Posted on 06/30/2009 4:42:00 AM PDT by Colonel Kangaroo
Uncle Sam has yet another program out to help distressed borrowers. This one bails out anyone with more federally-sponsored student loans than they can afford. Instead of repaying your student loans on a usual time- and interest-based schedule, the government is allowing people to pay based on income. It's an interesting idea, but I worry it could have some bad consequences.
(Excerpt) Read more at business.theatlantic.com ...
With no or little income (you don't get unemployment until you've had a job) it's difficult to repay student loans.
From their point of view this is just another trick by the government to keep sucking money out of them with high interest rates rather than to let them simply default on the loans entirely.
But the high unemployment rate among recent graduates might be a signal that the educational system is broke and the traditional college/grad school path to economic success, at least at its current scale, needs to go the way of the dinosaur. Such government intervention to prop up a dying industry is, as in all cases, destructive to economic efficiency and the correction and signalling function of the market.
No, this will bailout people who lived on student loans or subsidized their current lifestyle with the money for years. Essentially, they use government loans as another welfare system.
There are students who take minimal amounts and begin paying it back as soon as the can.
Ask anyone in a financial aid department though, and students take out the max and do things like finance cars, get cosmetic surgery and do other things. I saw a reality show contestant cop to the boob job by student loan once.
I work in a university and I heard of a case where some one owed over $100,000 in loans. This person came to my attention because she wanted money without being in a program. Even so, the school was wrecking her chances of fufilling her dream. We are not a 100K school. This person had a job in the field and made decent money. The student had just taken so many courses on student loans and maxed out, that she was in this hole.
Let me suggest that when the economy runs backwards and we have ten to twenty million unemployed, with 5 million of them being subjected to recent layoffs, it is more difficult than usual to find a job.
Shipping out 30 million illegal aliens to their own countries might help.
Student loans have been lumped in with fines for felonies. People have paid and paid and paid and then gotten sick and been unable to pay for some time, then, when they get back on their feet everything that they paid has been wiped out by the interest and they now owe more than they did when they first got sick.
More than this new system needs to be done.
I’ve got sympathy for those under the burden. I personally know and feel for some people who are really beset with student loan debt. I just think that American society might need to be easing away from such a system that leaves so many under the gun before they even start out in life. Perhaps the answer is less pre-adult education and more adult education and thus less debt. Perhaps the ideal would be if the typical first step to success was more often seen an entry-level job at age 18 instead of taking off on the debt path right after high school.
I personally tell eveyrone I know that if they feel they have to go to college NEVERR borrow money to do it.
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