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Our growing student loan debt crisis

by Dan Richards, published

The Student Loan Program has helped many over the past over five decades. The first student loan program began under recommendation of economist Milton Friedman. It was the National Defense Education Act of 1958 and is known today as the Federal Family Education Loan.

What has happened to a good program is a story of what happens with most socialist programs, good or bad. They get abused. Aristotle once wrote in his treatise that “It is not the Government’s duty to provide for Politician, the Merchant, or any group but the society.” He was right in that the Government will always abuse that power when they do so. Yet there are times when it is beneficial for the Government to do just what they should not. The student loan Program is just one of those few instances where their stepping in was the right thing to do.

The problem grew for five decades. The taxes that we all pay in one form or another can only supply so much money into this loan base. Even when honest people pay back their loans; it again can only keep so much in for people to use. What has happened is the loosening of purse strings so that well-off students could use the money instead of having their parents pay for their schooling. When I went to school in 1989, there were a large number on kids from very well to do families that had federal loans and grants helping them freeing their parents on the tuition costs. Many of them even got checks from their parents so they would not have to work, but could party and buy what they wanted. This of course means more money being used by those that did not need it and reduces the amount available for others more truly needy.

But even this is not a major issue, because this money usually gets paid back. However, there are major issues relating to student loans.

International Student Loans. Many do not get paid back and the home countries sometimes do not aid in the retrieval of the money. In other words, we lose twice. Foreign students may return to their home country. Thus the US doesn’t benefit from their education. Plus the loan might not be repaid.

Student-loan debt collectors” have power that would make a mobster envious.” Student loans are not dischargeable by bankruptcy, illness, or anything short of death. One student got a Masters in Music thinking his payments would be $600 a month and discovered they would instead  be $2,400 a month. Student loans are bundled and securitized just like mortgages are, and are guaranteed by the federal government, which makes them no-risk loans.  And they must be repaid.

This is not going to be a one fix operation, and by no means a one party view. Both parties are going to have to work as one on this.

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