Get the government out of student loans
With student-loan interest rates set to spike in July, Democrats in Congress and President Obama are up to their usual tricks, pushing legislation that would keep rates low. Instead of seizing the opportunity to stick up for free markets—and students—and distinguish himself from his opposition, presumptive Republican presidential candidate Mitt Romney is joining the sleight-of-hand game. That’s a mistake that a supporter of free markets shouldn’t have made…
If politicians really want to help students, they should give them a real-life lesson in economics. Start with the numbers. Either directly or through guarantees, the federal government had disbursed $848 billion in total student-loan debt as of last September, up 17.5 percent in a year. The Consumer Financial Protection Bureau’s Rohit Chopra estimates that students owe another $152 billion in private loans, taking the total to $1 trillion. Last year, the average debtor—or “student served,” in educational-bureaucracy parlance—took on $10,467 of federally guaranteed debt for just one year of tuition.
Even as everyone else is cutting back, then, students are borrowing more—and eight out of every ten dollars that they’ve borrowed came with some kind of federal string attached. That shouldn’t be surprising: when Washington subsidizes something, it makes more of it. This is true of student-loan debt, just as it was of mortgage debt before the credit crisis that started in 2007. The best thing for students would be for the government, instead of spending another year helping students pretend that they can afford all this debt, to get out of the student-loan market altogether.
Blowback
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Why?? They did/are still doing such a bang up job with housing loans…what’s not to like…??
BigWyo on May 3, 2012 at 7:48 PM
The 6.8% interest rate is arbitrary. Mortgage loans are going for 3.5% right now. There is no reason to create an artificial “subsidy” when the student loans are now taken over by the government, and the interest is paid to them. Quite in fact, it is only one part of the governments student loan business that will get reduced in this plan, and many students do make use of this loan, but only when the FAFSA tells them they can, or to the extent they might get $1000 from the old Subsidized loan, and then the other part of their loan is at 6.8%. And their parents are paying the government 8% now. When Big Bad Sallie Mae ran the loans, I was paying 3% interest, in the George Bush era.
The government is taking all the interest payments and crediting it toward government programs. How is that fair to parents?
I hope someone can make sure they actually are paying the loans back and not co mingling my principalpayment at the treasury with TARP funds and Social Security money.
But even worse, some parents pay more so other parents can pay less. I know for a fact that many colleges tell the admissions office how many full paying parents they need to admit in order to balance the books. This means mom and dad are paying for someone else to go to school, and not even getting a tax deduction receipt. And at a non profit institution, that is not supposed to profit unfairly from one parent compared to another.
This is where to start with the fixing. This is why the tuition is too high for middle class families, because they are not rich enough to pay for their own kids and other kids too.
The fact that the credit availability props up this system is the target in this article, but also, for many schools the Pell Grant system has them admit many students that are just marginal students. Therefore, we need to reward Pell grants and student loans based on SAT, ACT scores and place in your high school class, and of course, giving high schools with an abundance of good students a fair shot at places in college, today great students at high schools that grade on a curve can’t get into the schools they want to go to, and their parents can actually afford.
A return to merit admissions, and a return to academic testing, probably a return to the SAT test of earlier generations that did not rely on Inference of Attitudes, and was based on academic curriculum. These things might help stop the madness.
Fleuries on May 3, 2012 at 8:21 PM
Yes! Government student loans are funding the left’s infrastructure, while making college unaffordable for most Americans.
petefrt on May 3, 2012 at 8:45 PM
I agree with everything you wrote but this part in particular really made me want to cheer. You are so spot on. It galls me that after a certain amount of income you get nothing but the bill for your child and some unknown student. No tax break, not even a thank you note. To add insult to injury the vast majority of scholarships are then geared toward the financially needy. Hey I thought their needs were being met.
Romney and Republicans took a pass on garnering the loyalty of everyone who reads their FAFSA form not knowing whether to laugh or cry. We just went through the mortgage meltdown; it isn’t as though the vast majority of Americans will find all this too difficult to comprehend.
msmveritas on May 3, 2012 at 9:22 PM