The government isn’t going to solve the student loan crisis.
In the 1970s, the government guaranteed loans, but banks were still involved in the credit-making decision. This meant that people requesting loans had to demonstrate to banks an ability to repay them.
When Barack Obama took office, the government stepped in to remove banks from the decision-making process on student loans. Schools have used this as an opportunity to raise tuition, raise administrator salaries, raise professor salaries, and build new buildings.
There are “unlimited” funds, and it is all coming from students who are guaranteeing, in effect, that debt. Student tuition is now funding these expenses.
As this debt builds up, education begins to cost more than what it is worth.
When the government gets involved in anything, costs always go up and quality always goes down. In this case, the students are suffering.
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In the 1970s, during the end of my law school career, I needed a loan to graduate. I had to go to a bank. The government guaranteed the loan, but the bank was involved in the credit-making decision. The bank was involved in the process. I had to pass their test, which meant I had to show them that I could repay that loan.
In 2008, Barack Obama made the decision to remove the banks from the decision-making process on student loans. All of a sudden, the spigot was turned on.
Schools began to raise tuition. They raised administrator salaries, they raised professor salaries, and they built new buildings. There were unlimited funds, and it all came from students who were guaranteeing, in effect, that debt, who were funding all of these expenses.
Over the last few years, by the times these funds really began to build up, an education became worth less than what it cost to get that education.
When the government gets involved in something, costs always go up, quality always goes down. In this case, it’s the students that suffered.
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