Unintended Consequences of Student Loans

Federal student financial assistance programs are costly, inefficient, and fail to serve their desired objectives. They are among the worst of many bad federal programs. Yes, the Obama Administration has vastly expanded these handouts. Student loan debt now exceeds credit card debt. A speaker at Hillsdale College recently ticked off some of the worst effects of the federal college assistance handouts. He says college loans are absolutely not "a ticket to achieving the American dream."

1. Federal student grant and loan programs have caused the explosion in the price of tuition. The more federal handouts, the more colleges raise tuition to take advantage of the free money.

2. College loans are now a monopoly run by the federal government. Since the Obama Administration is hostile to private enterprise, it is just borrowing more money to hand it out in college loans. This money was originally designed to help poor kids, but it has now become a middle-class entitlement.

3. College loans have increased the number of students who enroll in college so much that so many can never get a job that enables them to pay off the loan.

4. The loans and handouts keep coming, but, for example, only 40% of Pell grant recipients get degrees within six years.

5. Lazy or mediocre students can get greater subsidies than hard-working and industrious ones. A student who works extra hard and graduates with top grades after three years will receive only half as much taxpayers' money as a student who flunks several courses and takes six years to finish or doesn't get a degree at all. In other words, there is a disincentive to excel.

College loans should be eliminated. They are loaded with unintended consequences.

Listen to the radio commentary here: