Sunday, June 8, 2014

The Student Loan Fiasco

Government policy seems designed to impoverish young people.  One big nail in the coffin of the hopes of the 18-35 age group is the government's policy on student loans.  Loans should be left to the free market.  The government should have no role.  Unfortunately, the government sees things differently.

The result is that loans are automatically granted to teenagers who are contemplating attending college.  Colleges lobby hard to get the government to expand such loan programs and they have been successful.  As usual, government loan programs are expanded in a bi-partisan manner.  There are precious few defenders of free market economics, when it comes to student loan programs.

These same prospective students, desperate for job training, are forbidden by law from receiving that training on the job (think minimum wage laws), so they turn to community colleges and vocational training schools.  Enter the government. 

The government provides the loans, colleges then jack up tuition and embark on absurd expenditures having nothing to do with education.  Have you visited a college campus lately?  It is ridiculous where the money goes.  Since government makes money available through government loans to impoverished students, the colleges find a way to spend it and jack up tuition ever higher.

So, then what?  Students either drop out or graduate, but the loans remain, a blot on their future.  In today's NYTimes Natalie Kitroeff chronicles in detail what happens to some of these students in "Young and In Debt in NY City."  This is an American tragedy and millions of young Americans are caught in this government-created trap.

As usual, government policies like this mainly affect youngsters in the bottom half of the country's wealth and income profile.  This is part of an apparently determined government effort to eliminate opportunity for those who are born in modest circumstances.  That's why folks like Warren Buffett support this.  It doesn't affect him or anyone that he is ever likely to meet.

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