How the US Government Created the Student Loan Crisis

Only the federal government could *lose*money on an industry that has grown at four times the rate of inflation. As Milton Friedman once observed, “If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand.”

Source: How the US Government Created the Student Loan Crisis - Foundation for Economic Education

It seems that most of the people who support student loan debt forgiveness don't understand how economics works. Or even how the Federal budget works. One person even argued with me that we might as well spend all this money on student loan forgiveness because it was already spent anyway and would just go to wars otherwise. I don't even know where to start with that.

What makes this issue even worse is that the government is largely responsible for the existing "crisis" anyway. Various successive policies by both Democrat and Republican administrations have made student loans harder to pay off. Obamacare largely nationalized student debt in 2010 (92% of it anyway). Since then, the nation's student loan debt has risen from an already astronomical $811 billion to nearly $1.8 trillion. Someone's brilliant planned changed typical student loans from fixed rate to a rate based on income. Unsurprisingly, this has made student loans more expensive. The more government steps in, the worse things seem to get.

The Federal government has managed to lose $311 billion on an industry that has grown at four times the rate of inflation (after the GAO's prediction of generating $114 billion). Now I'm not suggesting that the Federal Government try to make money on poor college student but it seems like it would have taken 0 effort to break even by providing low and no interest rate loans. Instead, it's used as a political tool and this is what happens. This just demonstrates one of many reasons that student loans are not the job of government.

Some suggestions for students thinking about student loans:

• Carefully read the terms. Don't take out bad loans.
• Make sure you get decent grades in high school. If you do, there is already plenty of scholarship money that will cover most of your tuition expenses (if not living expenses). If you don't, maybe college isn't for you.
• Stay close to home. By attending a community college or four year state college you could potentially live at home and in any case save a butt-load on tuition. At least chose an in-state university vs. an out of state university.
• If you do take out a loan, make sure it is for a degree program that is likely to net you a job that will pay enough to take care of that loan. Hint: English, Philosophy, Gender Studies, Underwater Basket Weaving and most liberal arts degrees are all poor choices on borrowed money. Medicine, Law and Engineering are better choices but do your research.