Lenders of First Resort

National Review Online ^ | March 26, 2009 | Robert VerBruggen

[rmlew]

Modern American college students are some of the most fortunate people ever to inhabit the earth. Why should we feel sorry for them?

Because they’re saddled with “the most oppressive debt in U.S. history,” argues Alan Michael Collinge in his new book, The Student Loan Scam. This is, of course, quite false: The most oppressive debts in U.S. history probably occurred when this country had debtors’ prisons.

Unfortunately, Collinge is filled with such unjustified indignation. He makes a big deal about high interest rates on private (non-federally guaranteed) loans, as if students aren’t given that information when they sign up. He seems offended by the mathematical fact that when you don’t pay your debts, interest and fees accumulate, and you can end up owing several times what you borrowed.

[rmlew]

The Democrats are buying the allegiances are college students by promising aid, which only raises total cost in the long run. Meanwhile Republicans are ignoring a Government-Educrat-Banking scheme bankrupting young voters.

[freeandfreezing]

The school loan industry is a great example of how a regulated industry works. Politically connected lenders have successfully lobbied the government to legislate and regulate the market to enhance their profits. Having stacked the deck in their favor, like the mortgage bankers before them, their actions help drive up prices.

Just like easy mortgage money inflated the housing prices, apparently easy student loan money has driven up the cost of college. Take a look at the rate of inflation of college prices vs. everything else - its astonishing.

Of course, just like the mortgage bankers, when the bubble bursts and the overly indebted college graduates can't pay their bills the student loan industry (and SALLIE MAE) will expect the taxpayers to bail them out.

[pnh102]

And for every student who trapped him/herself in debt there are many others who paid their own way through school and have no excess debt. There are many ways to get yourself through school without being buried in debt.

[redlegplanner]

amen.

I would propose an alternate way forward from our current system:

End all student aid except for GI Bill and ROTC scholarship. Pay me (taxpayer) first, then you (college student) can collect. for those that are truly physically unable to do military service, allow a civil service alternative (no more litter, etc)

[pnh102]

I like that idea... though I did borrow money for graduate school and worked various part time jobs to cover the bills. I think a lot of students these days don’t look at the practicality of the degrees they are getting, nor do they consider working during school to pay the bills either. As we’ve seen, that leads to insane levels of student debt.