Government

College Loan Glut Worries Policy Makers – WSJ

Back in the 1990s government decided that home ownership was a right and the push was on to make it easier to afford a home. Income of borrowers was of minor importance not only to afford mortgage payments, but to afford to maintain the home. Some of those who should have been able to afford a home abused the benefit through home equity borrowing thus putting themselves at risk. Unintended or otherwise we all know the consequences of government trying to make a silk purse out of a sows ear. 

But past experience never stops government from repeating its mistakes; of trying to put a square peg in a ring hole. 

Look at the story below. The fact is and largely ignored, that many people are not prepared academically, socially or emotionally to attend college successfully. Nor does a college education always add value to ones life. Nevertheless government promotes college for anyone and everyone without regard to significant criteria. The consequences in the form of dropouts, a no value education and lots of debt now at taxpayer expense are showing up. Imagine if we take the road of Sanders and make public college free?

The fact that you should be academically and emotionally prepared for college doesn’t seem to enter the equation when politicians set policy. While we are obsessed with a degree on every wall, we have no interest in a cost/benefit analysis or determining the value of our policies.  

Everything that’s “free” sounds good. 

The U.S. government over the last 15 years made a trillion-dollar investment to improve the nation’s workforce, productivity and economy. A big portion of that investment has now turned toxic, with echoes of the housing crisis. The investment was in “human capital,” or, more specifically, higher education.

The government helped finance tens of millions of tuitions as enrollment in U.S. colleges and graduate schools soared 24% from 2002 to 2012, rivaling the higher-education boom of the 1970s. Millions of others attended trade schools that award career certificates. The government financed a large share of these educations through grants, low-interest loans and loan guarantees. Total outstanding student debt—almost all guaranteed or made directly by the federal government—has quadrupled since 2000 to $1.2 trillion today.

The government also spent tens of billions of dollars in grants and tax credits for students.  New research shows a significant chunk of that investment backfired, with millions of students worse off for having gone to school.

Many never learned new skills because they dropped out—and now carry debt they are unwilling or unable to repay. Policy makers worry that without a bigger intervention, those borrowers will become trapped for years and will ultimately hurt, rather than help, the nation’s economy.

Source: College Loan Glut Worries Policy Makers – WSJ

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1 reply »

  1. Any government program that the banks will not back should always be a concern. There are three government programs that you should always worry about: home mortgages, student loans, and flood insurance. When the too big to fail institutions stay away from these things without government guarantees, that should be a red flag for later disasters.

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