An article in Forbes reports a dirty little secret The Motley Monk didn't know: A larger student debt load does not mean that a borrower is in worse shape than a person with less debt.
How could that possibly be?
- Data from the Consumer Financial Protection Bureau indicate that student borrowers in default tend to be those with the lowest average debt balances.
- One study found that those who have the highest levels of debt often have the least amount of financial hardship due to education level achieved.
In actual practice, this means the federal government is funding failure.
How so? Out on the stump, while Presdient Obama is touting higher education as a "right," his policymakers back in Washington, DC, are encouraging students to enroll in the better colleges and universities where their government loans make it possible to "pay" those higher tuition rates. Then, more than 33% of these students drop out of those institutions before they graduate, meaning they carry lower debt but lack the degree and, thus, are not successful in securing higher-paying employment to pay off that debt.
Isn't it a perverse policy that would encourage young people to go into debt knowing full well that the economic outcome for more than 33% of those young people will hurt their prospects to participate in moving up the income ladder? Worse yet, that the policymakers know these data but continue to encourage young people to enroll in these high-cost institutions?
And that's to say nothing about all of those institutions across the nation that accept these students they shouldn't have been accepted in the first place. For the two or three years these students are enrolled, they keep the cash flowing in, all thanks to the federal government. Then, when these students leave at semester's end--now indebted to the federal government--similar students take their places who also keep the cash flowing in, all thanks to the federal government.
All in the name of hopium and changium.
Let the discussion begin...
To read the Forbes' article, click on the following link:
"Who's Struggling to Pay Back Their Student Loans? (Hint: It May Not Be Who You Think)."