Wednesday, November 4, 2015

What We're Buying With $1 Trillion in Student Loans

" The federal government now has $1 trillion worth of student loans in its portfolio, a substantial portion of which will be forgiven entirely or in part. But almost no one even dares to ask what we’re getting for all this money. 

First there were the loans themselves, with interest subsidized while you’re in school. Then, when that proved inadequate, we instituted income-based repayment, allowing students to cap their payments at a percentage of their discretionary income (stretching out the loan, and getting forgiveness on any balance remaining after 25 years). Then, since that wasn’t quite enough, we made the terms more generous. Now the Obama administration has announced that it’s making 5 million more people eligible for the program.

Over decades, the government has restructured the educational system to make it look more like the health-care system, with the costs paid by third parties while the service is consumed by individuals who have no incentive to think about price. The effects are predictable for both."
[ Bloomberg View]

"If you understand the federal student aid system as a means for transferring money from taxpayers to an industry that’s basically a wholly-owned subsidiary of the Democratic Party, it makes more sense."

No comments:

Post a Comment