Student Loan Relief

Possibly responding to an “unofficial” demand the Occupy Wall Street crowd and in an attempt to play University Santa, the President has begun his promise to sidestep the Legislative branch of the federal government by invoking executive orders to change the business of college student loans. Again. Last time the President invoked changes to increase the number of direct loans issued by the Department of Education in order to sidestep banks and providing taxpayer dollars to absorb risks. This time the goal is to reduce monthly student-loan payments, consolidation of existing loans into direct loans (with interest reductions), increased loan balance and payment communication (how much is needed?) and offering loan forgiveness after twenty years. All of this, the President promised, won’t cost taxpayers anything.

Certainly it can be argued that the expansion of student loans can be considered a good, in parallel with a college education being considered a good. Problem is, when government gets involved in a formerly private enterprise and absorbs the risk, it has no incentive to properly guard an investment made on behalf of but unaccountable to taxpayers. By making access easier and shifting responsibility from students to imaginary demon bankers for not knowing how much they were borrowing, not understanding that what they were doing was getting a loan, that loans have to be paid back, not understanding that college costs money or some other known that college students are apparently too dim to comprehend it is logical to conclude that irresponsible behavior that leads to such misunderstandings will only increase. College students are supposed to be adults and it does no good to delay responsibility.

Worst yet was the President’s claim that these “reforms” will not cost taxpayers anything. Interest is the cost of borrowing money, lowering rates costs the entity making the loan. Loan “forgiveness” is just a word for default without consequence costing the entity making the loan. By taking over the student loan business by direct loan the President has established the government as the entity making the loan. And the government has no money unless it confiscates it from earners by way of taxation. How anyone could believe that an incredibly risky venture that includes many prospects for loss won’t actually cost the investor is confounding.