Student Loans

Federally insured student loans have long been regarded by the press, by academia, by parents and by students as a great vehicle for obtaining higher education. They are in such high regard by almost everyone, that both presidential candidates promised to make more of them available to students if they were elected. Perhaps we should revisit the premises on which this almost universal belief in their value are based.  I say almost, because the chief skeptics of the program are the students who have graduated and found themselves faced with a huge debt, limited means with which to repay that debt, and since it is a federal debt, unlike a private obligation, they can be hounded to their graves by collectors.

Each time a president raises the amount of money the student may borrow, the institutions raise their tuition. It is automatic. Watch for it the next time an announcement is made. Within weeks, your local university will announce that it has to raise its tuition. The student loan program has evolved into a way for the Federal government to give money to colleges and universities, and mortgage the students in the process. They are mortgaging the future of the very students they are purporting to help. As a former financial counselor, I saw many young people buried under those things with little to show for it. There should be extensive counseling done by a THIRD PARTY with no interest in the transaction, so that the student can make a rational determination of how much borrowing makes sense for the career they are training for. Right now, the loans are originated by a financial aid officer in the employ of the college or university. Their job is to get the maximum amount for each student, so that the money can then be paid to the university. Very neat and highly unethical. The whole thing resembles a criminal enterprise and now that the banks have been removed from the process, the chief criminal will be the US Government.

There might be some justification for it if the colleges and universities were delivering a valuable product to the student borrowers. But bloated administrative staffs filled with armies of highly paid, non-teaching personnel, huge building projects and curricula that are irrelevant to the actual workplace the students will face upon graduation have rendered the schools the best educated welfare queens in the country. When I attended the University of California, the classes were bigger, the professors taught more of them, there were fewer administrators and there was NO TUITION. My first quarter at UC Davis cost $37.50 in student fees and $40 for books.  Compare that to the bill presented to the average college student today. Are they receiving a better product than we received? I doubt it, but they are receiving a much bigger bill.

The ostensible purpose of the program is to make college affordable to those who don’t have the money to pay for it now. The actual result has been to raise the cost of college to the point that almost no one can afford it without borrowing. It is a system of perverse incentives for the colleges that are the chief beneficiaries of the program and it should be phased out.

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