The Corner

Education

Is the Federal Government a Loan Shark?

Students walk at the University of North Carolina at Chapel Hill, N.C., September 20, 2018. (Jonathan Drake/Reuters)

There is good reason to look at it that way when you consider federal student loan programs. A high percentage of borrowers are not able to pay down their loan balances. Surprisingly, the students in default aren’t usually those with the very high debts we often hear about, but are low-debt and low-income people who took out loans for college but either did not finish or if they did, could not find a job that pays enough to cover their payments.

In today’s Martin Center article, Anthony Hennen looks at recent data on the college loan fiasco.

“When almost half of the borrowers aren’t repaying their loans,” he writes, “the benefits of college are hard to see. The ‘college for all’ movement has promised students and parents socioeconomic mobility and a better future, but the ugly reality has left many students worse off than if they had skipped college altogether.”

Hennen discusses various reforms that have been suggested, but arrives at the correct, Gordian Knot-cutting conclusion: “Reformers who want the government out of the student loan business want to rein in college costs, but the better argument might be to abolish federal student loans because the federal government has become a bureaucratic loan shark, preying on low-income students.”

George Leef is the director of research for the John William Pope Center for Higher Education Policy.

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