Sunday, May 18, 2014

Student loans a "welfare-state scam"

This is a new take on student loans, completely applicable to NZ:

From Jacob Hornberger:

The federal student loan program ranks among the biggest scams of the welfare-state way of life that modern-day Americans have embraced.
An article in the Washington Post entitled “College Debt Is Still Keeping Grads from Buying Homes,” points out that “young people are still drowning in student loans, and that debt is holding them back from reaching grown-up financial milestones, like buying a house, according to a new report Tuesday.”
Here is how the scam works.
Federal officials point to the student-loan program and declare, “Your parents can’t afford to send you to college. We can help you go to college by lending you the money. Without our help, you’ll have to live without a college degree.”
So, both students and parents think to themselves, “Oh, aren’t we lucky to be living with such a good and benevolent government? What would we do without it? We certainly couldn’t go to college without federal loans. Praise the government for lending us the money! Praise the troops for defending our freedom!”
But neither the parents nor the students ever ask why it is that the parents lack the money to pay for their children’s education. That’s because parents and students, thanks to public (i.e., government) schooling, have never learned how to engage in critical thinking. They just innocently accept whatever the authorities feed to them.
That’s why they don’t ask the critical question: Where does the federal government get the money to lend to the students?
The answer? They get it from the parents themselves!



Heisenbug said...

Karl Denninger at Market-Ticker wrote a great analysis of the whole scam and points out that from a cost/benefit analysis there are only a handful of degree courses that are worth incurring debt for, and even those only if you complete the degree on time (which only 41% of freshmen do). Unfortunately the article is no longer available, though I found it in my RSS reader (it used to be here.

Basically, his advice is this: learn a trade, work for yourself, and live frugally because you can never get out from under a student loan in the US (where they can't be discharged in bankruptcy and if you have any problems repaying then the penalty interest rate is usurious).

S.Beast said...

A better question might be, "in a time of technological advances why are the costs of a university education so appallingly high that a loan is usually required?"

Certainly one reason is a continuing stream of government money void of free market critical thinking. Refer to Enrollment rates vs College Tuition graph

For severely disabled people who are unable to ever work a full time job it is simple not financially sensible to obtain a degree - especially not when they have to borrow to obtain it.