The looming student loan crisis
Before we get into dissecting the student loan issue, we need to understand how it happened. For all of you folks who have unpaid student loans – and especially those with big burdensome loans – never forget that your problem was caused by a bunch of left-wingers in Congress and academia. They are the same folks that brought us the real estate bubble that triggered the Great Recession of 2008. I mention that because they were both the result of promising something allegedly for nothing.
As a student loan holder, you are merely the middleman in a scheme that used taxpayer money appropriated by progressives in Congress to enrich their pals in academia. While you are weighed down with the burden of re-payment, the educational institutions have been reaping huge windfall profits – academic gouging, to be precise.
The evolving increases in the size of the loans did not buy better educational opportunities for you, the student. But they did enable the schools of higher learning to consistently increase their tuition well ahead of inflationary price rises. Essentially, the schools were increasing their income from taxpayer money – or at least taxpayer guaranteed loans – with the students being the conduit AND the holder of the debt.
It is a form of inflation in which more money chases fewer or unchanged spending opportunities. The scheme was so successful for the colleges and universities that the students were left with debt far exceeding the value of the education they received. Student loans have ballooned so much that they outpace virtually every other type of consumer debt. Think about that. Student loans are now one of the major types of debt – exceeding mortgages, car loans, consumer purchases, credit cards.
In fact, student loans have far exceeded the ability of graduates of even the more prestigious educational institutions to attain jobs commensurate to their investment. That is why it took decades upon decades for students to pay off their debt. The Return On Investment (ROI) is abysmal.
Student loans – which were sold as a benefit to middle-class kids – are now the latest example of the credit trap – a loan that is very difficult to pay off in a reasonable time with affordable payments.
The scheme was so corrupt that now the left-wingers who concocted the scam are looking to the taxpayers to bail out the victims. Folks like Senator Bernie Sanders and Elizabeth Warren want to erase the sins of their policies by simply writing them off – sticking the taxpayer for the trillion-dollar obligation. To be specific, 42 million Americans owe $1.7 trillion dollars in student loans.
To put that into perspective, that is the same amount President Biden wanted in his final Build Back Better bill – an outrageous expenditure. But in terms of the federal budget, it has the same impact. It makes no difference if you spend $1.7 trillion or write off $1.7 trillion.
Just as the Congress enabled citizens to buy houses they could not afford, the Student Loan Program provided students with the ability to purchase an education they could not afford thanks to the gouging by the schools. It is even worse than the housing catastrophe since the house at least had had a market value commensurate to the purchase price, but the education received for the exorbitant tuition was worth much less than the purchase price.
The big spending Democrats have put the students and the country into a no-win position. The kids were screwed, but we can hardly write off the debt. The real solution is to have the colleges and universities pay off the debt from their trillions of dollars in endowment funds – funds made fat by all that student loan money.
So, there ‘tis.