Imagine this scenario: a lending institution offers sub-prime interest loans to millions of people who otherwise would not have chosen to take on said debt, as time passes these people realize they are in a situation they can not handle, and are forced to take drastic action that has a devastating effect that potentially leaves their lives in ruin.
"Outrageous!" you cry, "those predatory lenders are amoral and should be punished!"
Would it change your reaction if I told you the scenario I described is not the much-discussed sub-prime mortgage breakdown, but the government student loan program?
Democrats in DC are discussing plans to cut interest rates on student loans by as much as half. These predators must be stopped! From the article:
Tom Joyce, a spokesman for Sallie Mae, the student loan organization, said "We do not oppose an interest-rate reduction, … (but) we’d better be careful of the law of unintended consequences."
I doubt Mr. Joyce has the same unintended consequences in mind as I do. What happens to these kids when "constant fluctuation depending on the current interest rates set by the government" causes their interest rates to shoot up?
Moreover, when you offer such cheap credit to encourage kids to go to college, the "investment" part of their "return on investment" decision matrix of going to college is distorted. The result is more kids going to college who, in reality, will not benefit from a college degree sufficiently to justify the investment of money or time. The end result will be millions of kids either graduating with virtually useless degrees (i.e. art history, english lit, etc.) in terms of the job market, or dropping out altogether because they could not handle the academic demands of higher education.
By offering sub-prime student loans, or even worse, government-subsidized college education opportunities, we are sending young people into a situation they should not be in. If the cost (i.e. interest rate) of financing a college education is set at normal market rates, the expectations of the students in terms of attaining marketable skills will be more realistic. If going to college costs you little or nothing, you are more likely to not take it seriously. You won’t have to establish high payoff expectations because, after all, it doesn’t cost much!
It seems that government’s goal is simply to put "butts in the seats" across college campuses. Nevermind what they will do once there, or how valuable their degrees will be if they graduate – "we must educate our kids to fill the jobs of our new ‘knowledge-based’ economy!" No mention is made, of course, of how to best inspire the creation of said jobs. This attitude simply puts the cart before the horse: if you break down barriers to entrepreneurship (i.e. gov’t taxation, regulation), the market will create the most rewarding jobs possible; as a result, kids will get the appropriate education/training to pursue these jobs.
So, just like those who had their homes foreclosed because their decision was skewed by sub-prime mortgages, young people will face a foreclosure on their future by the "predatory" college loan and subsidization practices by our government. I’m sure the outrage from those wanting to punish mortgage companies will soon be directed at this practice by our government that ruins the lives of our young adults. Yeah, right.