Welfare Queens—Student and Mortgage Loan Borrowers
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UPDATED: Jan 24, 2012
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What exactly is a welfare queen?
“You know the stereotype. The single African American mother whose full-time job is having more babies to increase her welfare benefits. The illegal Mexican immigrant that steals an American’s job and uses the public emergency room as his primary care provider. (Insert anyone else who speaks a different tongue, has a slightly darker skin tone and wears funny clothing) who collects food stamps because they are too lazy to get a real job,” said John Hrabe, a Huffington Post contributor, as he satirically defines this label in an article.
Hrabe wrote about the welfare queen in response to GOP campaign runner Newt Gingrich’s recent remarks instructing the African-American community to begin demanding jobs instead of paychecks.
“Let me be clear,” Hrabe elaborated, “I don’t think it’s racist to oppose handouts. I agree. Handouts and entitlements are destructive to America’s innovation, personal success and individual happiness. However, the worst welfare queens aren’t the petty offenders that collect $133 per month in food stamps.”
Rather he believes the real welfare recipients are those who take out federally subsidized student loans and those who are now forced to seek mortgage loan modifications after maxing out their home equity line of credit—among others.
The U.S. welfare system began in the 1930’s during the Great Depression as a response to the countless families that were left without food, power, and shelter. Ergo, welfare is the national response to the individual’s economic crisis. This system takes taxpayer money and attempts to lift our brothers and sisters who have fallen on hard times back onto their feet.
The term welfare queen, though, denotes something a bit more derogatory. Given the former speaker of the house’s comments on food stamp holders and Hrabe’s comments on student loan and mortgage loan borrowers, the term welfare queen seems to insinuate a person who takes advantage of the welfare system.
It may be worth our time to take a look at the three previously mentioned welfare queens: student loan borrowers, HELOC borrowers who now need a home loan modification, and food stamp collectors.
Federally Subsidized Student Loan Borrowers
From the moment our nation’s youth enter elementary school they are told they will need a college degree in order to have even a remote chance at acquiring success in life. As high school rolls around, they take test after test in preparation for “getting into college.” Then come November of their junior year, many receive personal help from their English teachers in writing application letters to the colleges they desire to attend.
But the dilemma that arises from this is, unless a student receives a rare scholarship or unless a student’s parents are well enough off to fund the enormous expense of higher education, the student will likely be forced to take out student loans.
Right as the nation dropped into the economic downfall now referred to as the Great Recession, 60 percent of all undergraduates that enrolled in a 4-year college took out student loans in some form or another to fund their education. According to American Student Assistance, the average student loan debt of individual enrolled borrowers was $22,700, and the graduating class of 2007 averaged a total of $12,400 in remaining debt.
Students, as unfortunate as it is, have very little choice in the matter. They don’t set prices and many are even unable to vote on propositions or regulation that would affect college prices (until they are already of age to be enrolled, that is). And due to those high costs, many are forced to finance their education.
If a young, up-and-coming student wants an education, and if he or she seeks to “be anything they want to be,” they will, more often than not, need a student loan.
Home Equity Line of Credit Borrowers
Home equity, the difference between a home’s appraised value and the amount a mortgage loan borrower owes, was once a source of great financial power for homeowners. At the turn of the century, homeowners across the country saw their property values spike, and as a result, they were able to take advantage of the equity in their homes.
Home equity lines of credit, more commonly known as HELOCs, became commonplace in the financial planning of fiscally-smart mortgage loan borrowers.
And given the fact that few seriously predicted the housing collapse—with “seriously” being the key word, as there were absolutely some who speculated a bubble was forming, but there was little national concern or warning—a homeowner would have had to be ignorant of home equity or would have had to be some kind of economic prophet in order to stay away from HELOCs.
A Quick Sidestep to Take a Closer Look at Loans
Merriam-Webster defines a loan as “something lent usually for the borrower’s temporary use”—more specifically, it says, “money lent at interest.”
Few would argue that definition, as our financial institutions and the loan services seem to follow that explanation pretty closely.
But something key to remember about borrowers is that they promise to return the money they borrow or collateral they give a lender as security. Regardless, loan borrowers do not sign up for a handout.
In the case of student loans, a student borrower promises to pay the full amount of their financing back to a lender. Their collateral? The knowledge and promise that they will satisfy this loan through some form of payment, as not even bankruptcy will relieve this debt. Granted, some students make a deal with the government and enter service-oriented jobs, an area where those willing to work are lacking, and substitute their monetary debt for their time and service. But at the end of the day, this population of borrowers satisfies their debt, and they do not run off with a handout.
Those with HELOCs borrowed against the equity in their homes, meaning their house was used as collateral. In the event they took too much money out of their property’s equity and were unable to satisfy their remaining mortgage loan payments, they willingly signed their home away to a lender. Hrabe’s argument against the HELOC borrowers is they now are requesting government-backed loan modifications. However, most of the near 30 percent of underwater homes need a loan mod, regardless of whether or not the equity was extracted—and that’s completely disregarding the fact that the government-backed loan modification programs have proven to be, so far, complete failures.
As stated before, Hrabe claims the welfare queens aren’t the food stamp collectors who receive $133 per month in food stamps, but that’s deduced by considering the cost for the individual, not the the welfare plan itself.
One out of seven Americans now relies on food stamps. According to the U.S. Census Bureau, the United States’ current population is right around 307,006,550. If one out of seven individuals receives food stamps, that means 43,858,078 people receive an average of $133 a year in food stamps. The result of which is an annual cost $5,833,124,450. For those not wanting to count the digits, that’s nearly six billion dollars… every year.
Additionally, in certain states food stamp recipients can simply re-apply when their allocations have expired, so long as they continue to meet eligibility requirements.
To be clear, Hrabe’s opinion is not completely invalid. It would be a stretch for even the most conservative of Republicans to call all food stamp recipients welfare queens. But most would agree that the program itself, not necessarily the individuals participating, is a deep money pit. It’s also a great source for somebody who fits our definition of a “welfare queen” to receive a near unlimited supply of government support if they wished to take advantage of our nation’s welfare system; a far easier source of exploiting handouts than, say, student loans—where not even bankruptcy will stop the debt collection— and home loan modifications—where one relinquishes their home as collateral if they don’t qualify.