Student loansharking

25 04 2012

That’s a nice 3.4 percent student loan interest rate you’ve got there. It would be a shame if anything happened to it…

That’s the ominous subtext to Obama’s recent focus on student loans. Whether delivered before increasingly disillusioned college students or performed slow-jam style on Jimmy Fallon, his message was as clear as it was cynical: support me, or terrible, terrible things will happen to your monthly student loan payments.

This was the best "loan shark" image I could find, I swear. It might actually be a lawyer, I don't even know

Of course, terrible things have already started happening to Americans’ monthly student loan payments. Recall the staggering fact that payments on about a quarter of our collective $1 trillion in student loan debt are already overdue.

But that’s not the fault of the interest rates on federally-subsidized Stafford loans. At 3.4 percent, those rates are relatively low in historical terms – although they are set to double to 6.8 percent on July 1 if Congress does not take further action. “Further action” means, in this case, further taxpayer resources devoted to keeping those rates low.

Despite that fast-approaching July 1 deadline, the student loan crisis has been brewing for decades. A few generations of counterproductive higher education policy has virtually ensured that there will be no winners in this situation – except those willing to use the desperation of debt-saddled graduates to grab political support.

Graduates are beginning to realize that quite often, their diploma is as much a fast pass to a lifetime of debt as it is a golden ticket to success. With half of recent college grads unemployed or underemployed, a degree may not even help make ends meet at the end of the month – let alone permit its holder to buy a house or raise a family.

Given these circumstances, it’s easy to see how those swamped with student debt can be swayed by political pandering. Yet a short-term interest rate fix won’t solve our higher education issues, even if it helps Obama rekindle flagging support among young voters.

Instead, we need to stop fueling the tuition bubble through the extension of subsidized loans and grants and allow true competition to return value to higher education. Getting government out of the way of an economic recovery is the best way to help those already facing the dual crises of loan debt and few employment prospects.

Obama’s cynical student loan message demonstrates how powerful the support me, or else message can be to an indebted voting bloc. Our addiction to debt has enabled the government to assume a dangerous role: that of loan shark.

While there’s no easy or “fair” way to walk back from the unrealistic promises made by pandering politicians, accepting the consequences of our poor economic choices and moving on is far less dangerous than continuing to empower government to act as an our own extortionist.

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