Too many people go to college. How do I know? Because of how heavily it is subsidized.
Anybody with a modicum of knowledge of economics should know that when you subsidize something, you get more of it. When you subsidize something to the extent that we subsidize higher education in this country, you get a much higher than socially optimal level of consumption. The government sets interest rates on student loans, meaning that many students pay rates below what they would be offered by a private lender.
This means that they don’t have to fully weigh the costs of getting a degree in something of dubious practicality. Obama’s suggestion that student loans should be forgiven after 20 years further funnels people into higher education programs which don’t make people much more productive.
Since college graduates tend to be amongst the higher earners in society, subsidized student loans are regressive and a handout to the upper middle class. Barack Obama said that giving students loans at below market interest rates does not constitute a handout, but as National Review points out, he is simply shoveling money to college kids. College students may play a pivotal role in the election, so this a shrewd political move by Obama.
A couple of weeks ago, Mitt Romney responded to a heckler asking for free birth control by informing her that “The Other Guy” is the candidate of free stuff, indicating to fiscal conservatives, such as myself, that he would take a stand against the endless subsidies and handouts of the federal government which distort incentives and place a large burden on taxpayers.
Unfortunately, Romney, too, has come down on the side of free stuff, too often.
For example, Romney wants to extend the College Cost Reduction and Access Act in order to keep the rates of certain students loans at 3.4% rather than allowing them to rise to 6.8%. While Republicans will purportedly fund the cuts by taking money away from Obamacare to prevent an increase in spending, such subsidies remain fiscally irresponsible.
In contrast, Senator Mike Lee of Utah recently responded to a constituent at a town hall by saying that federal involvement in higher education is of dubious constitutionality. Its nice to know that a few Republicans still stand for fiscal sanity rather than pandering to important demographic groups.
At most, education subsidies should be handled by state governments rather than at the federal level. In reality, such subsidies distort incentives and cause people who shouldn’t go to college to waste four years something that isn’t applicable to the real world.
About Charlie Vidal
I don’t think it’s totally intellectually honest to say “subsidized student loans are regressive and a handout to the upper middle class,” because by definition if you are in the upper-middle class (like I was) you don’t qualify for a subsidized loan. When I applied for a loan, they wanted all of my parents’ financial info, even though my whole point in taking a loan was so I wouldn’t have to spend my parents’ money. Their socio-economic status prevented me from qualifying for a subsidized loan even though I was paying for it myself.
I understand your argument that given my education I was headed toward an upper-middle class income bracket, but neither graduation nor employment were ever guaranteed.
I have seen this question over and over and over again. It doesn’t exist!!!!!!!! Why would any bank loan you money wuihott knowing of your payment history, employment history, and other indicators of whether or not you can repay your debts. If you have bad credit then you won;t qualify simple. My suggestions to you are perhaps look at a less expensive college, or take a few years to work and clean up your credit. The government also has loan programs that don’t require a credit check Consider it a blessing that you can’t get any private loans The lenders practically own you The payments are outrageous, the interest rates worse than the most subprime you can imagine, and they can do whatever they want, because they are non-dischargable in bankruptcy Be smart about your future.
It might be possible for prvatie student loans, but it would probably depend on your credit rating score. The answer might be different for the federal student loans. However, if you are currently attending a community or junior college and will transfer to a 4 year college or university, the EFC should adjust to the new school. I recommend trying for some outside scholarships if possible to limit the need for student loans. I will include some free resources to locate them. First, the college’s financial aid office and website has a list of prvatie scholarships offered from outside organizations and companies. Sometimes a college major’s website will list scholarships, too. Second, the public library has a book listing scholarships with some not even listed on the web. Third, try for the work study program on campus. It will provide both valuable work experience and income. Finally, I recommend joining several free membership scholarship search websites. There are scholarships for a variety of things including ethnicity, clubs, hobbies, and even wearing duct tape to the high school prom. Most are updated on a regular basis. Most offer a customized search based on information entered onto a form on the website. Good luck!