Student Loans Called ‘Federal Debacle’

from Newsmax –

With two-thirds of college graduates owing at least $25,000 on student loans and 53 percent of recent grads unemployed or underemployed, taxpayers could be responsible for tens of billions of dollars for loans that won’t be repaid.

That’s the warning from the Foundation for Economic Education. FEE’s publication The Freeman, in an article headlined “Student Loans: Another Federal Debacle,” observes: “The same cast of characters that brought you the housing crisis, a post office hemorrhaging billions, and a school system that gets more expensive as it gets worse has now brought us a student loan crisis.”

President Barack Obama has set a goal of boosting college enrollment, and total student loans have increased by 75 percent since 2007. The value of student loans outstanding is now close to $1 trillion, making it the largest share of non-mortgage consumer borrowing.

“The federal government has pushed relentlessly to expand access to college by cutting out the private sector in loan programs and by altering repayment terms for borrowers via executive order,” The Freeman states.

“It bears an eerie resemblance to the obsession with home ownership that got us into our current straits — like potential homeowners, students have been encouraged to borrow with impunity.”

It is increasingly likely, The Freeman adds, that the federal government “and thus the taxpayer will eventually be on the hook for tens of billions of dollars of loans that will never be repaid.”

The loan problem will put a drag on the economy as graduates with hefty debt will be forced to put off the purchase of a home or other expensive items.

Federal policy has also led to an inflationary spiral in tuition costs: Since 2000, tuition at public four-year colleges has risen by an inflation-adjusted 72 percent, and when costs rise, government loans rise along with them.

The Freeman concludes: “The government must exit the lending arena and be replaced by an active and innovative private market.”

If You Enjoy Articles Like This - Subscribe to the AMAC Daily Newsletter!

Sign Up Today

Leave a Reply

18 Comment threads
9 Thread replies
Most reacted comment
Hottest comment thread
22 Comment authors
newest oldest most voted
Notify of

Taxpayers won’t be on the hook. Unlike all other debt, including thousands of dollars of income tax debt, one cannot get out from under a school debt. I am still paying on loans (plural) 20+ years after graduation (postgraduate). My original loans were $17,000. Due to interest, penalties and deferments because of the many times I was either unemployed or underemployed, and the practice of capitalizing those penalties and interest, my loan balance reached $60,000 by 2001. (In those years any tax refunds were immediately swallowed by the government who guaranteed the loan, since I had no other assets they could take.) I am down to $32,000 now, but my loan has been rehabilitated (not my choice) at the cost of another 18.5% penalty. Thus I expect to die still owing on this loan, which is not dis-chargeable in bankruptcy. In fact, I currently have no debt other than this… Read more »


When Obamacare hits the economy head on, even fewer jobs will be available.

Right now only 60% of the population is working. If Obama continues his reckless policies, it may drop as low as 57%.

If this trend continues, these young highly educated, but yet currently poor unemployed loan carriers, may eventually wake up. No one ever told them that the unemployment rate of people under 30 living in socialist countries like France is well over 25%. In this country it may very well hit 30%.

Gerry Hafer

In my opinion, the academic institutions themselves share a major portion of the blame for this problem. First, as a result of the uncontrolled growth in tuition rates (did I just read about a 72% inflation adjusted increase rate since 2000?) which, I believe, is fueled by a total lack of accountability for economic cost control within academia. Second, as a result of the manner in which educational institutions and governmental oversight agencies turn their backs on their graduates as soon as they’re out the door. I am in the midst of trying to help my son’s fiance navigate the process of arranging loan consolidations and repayment schedules, and have been unsuccessful in getting any substantive guidance from the schools who ultimately benefited from the loan process. From a lack of standardized terms, to websites that are difficult at best to fathom, to personnel who are generally lacking in customer… Read more »

Emory Riley

The government needs to keep the colleges full to turn out more progressive ideologues. How else can they continue to brainwash people into thinking that big government is the answer to everything? So what if you and I who actually work for what we have end up footing the bill? It just shows how foolish we are for not buying into their way of thinking!

Liz S.

Hey! Someone tell me how they are getting out of paying for their loans!!!! My mom (who is in her 70’s) is paying for a school loan my niece defaulted on three years ago. $30,000 for a liberal arts degree she isn’t using! (…okay maybe for her stylized tattoos that cover 60% of her body!) I would love to be able to help my mom “default” on this loan that she “CO-SIGNED” for. She is the one paying $300 a month on a fixed income (all interest) and cannot even claim the interest! My new student loan requires me to make payments for ten years and then I’m done 120 payments….done. We have looked into reducing the payments but those sharks will reduce it but then you have to make 300 payments!!!! Really??!! The loan would not be paid of until she was 95!!!!!!

Joe Sexton

From a purely historical perspective, we need to question the value of wide-spread higher education. Prior to World War II, about 10% of the people who graduated high school went on to get a college degree. Most of the degrees awarded were in law, medicine, engineering, etc. All good things. But, post WWII, it rapidly became the accepted view that a college degree would put the graduate ahead of his peers and he would end up with a better job as a result. The GI Bill became a huge boost to this movement. University and college systems responded and swung into gear. We built community colleges like baking cookies. And, devised reciprocating agreements that gave full credit at state-sponsored universities for credits earned in the community colleges. Pell grants became routine from the 1960’s. Student loans and Sallie Mae became institutions. What was the result? There were several. Job requirements… Read more »

Sean Murphy

College costs too much for several reasons; Overpaid administrators & faculty, many of whom do no useful work; extravagant facilities, outright boondoggles. Students need to bear some of the costs by working: When does 12 hours of class time and maybe another 12 of study equal a full week.
When I was in school I worked anywhere from 20 to 50 hours per week. And I graduated twice (one undergrad degree and one doctoral degree ) with no debt.
Some of the students have no business in college anyway. And some of the programs are useless.
What does a person do with a degree in “Gender studies” do ??
If you have to go to college to determine your gender you have a bigger problem than a degree can fix.

Joyce D.

No one should be responsible for the unpaid student loans except the student themselves. No money…. no college. That’s that.

Michael E. Banyacki

I don’t see American taxpayers being on the hook for unpaid student loans, since my understanding is that these loans will be collected by the Government later in life either by collection agencies garnishing wages, payback thru Social Security, being devoid of receive tax returns or liens placed on assets that can be sold for repayment. Therefore I don’t understand how Mr. Freeman can make such a claim. Perhaps he can clarify what he means?


Decades ago, my orthopedist boss gave his oldest daughter a choice between her parents paying her tuition at an out-of-town college or giving her rent/food money, with the proviso for either choice that her grades never fell lower than a B. She chose the rent/food money and got a job at the university as a janitor, sweeping the gym floors, etc. She graduated at the head of her nursing class and was the main speaker at the graduation ceremony. I believe that by physically participating in the cost of her education and not borrowing money to make life easier as a student, she valued her education more and was a more serious, successful student. I realize that having the parental help she had is not available to many students but the self-help principle still applies – if you work and save for something you need/want, it means more.


How is this any different from what government involvement has done, and will continue to do, to the health industry with its push for single payer?

Kenneth Byrd

This is no different than any other government progam that has no controls or cost measures in place. These people don’t care it is not their personal money they have thier government pensions and their government health care hell they don’t even have to pay into social security. Goverment regualation is always great for the government but not great for the person being governed. They don’t care because the working class will pay for everything. How do we control any government through our local government and that takes time from people who don’t work for a living. This country has changed to people who do not want to work for a living. They want a free hand out and someone to take care of them. Free money to go to school on is just something else the government owes them. The government has it figured out there is no retirment… Read more »

Truth Seeker

Chicago Politics 101. Buy votes with taxpayers money. The taxpayer is the cosigner.
Also,people of a certain stereotype borrow (or steal) and do not intend to give back or pay for the items.
The only shame in stealing is if you get caught.
It is the Chicago way.


Students loans will end up rivaling the sub-prime crash in a few years time. Students are being saddled with loans they have no realistic means of ever paying off and we’ll all be on the hook to bail them out. After that, they’ll be the FHA loan scandal as millions of unqualified mortgages, formerly being backed by Frannie and Freddie, are now being backed by the FHA. All, once again, to promote home ownership by those that are not financially qualified to own a home. We’re in for a very bumpy ride folks. Hold on to what’s left of your wallet.

B. Holly

How about the poor retired cosigners?

B. Holly

How about the affects on retired cosigners? That can be a real personal disaster financially.

Ralph Hinrichs

Totally agree, government must get out of the business of finance. We are already hearing rumors of guaranteed job placement by institutions of higher learning. Government continues to expand into sectors it has no business in and, as stated here, creates a crisis and then blames the private sector as it has done with the housing market and financial crisis. Where will it stop? Looks like the government has an eye on charity, as if it were not already doling out millions, but it wants to be the charity of choice for eveything and everyone. What a nanny state we are headed for!

Diana Erbio

Access to federal grants for lower income students allows colleges and universities to raise their tuitions because supply and demand is not in play. Tuitions since 1980 have increased at a pace that if a gallon of milk had been at that trajectory it would cost $15. No one would accept that. We must let the principle of supply and demand work. That will bring tuition to a reasonable cost.