24 July 2015

Yet Another Student Loan Post

Go here to read a post about the debacle that is for-profit higher "education." In short with the collapse of Corinthian College and the very public complaints by its students that they borrowed lots of money for nothing, the federal Department of Education has put in place a mechanism for loan forgiveness. Bloomberg has a more detailed report here.

As I remarked in a post from three years ago:
It has been practices of the federal government (such as subsidizing student loans at the outset and later removing any limit on the interest rates that it would subsidize) and intense lobbying of Congress to limit additional oversight of for-profit schools that has exacerbated this sorry state of affairs. Rent-seeking and agency capture at their finest!
 Or again, from two years ago:
Why are we ("we" meaning the Federal government, which guaranties most student loans) handing out student loans like candy at Halloween? I've posted herehere, and hereabout our corrupt and irresponsible current system in which private lenders have no skin in the game and, together with venial (often for-profit) college administrators, lead unsuspecting young 'uns to undertake debt for no useful purpose.
Student loan forgiveness represents a double subsidy. Not only is the federal government making loans without inquiry into the ability of the borrowers to repay, it now forgives repayment of the money that has already been lent. The second half of the subsidy thus credits those student borrowers who got the least for the taxpayers' dollar. A rather perverse incentive one might say.

(If anyone knows what came of the momentary convergence between President Obama and Senator Rubio on the subject of addressing for-profit schools, let me know.)

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