I am not advocating that students or anyone else default on their loans, I agree with Laferrara (sic) that skipping on a loan is not a good idea. Rather, I am suggesting that we re-think where we place the high rates.
She did, however, restate her question about the interest rates congress sets on student loans. I didn't think that was the main issue, but she apparently does. So, I submitted a letter to the Democrat in reply, but it was not published. So, I left these comments on the NJ.com website:
I submitted a reply letter, but the Democrat is apparently not going to publish it. So,
for what it's worth, I thought I'd submit it here.
You ask “why the federal government would choose to invest [make loans] in large financial institutions with very low interest rates . . . but not students” through equally low student loan rates. The short answer is: All rates should be set by the market, rather than by a handful of politicians or Federal Reserve bureaucrats.
for what it's worth, I thought I'd submit it here.
You ask “why the federal government would choose to invest [make loans] in large financial institutions with very low interest rates . . . but not students” through equally low student loan rates. The short answer is: All rates should be set by the market, rather than by a handful of politicians or Federal Reserve bureaucrats.
The essential
issue is not interest rates, however, but the “investments” themselves. For the
government to “invest” or make loans, whether to banks or students, it must
first seize money—i.e., wealth—by force from productive private citizens who
earned it. This is fundamentally wrong, because it violates the rights of
productive citizens to spend and invest their own money by their own judgment. (In the case of banks, the fundamental question is: Should the government hold a monopoly on the monetary system? It should not, in my view. The Federal Reserve Bank should be abolished. That would end the"investment"—i.e., subsidy—of taxpayer wealth in the banks. But that is another issue.)
Federally funded or promoted loans, grants, and other subsidies to higher
education—allegedly designed to make college “affordable”—have
been instrumental in
driving college costs to ever more unaffordable levels
(up 1120% since 1978, 4 times the CPI). The result is the bizarre combination of a
“student loan crisis” coupled with a skilled worker shortage. To reduce the
rates on student loans to the scandalously minuscule level of the Federal
Reserve discount rate will only encourage more easy-money borrowing, more
upward pressure on tuitions, and a greater disconnect between students’ loan
balances and career earning power.
Government
involvement in the student loan market and tuition financing generally is both
immoral and impractical, and should be phased out entirely. This would leave
interest rates (and other loan terms) to be set by the voluntary, mutually
beneficial contractual agreements between private lenders and students (and/or
their parents)—i.e., the market. That’s as it should be.
Related Reading:
End, Don't Reduce, Federal Student Higher Education Funding
On "Nightmare" College Debt
Related Reading:
End, Don't Reduce, Federal Student Higher Education Funding
On "Nightmare" College Debt
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