The Biggest bubble of them all

www.tuition.io

www.tuition.io

Owen Ferris, Lenses Writer

The United States federal government has been offering student loans since the 1950’s. It first started under the “National Defense Education Act” when the government decided to issue loans for returning military personnel to attend college; however, the government’s involvement in the student loan business ballooned incredibly quickly.

The “Higher Education Act” greatly expanded the scope of  government student loans in the 1960’s. Through this legislature, the federal government began guaranteeing student loans that had been issued by private companies. Soon after, the government began issuing loans of its own. Also, by 2010, the federal government had eliminated its ability to guarantee private loans. Coupled with other legislation of the era this sounded like the government had left the student loan business; however, exactly the opposite occurred.

Instead of eliminating its ability to guarantee loans issued by private banks, the government merely began guaranteeing its own loans under the “Student Aid and Fiscal Responsibility Act.” As a result, the government provided and backed student loans present a plethora of issues for the economy but more importantly for the student.

First, excessive government involvement in any industry is inherently socialist. President Barack Obama’s goal in this industry has always been to eliminate private bank’s profits from student loans and somehow bring costs down. This plan will not work. If eliminating profits somehow brought costs down, it would apply to every industry, not just the student loan industry.

Moreover, when the federal government removed profits and inserted bureaucrats, they essentially removed competition from the industry. As the amount competition decreased, the quality of student loans decreased. There was no incentive to create a better product because nobody was competing. It is not difficult to surmise that student loan costs will inevitably rise as the government permanently entrenches itself in the industry.

Next, the only reason that college rates have risen over seventy percent since 1980 is that the loans are guaranteed. Also, colleges know that regardless of whether the student defaults on debt or does not pay on time they will still be payed. For example, the average cost of college in the State of Illinois has risen from $2,538 a year in 1992 to $12,400 in 2013.  And if the student does default, the financial burden then falls on the taxpayers to contribute money to public institutions they already fund.

Whatever industry is examined, more government involvement is egregious. Greater federal involvement means lower productivity, higher costs for the consumer, higher taxes, higher interest rates, less freedom and fewer private sector jobs. The bigger the government gets under the guise of “protecting the little guy” the smaller and smaller that unfortunate paltry American becomes.