Eliminate Federal Student Loans

Here is a three-part plan for something practical the federal government could do to relieve college-loan debt. Step 1: The federal government should stop making college loans itself and cease guaranteeing any such loans. Step 2: It should prohibit educational lending by federally regulated financial institutions or, if that seems too heavy-handed, require the application of ordinary credit standards in any private educational lending, treating the student himself as the main credit risk in all cases, including those of secured or unsecured loans taken out by parents or other third parties for that student’s educational expenses. And 3: It should make student-loan debt dischargeable in ordinary bankruptcy procedures.

The most likely end result of this would be the effective abolition of government- and bank-based financing of college education in all but the most narrowly defined circumstances. Good riddance. That leaves about $1.5 trillion in existing debt on the table, a very large number from which the federal government derives very little income, about 0.1 percent a year, or $1.5 billion — a fact that should enter into our calculations about whether we attempt to collect every nickel of that money or, perhaps, slowly forgive some of that debt for students who keep up with their payments and are otherwise good citizens, maybe at a rate of 2 percent of the principal a year.

About the Author

Kevin D. Williamson

Kevin D. Williamson is a former fellow at National Review Institute and a former roving correspondent for National Review.

Here is a three-part plan for something practical the federal government could do to relieve college-loan debt. Step 1: The federal government should stop making college loans itself and cease guaranteeing any such loans. Step 2: It should prohibit educational lending by federally regulated financial institutions or, if that seems too heavy-handed, require the application of ordinary credit standards in any private educational lending, treating the student himself as the main credit risk in all cases, including those of secured or unsecured loans taken out by parents or other third parties for that student’s educational expenses. And 3: It should make student-loan debt dischargeable in ordinary bankruptcy procedures.

The most likely end result of this would be the effective abolition of government- and bank-based financing of college education in all but the most narrowly defined circumstances. Good riddance. That leaves about $1.5 trillion in existing debt on the table, a very large number from which the federal government derives very little income, about 0.1 percent a year, or $1.5 billion — a fact that should enter into our calculations about whether we attempt to collect every nickel of that money or, perhaps, slowly forgive some of that debt for students who keep up with their payments and are otherwise good citizens, maybe at a rate of 2 percent of the principal a year.