Federal Student Loans: Borrowing Trouble for Students and Taxpayers (Why Tuition is Going Up)

When Rep. Ron Paul (R-Texas) released his economic plan, which calls for eliminating the U.S. Department of Education, the howls of outrage from the media were predictable. Paul was accused of wanting to end the federal student loan program immediately and, therefore, of being anti-education.

Paul responded to his critics with a cogent op-ed in USA Today in which he explained that he had merely proposed transferring the student loan program to another federal agency and has no intention of repealing the program in the short term. However, he added that, in his opinion, the program ought to be retired in the long term, arguing that "we will assist [students] the most by eventually transitioning student aid away from the inefficient and ineffective federal government and back to local governments and private market-based solutions — which simply work better."

Is Paul correct that federal student loans are a bad idea? Certainly it doesn’t make good financial sense for students to take on tens of thousands of dollars worth of debt in the present economy. Americans already owe about $1 trillion in student loans, and delinquency and default rates are on the rise.

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