Feds’ student loan fraud
President Obama had a great idea back in 2010: nationalize the student loan program, and its problems would soon go away. It didn’t happen. Instead, more people are refusing to pay their student loans than ever before.
In a study released last week, the Consumer Federation of America found that millions of people were in arrears on $137 billion in federal student loans in the first nine months of 2016, an increase of 14% from 2015. All told, the federal government’s portfolio of student loans now stands at a whopping $1.3 trillion.
As the Washington Post notes, “What’s striking about the findings is that Americans have a variety of repayment options to avoid default. The Obama administration expanded programs that cap monthly payments to a percentage of earnings, but even though millions of people are enrolled in those income-driven plans, there is still a disconnect.”
Actually, there is no disconnect at all. As we noted earlier, just under one-half of millennials today believe their student debts will be forgiven, and an increasing number even use their loans for exotic spring break vacations, booze, and partying. So, by that logic, you’d be a fool to pay.
That’s a big reason why last year average federal student loan debt stood at $30,650, a 17% rise since just 2013.
The Post article does a lot of head-scratching over the cause of this problem, but it’s really not that hard. Anytime someone thinks he or she is entitled to something or that a debt will be forgiven they’ll behave accordingly.
By taking over the student loan program, Obama in essence politicized it. Last year on the campaign hustings, both Hillary Clinton and Bernie Sanders repeatedly talked about making college “free.” That is, they want to socialize the costs, but privatize the benefits, of a college education. Still surprised people aren’t paying their loans?
This mindset is made worse by the fact that the federal government isn’t lending its own money; it’s lending taxpayers’ money. Politicians don’t care whether it’s paid back, just that they get a pat on the back for “doing something” about college costs.
The problem is, by subsidizing college with cheap loans, the government only drives the price of tuition higher. Colleges have hooked up to the government student-loan gravy train as never before, paying lavish salaries for do-nothing administrators and incompetent professors who in earlier, more-disciplined times would have been laughed out of the academy.
Parents who despair over the soaring cost of education should understand: As long as the government regulates and pays for education, the cost will only rise further. It’s time to remove government from higher education, before it wrecks another once-great institution.