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Educate me on libertarianism vs Pell Grants/Fed college loans...

I just heard a libertarian saying something about how taxpayer-funded federal college loans drive up the overall price of college.

How does that work?



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Basically, the government

Basically, the government undercuts the private interest rate for college loans, which itself was ridiculously low. This creates more demand.

In reality, there is very little effect. Even if one had to pay a higher interest rate, a college degree has so much value that it would stop very few people from going. After all, the interest cost difference on tuition of 20 grand would be less than 5,000 over the life of the contract.

Simply put, regardless of government interference, college costs are going up because supply is limited and demand has absolutely skyrocketed.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

Basically, the government

Basically, the government undercuts the private interest rate for college loans, which itself was ridiculously low. This creates more demand.

In reality, there is very little effect. Even if one had to pay a higher interest rate, a college degree has so much value that it would stop very few people from going. After all, the interest cost difference on tuition of 20 grand would be less than 5,000 over the life of the contract.

Simply put, regardless of government interference, college costs are going up because supply is limited and demand has absolutely skyrocketed.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

Just like Health Care

It's the same reason why Health Care costs will rise now that Health Insurance is federally subsidized. The government is viewed as this undeniable source of income.. if they say they will pay for it, people will believe them. After all, they're the ones with the printer! [this isn't true, this is simply the general perception!!]

So when the government tells a university, offer these loans to students at this rate. We will front the cash, you'll get your bases covered, and then we'll handle the collection when it's over with. The school now, more or less, has a guarenteed source of income; regardless of the students coming in. The government will pay for it, and it's all good. Tuition will be raised, and the government will continue it's promise 'offer these loans, we'll get the interest, and you get your students'.

The "student loan bubble" is the debt the government is putting itself in by students who are unable to pay back their loans in a timely fassion, due to no employment. The universities won't suffer any consequences until the government realizes this hole they're digging (probably too late) and elects to stop subsidizing these loans. Suddenly, students won't be able to afford the inflated costs of the schools and you'll see various colleges and universities cutting back or closing down.

Hospitals will see the same things happen. Subsidized health insurance means they can charge a greater rate for their services. When the government program collapses under it's own debt and the insurance program is terminated, hospitals will be left with many many unpaid bills.

If you ever want something to be destroyed, let the government take care of it.

Just posted an essay on this

albeit not addressing the issue directly

http://www.dailypaul.com/284986/monopoly-on-human-worth

Séamusín

Because colleges are

Because colleges are businesses plain and simple. When consumers have more purchasing power via a federal loan, the business - AKA the college - experiences an increase in interest from leaving highschool seniors who may not of had the benefit of an academic scholarship. With such high demand and only an X amount of slots available for incoming freshman, the college will always increase prices. They can get away with it because the demand is there even though it's artifically created by the government. The government says, "Here, take the money. You deserve a college education." This floods the education market with students who don't even know why they're going in the first place. Federal loans might give students the illusion of being able to afford college but make no mistake about it, federal loans only give colleges the green light to bump up their tuition rates...

Very nicely

explained!

I would add that education isn't the only thing inflated by government involvement. The same also applies to health care, and is the reason delivering a baby can cost (tens of) thousands of dollars now - the cost for a natural event.

http://blogs.babycenter.com/mom_stories/how-much-did-your-de...

There was also one genetic test we had performed that insurance did not cover. When all the bills finally were processed, the $260,000.00 Children’s hospital bill for 17 days cost us a total of $2,500 dollars (just 1% of the total billed cost!!!).