It's a great political strategy.
- Gin up anxiety that without a college degree, no one will be able to survive in the new economy.
- Provide the loans upfront especially those who have no visible means of paying the loans off.
- With the economy in the tank and showing now signs of improving, there'll be no high-paying jobs for over-qualified graduates.
- Awash in debt, they need relief.
- Swoop in and come to the rescue by relieving their debt.
That's sure to win more than a few votes because those politicians are so "compasisonate."
As Rahm Emanuel famously observed, "Don't let a good crisis go to waste!"
The crisis the feds have decided to seize upon is the for-profit enterprise, Corinthian Colleges. The firm recently went into bankruptcy.
According to U.S. News and World Report, the crisis became a good crisis yesterday as the Secretary of the U.S. Department of Education, Arne Duncan, announced a scheme that will forgive the debt of thousands of former students of Corinthian Colleges. But, don't be fooled. The spigot is merely being opened, sort of "slow drip" approach to work out the kinks. How so? The scheme is actually intended to extend loan forgivenesss to all federal borrowers who can prove they were defrauded by their college.
This scheme isn't just about Corinthian Colleges. It's about opening up debt relief to a vast pool of students soliciting statements from borrowers at other for-profit colleges to prove those institutions have engaged in predatory practices.
It just so happens that The Motley Monk believes that shutting down for-profit, higher education scam artists is an excellent idea. But, this approach to solving the problem isn't about a "White Knight" riding in on his high horse to save all of those students who didn't know any better and find themselves mired in debt, have no job, and they have no other means to pay off the debt incurred.
Q: Why have those for-profit colleges been thriving? Almost from out
of nowhere, they sprung up like weeds.
A: The federal government's college tuition loan program.
What's the White Knight's program going to cost taxpayers?
- The ~40k students who took out loans to attend certain programs at the Corinthian-owned Heald College are eligible to have their debts erased. If all those former students applied, it would cost about ~$544M.
- If all of the ~350k Corinthian students who took out federal loans in the past 5 years were successful in applying for debt relief, the cost to taxpayers would $3.5B.
And that's only 1 for-profit institution. What about all of the other students this scheme is intended to cover?
The real scam is that the feds act surprised. It's all an act, of course. They knew this crisis was coming down the pike from the very moment they expanded the number of students who would be loaned money to pay for college, just like the feds did when fueling the housing bubble. It was just a matter of time before the first domino fell. Now that the crisis they fueled has arrived, it's time not to let a good crisis go to waste.
The poor sheeple. They're getting scammed and aren't even aware.
Better yet: Guess who's ultimately going to foot the bill? The taxpayers, yes. However, not today...or tomorrow...or next year...or in five years. Just add those costs to the nation's debt. The irony is that when the U.S. debt comes due in 10 or 20 years, those who will be footing the bill will be all of those whose debt was forgiven.
Rule #1 in Life: There is no such thing as a "free lunch."
Let the discussion begin...
To read the U.S. News and World Report article, click on the following link: