What are the reasons for the high level of student loan debt in the United States? What are the potential consequences if this debt is not addressed? What are some possible solutions to this problem?
Originally answered on Quora September 17, 2022
Tuition hikes are a classic example of the principal agent problem and naked rent seeking on the part of universities. The principal (students) usually have no collateral, job, or credit history to secure a loan so the agent (government) basically gives them a NINJA loan to earn legal certificates that gives them a privileged position in the labor market. The government makes this NINJA loan on the assumption that once the student earns their certificate they’ll have higher earnings, on average, and be able to pay back the loan and higher income taxes, which in theory is a win/win situation for the government. However, since these NINJA loans are guaranteed to be repaid and come with no risk of foreclosure/repossession on the part of the borrower, the sky's the limit for how much the government is willing to lend and therefore how much the gate keeper’s of these government granted privileges can charge for their certificates. However, unlike real estate or vehicles there is no way to foreclose/repossess on a defaulted loan and thus no way for the bubble to burst and drag down the overpriced tuition that universities charge. Add to this the usurious rates the government charges can drag out repayment for several years beyond the principal borrowed. There’s no way to foreclose/repossess a college education so it makes no sense to lend money for it in the first place. The interest should be zero. If they simply scrapped the usury and garnished the earnings of college grads (perhaps a special tax only levied on college grads) to recuperate the cost of their education, regardless of whether their degree leads to higher earnings, while putting price controls on state university tuition and income caps on admins the $1.7 trillion of debt could disappear within a generation or two.
I think what really happened with the Student Loan Debt, was a hush hush way to hand over the Banks more Control over the Population through higher taxes... The Students aren't walking away with any of our Cash, but the Banks sure are...
Exactly, the fact that people can't see the similarity between sub prime mortgage speculation through MBS market that crashed the housing market and the student loan racket just shows how much they've been brainwashed by partisan hackery of simple minded platitudes of "deregulation" and "more regulation" forgetting that regulators and regulated are the same people.
You make it all seem too complicated for such an easy solution... We need a "Stable" Monetary System, backed by Silver and Gold Coinage...
Well the financial sector is complicated because it's buried under multiple layers of plausible deniability. That's why banksters never go to prison for their fraudulent and usurious actions.
If I hand over a One Dollar Silver Coin for something that Cost 55 Cents, I'll be expecting to get back some change... My Corrected Monetary System is as simple as that...