"We're also gonna have our loan program so that people are able to afford school", said Mitt Romney, the presidential hopeful, in the last debate. No surprises there but it might be a good idea to reiterate just how toxic this student loan bubble has been.
Now typically when you borrow money from your friend, what do you say to them? Give me some money so that I can afford this or that? Of course not! You tell them "give me some money because I can't afford this or that. When you don't have your own money to pay for something, that's precisely when you can't afford it. And the fact that you have to borrow money for it proves exactly this. When you borrow money it doesn't magically reverse this and make you afford it. It means that you still can't afford it and that you will have to make sure you can afford it at the point of time in the future when you have to return the loan.
Of course students don't benefit from any of this and it doesn't make schooling affordable. It does the opposite. When government gives or guarantees student loans it makes it possible for Universities to jack up prices. So it makes schooling even less affordable. Naturally. The old story of government programs - they tackle a problem, make it worse and then blame everyone else for the outcomes. And then at the end students are graduating with mountains of debt and very few jobs out there with which to pay off the debt. Today student loans in the US are north of $1 trillion, which is higher than credit card debt. Great, congratulations!
But I'll tell you who does benefit from all these loans. The banks. They love it!
Matej Avsenak Ogorevc
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