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Financial Exploitation of Students

Lending to students has a striking resemblance to subprime mortgage lending prior to the Great Recession.

Student debt now stands at $1.3 trillion. More than half of student borrowers are unable to repay their loans according to the original terms. In a well-intended but poorly executed effort to make college broadly accessible, the government has lent freely to students, with little attention to whether they can repay those loans. ...
As a college president, I frequently hear from students who are anxious about their ability to repay their loans once they graduate. Many let student debt guide their career choices. ...
We saw during the housing crisis how unaffordable mortgage payments weighed on our economy by reducing the amount of disposable income available to people for spending. Excessive student debt is putting the same kind of drag on our prosperity. A growing body of research has concluded that as young people cope with high monthly student debt payments, they forgo things like buying a car or a house. Many live paycheck to paycheck. Escalating defaults among student borrowers impair their credit scores, making it even more difficult to borrow for large purchases. ...
We bemoan consolidation and “bigness” among banks and corporate America, yet the same thing has been happening in higher education, where 1 percent of four-year institutions hold more than half of all endowment wealth. ...
By moving quickly and decisively on the student debt crisis, Mr. Trump could promote his pro-economic growth agenda, while enhancing his standing among young people and voters with college degrees. Student debt relief is smart economics and smart politics for the new administration.
- Sheila C. Bair, To Boost the Economy, Help Students First, NYT, Dec. 21, 2016

This article overlooks the question of whether these students are a good investment. What is to prevent a student from a Chinese or Indian immigrant family getting an expensive education and then migrating back to Asia and never paying? What is to prevent a graduate with an expensive education from embarking on a hippie life, making just enough to live by some marginal enterprise such as selling organic cotton candy at community events, and paying back little or nothing? What is to prevent an enterprising graduate from creating a startup, taking a minimal salary, and paying little or nothing even while building the basis for a future fortune? The article also overlooks the advantages for the wealthy of having large numbers of young educated workers who, like indentured servants, are forced by debt to slave away at whatever businesses need them to do.



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