The Student Loan Problem — A Solution: Stop Making Bad Loans!

By: Donald L Swanson

It is the lot of good intentions—to go awry.

And so it is with the federal government’s student loan program.  Its good intentions are obvious: making a college education available to everyone—even at high-price colleges.

Catastrophic Consequences

Such good intentions have gone awry, with catastrophic consequences for many.  The catastrophes include:

• higher costs (for everyone) to get a higher education;
• colleges and universities are completely dependent (for survival) on federal loans to their students; and
• students are stuck holding the bag—with loans that many can never repay.

Basic Problem

In our credit-driven and market economy, responsibilities for prudent credit decisions rest on both borrower and lender:

• borrowers need to avoid taking loans that cannot be repaid; and
• creditors need to refrain from making loans beyond a borrower’s ability to repay.

The basic problem with student loans is this:  the federal government makes many student loans that it knows (or should know) can never be repaid.

The government compensates for making such bad loans like this: it makes student loans non-dischargeable in bankruptcy.  

The result is that many student borrowers are in perpetual servitude to the federal government—their entire lives are governed by that servitude.

This is terrible!  It needs to stop.  And here’s where the stopping needs to start: 

• the federal government must stop making student loans that can never be repaid!

Accountability

No one is accountable for making a bad student loan, except for the student:

• the college/university keeps on charging ever-high prices to its students, with no responsibility for students who can’t repay their loans; and 
• the federal government keeps on making bad student loans that can never be repaid.

But for a student burdened with bad student loans, accountability is permanent and can never be escaped.  

Conclusion

When the U.S. Government makes a bad student loan that can never be repaid:

• It is the student who pays the price;
• It is the college/university who receives the benefit; and
• It is the taxpayer who funds and enables the entire debacle. 

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