College loans we can’t afford
A recent article in the New York Times, “For the Poor, Leap to College Often Ends In Hard Fall,” raises some disturbing issues about the funding of higher education in the United States.
Buried within it are some disturbing similarities between the housing debacle which precipitated our last financial crisis and the building educational debacle which is already precipitating our next economic crisis. In short, we have learned that mortgage bankers/brokers, in conjunction with tacit support from the federal government through Freddie Mac and Fannie Mae, promoted and encouraged individuals and families to apply for and receive mortgages for which they were fundamentally unqualified and which they would be able to repay only if real estate values continued to rise.
Very simply, the mortgage system, with support and backing of the federal government, promoted massive over-borrowing by the citizenry of the United States.
Now, in the face of ever-escalating college costs, it appears that college aid officers and admission personnel are encouraging economically unqualified students to take on loans, in part through altering the application fundamentals, that they will not be able to repay unless they graduate and unless the economic value of a higher education continues to rise.
Similarly, the system, with tacit government support, is encouraging individuals and families to take on debt that they are unlikely to be able to repay.
With student loans approaching $1 trillion, 93 percent funded by the federal government, the educational system is now promoting massive over-borrowing by the citizenry of the United States.