Taxpayers On The Hook For Student Debt

Student loan experts warned the House that the student debt crisis is now a “trillion-dollar blackhole” and was hurting the financial system.

“Every 28 seconds, another borrower defaults… like kerosene on a fire, student debt is … tearing our country apart,” stated Seth Frotman, former student loan ombudsman and the executive director of the Student Borrower Protection Center. “We cannot continue to be lobbied into believing that the companies getting rich off the misery of millions of Americans are not part of the problem… [and] the trillion-dollar black hole in our financial markets.”

Frotman, who made the comments during a hearing with the House Committee on Financial Services on Capitol Hill, was also accompanied by other panelists who also highlighted the difficulties student borrowers were facing — whether they had federal or private loans.

Source: Aarthi Swaminathan Finance Writer Yahoo Finance.

It was just emphasized the other day that Obama completely altered the
student loan system as he snuck a forced government-controlled system
into his ACA laws. It eliminated private lenders, which got rid of
competition. “Free and easy” student loans handled by the government
resulted in far more students with limited resources or
after-graduation plans to get loans that they were unlikely from the
beginning to be able to pay off as promised. It encouraged schools to
raise prices because the government was guaranteeing that students
could get the loans. The taxpayers are now the ones being told to fix
it by handing over trillions of dollars to wipe out the debt.

There are ways to spend wisely on college. I attended the local state
school (a decent one, unfortunately, minutes from my parents’ home in
a college town). I lived with my parents to save money. I didn’t do a
study abroad semester as everyone in the entire university system
pushed students to do because everything I saved by living at home
would have been wasted on the cost of living overseas, despite how
much aid they “promised” would be available. (Did I want to? Sure. But
I was trying to be smart and think long-term.) Lots of people would
rather have the “fun” experiences of living on campus, attending
parties, studying abroad, majoring in something “interesting”, going
to the “good” liberal arts schools across the country from home, etc.
That’s not wise, financially. If you have to take out a loan for
school, you really should do everything possible to limit the amount
you need. And start planning for the future right away. Pick a degree
that will provide employment, start looking for jobs as early as
possible before graduation, don’t build up credit card debt on top of
the rest by spending frivolously, etc. It takes sacrifice. And,
unfortunately, it really takes some adults putting in the effort to
talk to the kids and teach them about this stuff in advance. If
parents don’t want to do the job, high school is a good time. Econ and
finance courses could include a basic “student loan survival guide”
section. And college could also not be pushed on so many kids for whom
it really is of no benefit. Learning a trade is a good option. Fields
in art, acting, etc. could be more open to hiring without emphasis on
education and pedigree, focusing more on natural talent, which can’t
be taught.

And not being able to afford college simply might be what happens for
some kids. My mom grew up in a rural area, with 4 siblings, all raised
by their widowed mother. A couple of siblings went to community
college for finance-related educations and have been working
“practical” jobs ever since, and they should be able to retire
comfortably in the next few year. My mom couldn’t afford, because she
and my dad married young, and they were working to put him through
college. Two loans and tuitions would have been a lot, even then. We
now tell all kids that they can go to college, but not all of them
really should. There are only so many college-degree-dependent jobs
available in the country, and plenty that don’t, as long as there are
people willing to do them. “Student loans” made it possible for more
students with the skill and desire to attend college even if their
families weren’t as financially capable as other “wealthy” families
(who, in the past, were the only ones who could send their kids to
college). But those loans gave a false impression that practically
everyone could and should splurge on college. Obama’s changes in 2012
made that even worse.

It’s not the taxpayers, many of whom didn’t attend college because
they considered other options, and many of whom attended and saved and
spent very carefully so that they could pay off their own loans, who
should be on the hook. Fixing it will be good, but not on the backs of
the people who are already having to provide so much for so many. The
government loves to spend taxpayers’ money, and they should be trying
other “repairs” to the system before adding even more to the taxpayer
debt.

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