AudiBlog: Want to solve the student debt crisis? Get the government out of student loans.

The student loan debt crisis might be the biggest problem facing our nation in the years to come. The total debt sits around $1.6 trillion right now. Several politicians, including Senator Bernie Sanders, have proposed plans to "cancel" student debt, and make all college tuition free.

 

There are a couple things we need to get out of the way. First off, the government has been involved in the subsidization of student loans since 1958, with the passage of the National Defense Education Act. At that time, the governments involvement was limited to college degrees including science, technology, math, or engineering. It should come as no surprise that it only took 7 years for the feds to decide they needed more than just control over the STEM fields.

 

In 1965, they passed the Higher Education Act. The stated goal of the HEA was to promote "greater social mobility". The HEA has been the doorway to the federal government's full involvement in college education. At that time, they were able to start subsidizing or guaranteeing all student loans.

 

The cost of college began to rise with the involvement of government subsidies, as we've seen in most other industries (look at a graph of medical costs following the passage of Medicare). As you would read in Basic Economics by Thomas Sowell, the artificial demand created by government stimulus resulted in a shortage of supply, leading to higher prices. Your high school economics lessons will teach you that creating a virtually unlimited demand will cause higher prices 100% of the time.

 

Although the cost of degrees were already on the rise, the greatest acceleration happened in 2010, when the government completely took over the student loan process with the Student Aid and Fiscal Responsibility Act. That title definitely hits the top 10 most "Ironic Congressional Act" titles in my book. It's right up the with the "Affordable Care Act," and "No Child Left Behind." Up to this point, private institutions were still involved in the lending process, but all loans given by private lenders were guaranteed by the US Government. The housing market crisis comes to mind with that last statement.

 

In the graphs below, you'll see the massive spike in student loan debt, corresponding with the 2010 year mark- the first year private institutions had been removed from the student loan ma --- Support this podcast: https://anchor.fm/goodmorningliberty/support

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