What’s the next financial disaster? In an alarming piece in yesterday’s American Thinker, Gary Jason argues the ducks are finally coming home to roost on an overbuilt, overpriced and overvalued system of American higher education. The culprit? Federal student financial aid. The evidence is hard to ignore. Average student loan balance ($26,682) is growing rapidly. The percentage of households headed by someone younger than 35 with student loan debt is 40 percent. And, the two-year default rate rose from 8.8 percent in 2008 to 9.1 percent in 2010; the fifth consecutive rate of increases.
Want more bad news? Remember these stats don’t count borrowers who are allowed to postpone payments because of economic hardship. With half of all recent graduates unemployed, you can bet the default rates will only increase.
Remember for the last four decades student financial aid has been fueled by the perceived “need” to make college more affordable and to ensure our students are able to compete in the global economy…. And what have we gotten for the billions that have been spent?
Educational attainment has increased, but at a hefty price. The availability of student financial aid has spurred endless increases in college tuition and fees and contributed to administrative bloat, with no real increase in educational quality. Furthermore, expanding college access to students of average ability has only decreased real net returns on investment in higher education.
You’d think such outcomes would cause us to rethink federal policy. Don’t bank on it. Earlier this spring Congress and the President both proved themselves without spine when the possibility of potential increase in student loan interest rates. Election year politics? Maybe. Still name the last time any politician had the courage to cut entitlements?
Jason provides the real reason why we the current program needs to be overhauled. He writes:
Remember, under recently adopted rules, payment on student loans will be capped at only 10 percent of the borrower’s “discretionary” income, and the balance “forgiven” after twenty years. What this means is that more and more massive amounts of bad student loan debt will be saddled on the backs of taxpayers, many of whom never got to go to college in the first place.
There you have it: another bailout. In the meantime, let’s refuse to make any changes and keep doing the same thing. What did they say about the definition of insanity?