Regarding your editorial "The Rolling Student Loan Bailout" (Aug. 10): Whenever the government gets involved in an activity that is not properly any of its business, we get the infamous trio: waste, fraud, abuse, and then the politicians feel the need to meddle still more in an effort to solve the problems they've created. The federal student-aid programs are a perfect illustration. Repayment of loans is being politicized, with easy terms for students provided they make the "right" choices in employment. That will only further misallocate resources and help to keep the higher-education bubble inflated.
Instead of further politicizing student lending, the right move is to get out of it altogether. Even if there were any constitutional warrant for federal lending to college students (and there isn't), it would be a bad policy. Politicians and bureaucrats are very bad at deciding how to lend other people's money.
George Leef
John W. Pope Center for Higher Education Policy
Raleigh, N.C.
You describe characteristics of today's government-backed student loan program that have an uncanny resemblance to features of the pre-housing-bust mortgage market. Interest rates on loans are kept artificially low, loans are extended to those who are unlikely to repay, and prices (of houses and college tuition) are inflated because federal subsidies distort markets. The housing-market meltdown was messy because Wall Street stood between borrowers and taxpayers. There are no buffers in the student loan market to interfere with a "rolling" bailout accomplished below the public's radar.
Would a taxpayer want to invest in a loan that pays less than 4% interest today and has just a 60% chance of principal repayment? There are, of course, social and economic reasons to help Americans earn college degrees, but as usual government intervention causes more problems (e.g., skyrocketing tuition) than it solves. Meanwhile, Washington reveals its contempt for taxpayers by telling us that its latest student loan deal will reduce our deficit. The government helps send us to college but treats us like idiots.
Michael Hart
Corolla, N.C.
Colleges and other educational institutions have prospered mightily. Federal loan and grant subsidies have enabled them to increase tuition and fees in excess of inflation for decades, often for courses of study that don't lead readily to gainful employment.
Why then would it not be both fair and effective to have repayment of future loans be made the responsibility of both the student and the educational institution? Such a change would cut the default rate to an insignificant amount, while at the same time providing a powerful incentive for being more responsible in making grants to begin with.
Jame Cottle
Sonora, Calif.
The new repayment plans don't go far enough to address older student debt because they apply only to new borrowers who are making payments and only to the federal Stafford loans and Parent Loan for Undergraduate Students loans signed for by students. They don't apply to the PLUS loans signed for by parents or the mega-private loans that parents and graduate students took out decades ago, which is the bulk of the $1 trillion of outstanding student debt.
By extending the pay period beyond the standard 10 years, the working poor are paying three to four times the original amount. Then the balance forgiven becomes a taxable event for those working for government or a nonprofit, and the borrower must pay tax on the amount forgiven.
Before 2010, under the Family Federal Educational Loan Program, loans were a huge moneymaker for commercial lenders, originators, guarantors, state loan authorities and servicers, who couldn't afford to stay out of the federally guaranteed student loans programs. It's likely that by ending FFELP and cutting out the commercial middleman, the government is making money now despite the defaults because student loans are not dischargeable even in bankruptcy, so they follow the borrower for life.
This results in our young people being unable to buy a car to get to a better job, buy a house and build equity instead of renting, and become taxpayers who contribute to society.
C. Claire Law
Charleston, S.C.
