Student Loans Called ‘Federal Debacle’
With two-thirds of college graduates owing at least $25,000 on student loans and 53 percent of recent grads unemployed or underemployed, taxpayers could be responsible for tens of billions of dollars for loans that won’t be repaid. That’s the warning from the Foundation for Economic Education. FEE’s publication The Freeman, in an article headlined “Student Loans: Another Federal Debacle,” observes: “The same cast of characters that brought you the housing crisis, a post office hemorrhaging billions, and a school system that gets more expensive as it gets worse has now brought us a student loan crisis.” President Barack Obama has set a goal of boosting college enrollment, and total student loans have increased by 75 percent since 2007. The value of student loans outstanding is now close to $1 trillion, making it the largest share of non-mortgage consumer borrowing. “The federal government has pushed relentlessly to expand access to college by cutting out the private sector in loan programs and by altering repayment terms for borrowers via executive order,” The Freeman states. “It bears an eerie resemblance to the obsession with home ownership that got us into our current straits — like potential homeowners, students have been encouraged to borrow with impunity.” It is increasingly likely, The Freeman adds, that the federal government “and thus the taxpayer will eventually be on the hook for tens of billions of dollars of loans that will never be repaid.” The loan problem will put a drag on the economy as graduates with hefty debt will be forced to put off the purchase of a home or other expensive items. Federal policy has also led to an inflationary spiral in tuition costs: Since 2000, tuition at public four-year colleges has risen by an inflation-adjusted 72 percent, and when costs rise, government loans rise along with them. The Freeman concludes: “The government must exit the lending arena and be replaced by an active and innovative private market.”
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