A couple of months ago I commented
here and here on the timebomb of student loans and its causes. Fundamentally, I
argued, there is excessive student loan debt because of federal loan subsidies.
As with the collapse of the housing market, loan guaranties enable unscrupulous
schools and lenders to lend money to students who have no reasonable prospect
of repaying them. Coupled with their nondischargeablility in bankrupcy, student
loans will be albatrosses around the necks of many folks for years to come.
For some years the Department
of Education has developed rules by which it hoped to separate the wheat of
schools that at least try to educate from the goats of educational scammers who
are in the higher education “business” only to get tuition dollars. Thirty-five
percent of the school’s gradutes must be repaying their loans. Not a very high
bar, if you ask me.
Unfortunately, even this
effort has failed, at least for the time being. The federal district court in Washington held
that the rule lacked a rational basis and so must be stricken. Read all
about it here.
Colleague David Wagner is the
local expert on the Supreme Court Chevron
decision so I’ll defer to his opinion on whether the Court failed to give the
rule the deference it was due. But in any event it strikes me as at least
imprudent to permit educational scammers to continue to suck the lifeblood of
future earning from mal-educated students at taxpayer expense.
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