Posted on 12/01/2020 7:12:20 AM PST by SeekAndFind
Millions of borrowers in the federal student loan program are defaulting on their loans. The Education Department now estimates the cost of student loan losses at more than $400 billion. That exceeds the losses of banks during the sub-prime mortgage crisis. As such, progressives are now pressuring Joe Biden to forgive student debt entirely. The losses in the student loan crisis increase the federal deficit, imposing heavier tax burdens on current as well as future generations. Citizens need to understand why the federal student loan program failed, and what impact this failure has on our society.
The federal student loan program was originally defended on the grounds of efficiency. It was argued that private student loan programs were inefficient because students could not collateralize their future earnings. This argument has proven to be false, as colleges have extended loans to students using income-based repayment schemes. Private lending institutions are in fact efficient in allocating loans to students. They have an incentive to practice due diligence, selecting borrowers who are likely to repay their loans. Potential default on the loans sends the right signals. Private lenders assume the risk when the loans are in default. Credit agencies assign lower credit scores for lending institutions that extend loans to students who are not creditworthy.
During the financial crisis in 2008, some lending institutions with a risky portfolio of student loans in default went into bankruptcy. Students who default on loans bear some of the cost of non-repayment, in the form of low credit scores that preclude them from borrowing for homes, cars, and other loans.
The private student loan program has been largely displaced by the federal program extending loans to college students directly. The rationale for the federal student loan program was to extend loans to a broader group of students.
(Excerpt) Read more at americanthinker.com ...
Bingo. They don’t even need to do step 4; the indoctrination does far more help than money ever could.
I agree Obama is partly to blame but it goes back before then. I blame Bush. The special treatment given to student loans in the BAPCPA made it so lenders were not incentivized to limit their risk (they’d be paid back somehow in 99.9% of cases). So, they just kept making funds more readily available, which colleges responded to by continuing to increase cost of attendance.
I don't disagree with you so much as I will say that since the government got their hands in the student loan business, it has been a disaster.
Thanks for responding.
This is a great post and a great thread.
This is just one of many [all] posts and threads which demonstrate the intelligence and analytical capability of FREEPERS. Thanks to everyone commenting. https://freerepublic.com is still the BEST source of good political thought on the internet.
If we lose this country by “losing” to the criminal damocrats, after me borrowing and repaying my own educational loans, and latter sending MANY children through college debt free, who will seek “social justice” for all of my slavery for “the man” ?
I seriously now am in a position where, multiple times per year, I am implored by persons who took out educational loans, often for multiple thousands of dollars, YEARS ago, never graduated, used the money for whatever, paid ZERO on the loans, were never called to account, are now on “welfare,” [a useful term that is no longer politically correct], and now want me to sign new exemption forms asserting that they are now just too old and sick to repay them. And of course they ARE by now.
These things occurred under “republicans” and even R Reagan — don’t tell me there never has been any “social justice” — it’s been going on the entire 20th century.
I’m a slave too, I just did what they want without being whipped, it’s not that same thing, but it’s still a form of slavery when we are abused by government fiat.
(Sorry to be so dramatic but I am in a mood.)
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