“When is the last time you heard of a college or university talking about getting more operationally efficient in a way that would allow it to reduce tuition?”, Dave Cooper and Robert Schaefer

Letters

Student Loan Debt and Counting Liabilities as Assets

Only 56% of student-loan borrowers currently are repaying their debts.

Joel Best and Eric Best’s “Student-Loan Debt: A Federal Toxic Asset” (op-ed, Oct. 2) hits the nail right on the head. This program is toxic in every way a financial program can be toxic.

However, we believe that the article fails to properly identify the root cause of this disaster. The real issue is that it costs way too much to get an undergraduate degree. We went to college (and graduate school) in the late ’50s and early ’60s. We both graduated with zero student debt. In fact, we didn’t know anyone who had student debt, and to our best recollection, the term student debt didn’t even exist. Why is it so different today?

When is the last time you heard of a college or university talking about getting more operationally efficient in a way that would allow it to reduce tuition? When is the last time you heard of a college or university talking about downsizing administrative staff levels? Do you believe that most colleges and universities are on the prowl to find more ways to raise revenue and to find ever more areas in which they just have to spend it?

Let’s make an all-out effort to get college tuition levels for undergraduate degrees down to, say, no more than an average of $5,000 a year. This would of course require the federal government, instead of enabling the always upward tuition spiral largely financed by the federal student-loan program, to use its considerable persuasive power to make colleges and universities lower tuition rates.

Dave Cooper

Tipp City, Ohio

Robert Schaefer

Anaheim, Calif.

The authors point out that only 56% of student-loan borrowers currently are repaying their debts, yet the federal government carries more than $1 trillion of outstanding student loans on its books, under the assumption that all debt will be repaid. Private lenders would never get away with accounting that failed to adjust for delinquent payments by nearly half of all borrowers. The national cost of student-loan repayment delinquencies could dwarf the mortgage write-downs absorbed by private banks as a result of the housing crisis.

According to Sen. Elizabeth Warren, who has been demagoguing the student-loan “emergency” all year, Washington will be booking $66 billion of windfall profits on just the slice of student loans issued between 2007 and 2012. So, at the same time that more than $400 billion of debt isn’t being repaid, the income received on debt that is repaid is considered by Sen. Warren to be outrageous. Sen. Warren suggests reducing the interest rate on new student loans to less than 1%, but she doesn’t explain how cheaper student loans would resolve the problem of escalating college tuition, which is the root of the debt explosion.

A reality check would be to let private lenders bid on how much they would pay to buy $400 billion of nonperforming loans from the government. A wild guess is, “not a lot.” Washington’s student-loan portfolio is, in a nutshell, another massive income redistribution mechanism waiting for official ignition. Sen. Warren is pumping up students (and their families) to demand that their overpriced, burdensome obligations be written down or wiped out. Democrats need just one more watershed election to make what Sen. Warren calls the “stark choice” between billionaires or students.

Jim Mason

Charlottesville, Va.

Posted on October 17, 2014, in Postings. Bookmark the permalink. Leave a comment.

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