Student loans and the college scam

For some reason, I feel that I must disclose that I voted for Harris. I say that because people may feel like this is a political discussion; it’s not although it’s a discussion about a political policy that was recently introduced. It’s about stopping federal funding for student loans.

We have heard in the past where politicians were stating that they were going to “forgive “ student loans. I’m going to show you how this is a lie and the problems with these loans.

First problem is with the colleges. Since the government has been granting loans to any person who wants to go to college, the college tuition rate has skyrocketed. Not only has tuition increased but more classes were added on to curriculums in order to get more money from the students. These colleges have taken advantage of a system meant to help the underprivileged.

Next is the loan. These loans are predatory loans. The high school graduate who takes on the loans really has no clue about the details or the cost of the loans. Read the fine print! It is a non forgivable loan and the only way out is to be labeled brain dead. Yes, that’s the terminology. Now, the financial institutions that give these loans out do not consider if the loan is too high risk and the borrower won’t be able to pay. Why? 2 main reasons. First the financial institution is not going to hold onto the loans. The sell them to another financial company who puts them into bonds, collateral debt obligations (cdl) or any other financial product. These bonds or products are then sold on the open markets and bought up by 401k plans or other investments. So the financial institution that is lending students the money has no interest in considering if the borrowers are high risk or shouldn’t get the loan. They make money by selling the loans off and they take no risk.

So here’s how the government comes in. People feel like the government should just “forgive “ the loans. That’s trillions of dollars out there. And politicians know that saying they’ll forgive will get them elected. Here’s the big problem. Do you know what the government’s role is in this situation? The government INSURES the loan. Remember how we said that the loans were put into cdl? Well those cdl are rated as insured by the federal government. So, your politician says that he’s going to let you default on a non forgivable loan. Who loses? Not the financial institution that lent the money; they got paid. Not the colleges that raised the tuition and added more classes. And finally, not the cdl holders; no because that loan was insured by the federal government. Yes, the federal government is on the hook for trillions of dollars.

What must happen: first the federal government has got to stop insuring student loans. I know that it’s an unpopular stance but it’s necessary. Think about this: how can a politician forgive loans that they themselves have insured and at the same time, issue new loans? Second: every college that raised its tuition and added classes because they wanted to take advantage of the system should be forced to return money to the government and have that amount taken off the student debts. Third: no more open ended loans. The financial institutions who make the loans should be forced to hold onto the loans for 4 years after graduation. They should not be allowed to sell before that time. This should make them responsible in giving loans out.

College graduates are leaving college with massive debts. The colleges do not care if they get a good paying job. The politicians will say anything to get a vote and will continue to let these predatory loans go on because it’s unpopular to stop them. And to any college graduate who may still think that their loans will be forgiven. I can assure you that if even the smallest fraction of a loan would be forgiven, most likely you won’t qualify for the forgiveness. They will take everything before they forgive it. Did your parents co-sign? Do they have a house; retirement savings? This is a problem and something must be done