Student Loans Creating Long-Term Bondage For College Graduates
Student loans, which are now guaranteed by the government, require a debt service that has become unsustainable, especially with so many graduates out of work. Student loan debt in the U.S. has now reach an unbelievable $1 trillion.
Many college graduates are simply drowning in debt.
About student loans, Rep. William Ford, a Michigan Democrat, once said that “we are producing a class of indentured students who must work to free themselves from the bondage of educational debts.”
Businessweek explains that the modern federal student loan program started in 1965 under the Johnson administration and implemented a process whereby the federal government would guarantee loans made by banks or other private lenders. Student would start paying down loans one year after graduation. In 1992, the government removed any income restrictions on student loans, in 2006 allowed almost unlimited borrowing for graduate school, and in 2010, the Obama administration pushed out private lenders and began making new loans directly. This means that the taxpayer is on the hook if the student defaults.
Annual undergraduate tuition can go as high as $60,000 a year at some educational institutions, and government-guaranteed financial aid encourages more and more runaway spending by colleges and universities rather than budgetary reforms. Undergrads owe on average $25,000 after they get out.
William Bennett, U.S. Education Secretary under President Reagan as quoted by Businessweek, maintains that “the tendency of the college and universities at the undergraduate or graduate level is to charge as much as they can, and continue to build and expand.”
Businessweek notes that the “once modest federal program” has spiraled out of control and is now “weighing down low- and middle-income families…that it was designed to help.”
Do you think debt from student loans could pose a danger to the economy similar to or even worse than the subprime mortgage meltdown in 2007-2008 in the event of widespread defaults? Do you think paying big bucks for a liberal arts degree makes sense anymore?
