Monday, April 30, 2012

Student Loans and Economic Prosperity

The student debt crises has made the news and the editorial section of the Washington Post. Absent from the discussion so-far is the effect of student debt on the economy. Both Obama and Romney want to stimulate the economy to reduce unemployment. Yet, at the same time they are promoting the use of low interest government guaranteed loans to encourage people to attend college. Getting a higher degree is very desirable, but the students are graduating with a massive debt burden. What this means is that, instead of consuming they are working to pay-down debt. This is a drag on the economy.

Tom Toles of the Washington Post
Besides the economic drag of paying down debt, the sad economic reality is that low interest government guaranteed loans, actually increase tuition and make college less affordable.  The coming student loan boondoggle will be very similar to the housing bubble and fraudulent Green Energy programs (Solyndra) and will someday burst. Similar to the housing bubble, cheap easy to obtain loans are ripe for fraud. Obama just recently addressed the issues of diploma mills.  Disingenuously, Obama, by promoting cheap easy to obtain loans, is actually promoting the growth of diploma mills. Want to slow increases in tuition and minimize the fraud of diploma mills, end all government guaranteed loan programs.

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