead of moving into their own apartments. That might mean fewer car sales.
If college graduates are paying back their loans at an interest rate that is low enough for the banks to live with, that should be the end of it. Whether it should be capped or not is a question with a lot of variables.
There are no free rides, nor should there be any. Congress and the White House need to find a way to keep interest rates at reasonable levels so those graduating can still pay the banks back. In the end, we want the banks to be repaid at full capacity, or we all feel that pain.
The only way the economy will rebound is if all boats come up with the tide. I rented an apartment to a young man a few years ago. I told him, much to the disagreement of my friends, that his rent would never go up (unless I had to pay more in expenses).
Every year when his lease comes to an end, he asks if the rent will go up and I repeat my commitment to him. The bottom line is that he is a good kid. He pays on time. He is no trouble.
What landlords in this city – and we can throw banks into this as well – do not understand is that there is no substitute for steady, uninterrupted economic activity.
I made the rent amount as low as I could make it, and I told my tenant that I wanted him to have money for food, furniture, vacations, and life in general. If you rely on someone who is economically vulnerable, you become economically vulnerable. And that is what happened in this economy not too long ago.
If banks can keep fairness in mind, they will win in this economy for a long time. Instead, we see bankers only looking to the next quarter or two. That is bad business.
Banks should be thinking about the next ten years. Inconsistent cash flow is the worst of all worlds in economics, and it is too bad that big banks do not understand that because it would actually make them richer later on.