College is Swimming in Debt

Monday 22 August 2011 - Filed under Uncategorized

Of course it’s not debt that colleges themselves have accumulated, but debt that the government heaps on to students in order to get a college education that may never pay for itself.

Obviously the number of students didn’t grow by 511%. So why are education loans growing so rapidly? One reason could be availability. The government’s backing lets credit to students flow very freely. And as the article from yesterday noted, universities are raising tuition aggressively since students are willing to pay more through those loans.

[. . .]

All this college debt could put the U.S. on a slower growth path in the years to come. As Americans grapple with high student loan payments for the first few decades of their adult lives, they’ll have less money to spend and invest. All that money flowing into colleges and universities is being funneled away from other industries where it would have been spent in future years. Of course, this would be a rather unfortunate irony: higher education is supposed to enhance a nation’s growth, but with such an enormous debt burden, graduates might not be able to spend and invest enough to allow that growth to occur.

When a market is flooded with cheap cash, the price of the product or service in that market will soar necessitating that ever-larger amounts of cash are needed to pay for said product or service. In the education market, government loaning out large sums of money to virtually anyone who wants it has created a very ugly cycle of ever-increasing numbers of students borrowing larger and larger amounts of money in order to pay for an education that may not enable be able to support paying back said loans.

Great plan, that. The idea behind a college education is that it empowers people economically so that they can experience more freedom, yet all it’s doing to many is making them less economically stable and mired in debt.

2011-08-22  »  madlibertarianguy