Coming Student Loan Crisis: Crony Capitalism + Egalitarian Liberalism

Jonathan Bean

Take the notion that every child deserves to attend college (egalitarian liberalism) and add crony capitalism (banks with the power to squeeze you despite bankruptcy (i.e., kind of like the IRS!). The result is the warning of several commentators recently of a coming student loan crisis. In last week's Wall Street Journal, Andrew Hacker and Claudia Dreifus are quoted from an Atlantic.com story they wrote:

As this semester begins, college loans are nearing the $1 trillion mark, more than what all households owe on their credit cards. Fully two-thirds of our undergraduates have gone into debt, many from middle class families, who in the past paid for much of college from savings. . . .

If you want to get a name as an economic seer, try this one. The next subprime crisis will come from defaults on student debts, starting with for-profit colleges and rising to the Ivy League. . . .

Still, there's a difference. With mortgage defaults, banks seize and resell the home. But if a degree can't be sold, that doesn't deter the banks. They essentially wrote the student loan law, in which the fine-print says they aren't "dischargable." So even if you file for bankruptcy, the payments continue due.

Hence these stern words from Barmak Nassirian of the American Association of College Registrars and Admissions Officers. "You will be hounded for life," he warns. "They will garnish your wages. They will intercept your tax refunds. You become ineligible for federal employment." He adds that any professional license can be revoked and Social Security checks docked when you retire.

Read the full article because it is worth the read.

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