Student Loans

Educators have long been concerned over the heavy loan debt carried by students once they leave school.  Their primary concern is that the loans constrain the work choices the students have once they graduate.  In other words, students cannot take "public interest" jobs and must, horrors, go to work in private industry to pay back their loans.  Like most redistributive arguments from the left, the argument assumes the existence of the loans.  That assumption is now in question.  One of the largest student loan agencies, the Penn. Higher Educating Assistance Agency, is suspending student loans, even if backed by the federal guarantees.  The collapse of the securitization market makes it impossible to cash flow the business.  In the past the loans were packages and resold and the new money was used for new loans.  Now the loans cannot be resold at reasonable rates and there is little new cash for new loans. 

So now students may not have to worry about repaying loans; they may not be any.  Students that do not have the cash to go to school must work before school in, I daresay, private industry, to raise cash to go to school.  Public service jobs will not support future tuition just as they did not support past tuition. 

Educational institutions could attempt to take up the slack by turning into loan companies, a task for which they are not designed and will not do well, but the amount available will be slight compared to the amounts that were available in the private market.  Government could step in the loans and we would have another huge, very expensive government system to fund and monitor all in a time when government budgets are stretched to the breaking point.  Higher taxes anyone?. 

Another hard lesson for the left--be careful what you complain about you may lose it.