This really irks me. I had a bit of a rant in 2008 about the federal government bailing out delinquent home owners (Bail Out My Mortgage) and now they’re at it again, this time with student loans. And a lot of it is rooted in the same structural issue: a federal government that guarantees (either explicitly or implicitly) loans, resulting in private lenders providing easy access to credit, inflating the underlying asset – in this case tuition – and feeding a bubble. Have a quick think how often you see night and weekend MBA, or executive MBA, or online degrees seen advertised in the popular media. All fed by the ease of credit for student loans and the creation of for-profit institutions that want a piece of the pie.
The onus for the creation of the student loan mess ultimately lies with the federal government, which controls the student loan business at its core. But what really steams me is that the people taking loans for education are supposed to be the more intelligent members of society. What is so hard to understand about the fact that when you take a loan you are agreeing to repay that money? The sign on the right in the image below is unfortunately typical of the attitude of the younger generation: I did my part now spoon feed me with a nice job and a comfortable salary so I can live the American dream. Sorry, it doesn’t work like that, especially in this economic environment. You have to work for your daily bread, and if you find yourself in a situation where you don’t have the wherewithal to satisfy your cash flow requirements then the best way to learn about your mistakes is the hard way. If the federal government bails out the student loan program what kind of message is that sending to my generation about recourse on debt?
In no way am I endorsing Herman Cain or labeling myself a republican – I don’t get to vote so don’t really follow the presidential race very closely. But it was a little refreshing to hear Cain tell it how it is when in a recent interview when he labeled the Occupy protesters as “jealous” Americans who “play the victim card” and want to take “someone else’s Cadillac.”
As a colleague of mine commented this morning: I wonder how much of the $550B of outstanding student loans was spent on pot, beer and partying?!
