Student loans provided by the Government to the dumb and lazy are a disaster. It is a disaster for the student, for the Government and for society as a whole. One can only wonder how providing unqualified people with money they cannot afford to pay back, to be used for something that they should not be purchasing can end up. For starters - this is identical to subprime mortgages and the housing bubble. #FinancialMeltdown #Recession
Hash tags aside, let's take a look at some reasons why providing subsidized Government loans to the dumb and lazy to attend college is a horrible idea:
- It Provides Poor Incentives:
- It Is Simply Not Affordable:
- It Artificially Drives Up Price:
When a dog pees in the house, do its owners throw him a bone? The Government, by providing student loans not based on intelligence or work ethic, is letting the student know that no matter how hard he/she does not work he/she will still be rewarded. Subsidized alcohol and sex (college) is that reward.
With an estimated amount of student debt nearing $1T, the weight on student's shoulders is just too much. People would like to make it sound insensitive to reject someone the chance at college. I believe that it is insensitive to put debt on these kids' shoulders that they cannot pay back. Roughly 60% of borrowers are still paying back student debt over the age of 30 with 17% older than 50 (asa).
Simple economics here. Providing subsidized student loans artificially drives up demand for college the same way subprime mortgages drove up the price of housing. The price for college is way above its fair market value because of this excess demand and is making tuition unaffordable to the vast majority of people. This is working in a vicious continuous cycle.
What happens when the $1T in debt outstanding in student loans is not able to be paid back? Currently with youth unemployment as high as it is, this is not a possibility but rather inevitability.
Riots in the streets? Chronic unemployment? A skipped generation?
Please share your thoughts.
Disclaimer: I am purposely not talking about the qualified individuals. Smart people, with strong work ethic from a poor family who proved themselves to have potential during high school should definitely be given aid to attend the college of their choosing.