Student Loan Crisis

For too many years, students have taken out too large a loan for their higher education. The government guarantees many of these loans. This situation amounts to an exact parallel to the housing crisis. Massive student-loan-debt in the face of unemployment will soon lead to default and yet another banking disaster. The student-loan bubble will soon pop.

Unscrupulous entrepreneurs sought government-backed areas of lending. With a banking relationship, what amounted to a marketing enterprise, promoted the loans on a massive scale. Because student loans became so readily available, colleges and universities had no qualms about raising their tuition. Banks accepted these loans because of government backing and the more the better, but just to be sure, they spun the loans off into the murky world of hedge funds and credit default swaps leveraging the loans to an even higher degree whilst spreading wide the liability.

This student loan racket amounts to criminal collusion and extortion on the part of the promoters, the banks and the institutions of learning and maybe state legislators who encouraged their universities to be self-sustaining. The attorney general will not pursue litigation. The government will institute another huge bailout and cover up of their folly in privatizing higher education. Parents will not say much either out of shame for not being able to afford the tuition for their children. Institutions of learning will deny culpability.

Politicians scream about the deficit, claiming that we are passing on the burden of debt to the next several generations, but what about the debt that we imposed on our students. What about the enormous cost of bailing out the student loan default crisis?

True, we must fix both the deficit and the budget, but what should we do about the run-away tuition cost, wherein most high school graduates turn away because they cannot afford the tuition or do not want to take on the risk of enormous debt? What other critical infrastructure deserves broad based government support so much as education?

If you ask why the depression, you need to look no further than our long-term lack of a population adequately educated to find jobs in a highly technical environment. The lack of a broad based capital investment in education puts economic recovery in doubt. “They do not learn it in High School and they cannot afford college.” Recovery demands a healthy US work force educated in science, business, math, and technology. We do not have any of the above in sufficient numbers.

There is a difference between discretionary spending and capital investment in critical infrastructure. This will be a long hill to climb given yet another debacle.