Educated debt serfs: The massive scam (and bubble) which is the federal student loan program.

student loan default rates

Over the next 10 years the federal government stands to make $184 billion in interest from college loans. The main beneficiary of these loans (aside from the government) is the American university system, which has increased the cost of a college education at 3 times the rate of inflation for decades now because of all the easy money. Professor salaries reach ever higher. As have the buildings.

The recession barely touched much of the academy as students of this generation have sought refuge from the economy in college in the same way students sought refuge from the Vietnam War 40 years ago.

Basically the equation is this:

Parents who did not save enough money for college which keeps rising in cost at astronomical levels anyway because of the government induced student loan bubble + student who believes the world will end if he or she doesn’t go to college + societal pressure + bad job outlook + super easy credit + a university system which wants to get paid and encourages students to take on enormous debt + students who are clueless about what debt really is = Nearly an entire generation of middle class university students who will be in debt for the rest of their lives. They are educated debt serfs held in check by their credit ratings and an unrelenting collector in the federal government (which incidentally gets the money it loans to students for free.)

(From Rolling Stone)

First in line are the colleges and universities, and the contractors who build their extravagant athletic complexes, hotel-like dormitories and God knows what other campus embellishments. For these little regional economic empires, the federal student-loan system is essentially a massive and ongoing government subsidy, once funded mostly by emotionally vulnerable parents, but now increasingly paid for in the form of federally backed loans to a political constituency – low- and middle-income students – that has virtually no lobby in Washington.

Next up is the government itself. While it’s not commonly discussed on the Hill, the government actually stands to make an enormous profit on the president’s new federal student-loan system, an estimated $184 billion over 10 years, a boondoggle paid for by hyperinflated tuition costs and fueled by a government-sponsored predatory-lending program that makes even the most ruthless private credit-card company seem like a “Save the Panda” charity.

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