Federal Student Loans are Detrimental to America

February 17, 2011 - 5:01 AM

President Obama’s proposed budget cuts for Pell Grants and the elimination of the in-school interest subsidy on the Federal Subsidized Stafford Loans for graduate and professional students is farcical. The amount would not make a dent in FY12 or the current fourteen trillion dollar national debt.

It also presumes that students, some of whom owe an excess $200,000, can pay the interest and eventually the principal. The federal government’s assumption of all student loans as part of the Obamacare package has not only added to an insurmountable deficit but has put most loan recipients into perpetual government clientage.

From the earliest days of the republic the anti-federalists (states’ rights adherents) recognized that the central government’s assumption of the states debts left over from the Revolutionary War would greatly enhance federal control.

Over the years, and especially during the 20th century, states’ rights and even individual rights have been greatly diminished due to federal programs and entitlements. This offends the original federalist system of subsidiarity, which embraces local authority because it guarantees greater participation in government and provides better responsiveness to a particular community’s needs.

Subsidiarity requires a capitalist system which builds on personal enterprise, investment, risk and responsibility. For this reason, federal funding for education is not economically sound, nor good for character building. In the end, it creates a mediocre society.

Whenever money, real or fiat, is dumped into any system with little over-sight or concern as to the possibility of a return on the investment, the risk of default becomes enormous. For example, federal loans have permitted many students to attend college, professional or graduate schools who perhaps should not have.

Also, too many recipients of these loans have caused high unemployment in certain careers. This is because government money has effectively skewed the law of supply and demand. The glut of lawyers we now have is a case in point. According to some recent articles many students who are currently without the prospect of well-paying jobs are hoping that their loans will be forgiven.

What else is there to hope for? If there were no education loans they could have adapted their skills and time to what the market would bear and instead of owning money they would be making it working.

There is also a more frightening scenario; government often creates jobs (not wealth) that are unnecessary and unproductive. The bloated bureaucracy in many states and in Washington can attest to this. A man who works for the federal government recently said, “If I work an hour a day that’s allot. And, I have security.”

This shows that Americans have become more and more dependent on the state and lulled into doing and accepting less. Worse still the heavy tax burden placed on business to pay for these programs curtails private enterprise and economic growth since they have to carry the dead wood produced by an unresponsive educational system and have less for investment.           

This artificial comfort zone created by the nanny-state is also devastating for character building. If there is easy money it causes a nonchalant attitude toward studies and an easy life-style. Education must have a very high value in a free society. Like anything worthwhile it must be worked for and sacrifices must be made.

There is little indication of this if we observe the cars students drive, their frequenting of restaurants, vacations to Cancun and even trips abroad (for study?) Many are living better lives during their school years than they will after graduation.           

Student loans have created a nation of soft people who have an over-inflated opinion of themselves and, yes, a sense of entitlement. It has also set them up for a big let down when the well-paying job they were expecting upon graduation does not materialize and they have to return home to live with their parents.           

Federal entitlements for higher education should be eliminated not only for economic reasons but for the developmental well being of our young people. Not to do so will diminish our freedom, creativity, and hence the quality of our citizenry.