More Control: Part One

As a sophomore in high school, college is starting to creep its way up my list of concerns. I have senior friends who are attending top schools in the country; majoring in music and other liberal arts. The schools are costing them over $40,000 per year. Now, I understand some households can afford to put up $160,000 for a four year education, but that is not the case with us. If I leave Iowa for college, I'm going to need a student loan. Not a very large one, but I will likely need one. Unfortunately, under new legislation, the US Dept. of Education will move its share of student loans from 20% (federally backed loans) to 80%. This move will take place before July 1, 2010. According to the Wall Street Journal, by next summer, tax payers will have to fork over over $100 billion per year to lend to students. There are already two things wrong with this plan:

1) If I want to get a student loan, why should I have to go to a government call center to get one? I don't want to be held accountable to such an ineffectively run government, and I'm certain customer service can't be very good...

2) Why should $100B/year be spent on loans, especially during a recession. This country was built upon helping yourself up. It has become less so. I'm not downplaying the need for financial aid for the impoverished trying to bring themselves up, but during a recession, this doesn't seem like a good plan.

Under this new plan, the government is also adding some "hidden" rates. These rates generally speaking, for an average $25k loan, will overcharge the students by about $2,000.

Up until now, 15 million out of 19 million student loans were government backed private loans, where the government usually covered a default, and the banks were able to make a "regulated" profit. Now the 19 million students will receive loans from our people in D.C., who will be borrowing $500 Billion from China to pay for it...this being said, our debt is sure to increase.

One last concern I have for this measure is the effect it will have on the job market. Writers at the National Review are saying up to 31,000 people in community banks and non-profit loan centers will be losing their positions...likely to be thrown onto the government unemployment payroll, which has no end.

Sources:
National Review Online
Wall Street Journal