Obama to Lure More Students into Incredible Debt Loads

Bonnie Kristian
Mar 15, 2010 at 4:59 PM

I've referenced Mish Shedlock before (see here and here) when discussing college tuition hikes and the problems with the student loan system.  Now, I'm doing it again, because he has a timely new post on the president's disastrous plans to expand the Pell Grant system and lure even more college students into ridiculous amounts of unnecessary debt.  Shedlock explains:

If president Obama gets his way, still more money, up to $50 billion, will be thrown at the failed Pell Grant system. Pell Grants are based on a means test and the funding comes with no strings attached. The money does not have to be repaid. That alone should tell you the program is rife with fraud. And it is.

He quotes a New York Times article, which explains, “If these programs keep growing, you’re going to wind up with more and more students who are graduating and can’t find meaningful employment...They can’t generate income needed to pay back their loans, and they’re going to end up in financial distress.”

In short, further federal funding of these grants seems like a good thing in that it helps more students go to college -- but it's driving up the price of school for everyone and leaving students with debt loads they can't realistically repay and without viable job options.  Shedlock's right when he concludes, "Rather than throwing hard earned taxpayer dollars at programs that invite fraud and make debt zombies out of students, it's time to kill the program entirely."

More people need to come to South Dakota. You get a year's worth of education for less than $10,000. If you can hack an engineering program at SD School of Mines and Tech, you're likely to graduate with zero debt due to internships and cooperatives, and benefit from a 99% placement rate in your chosen field.

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The problem is that we live with a system that it is impossible for many to attend college without the Pell. I understand the free market argument that it is government intervention that drove prices up, and I agree. However, if we cut the Pell today, I would be on the street without a degree. In a world of credential hyperinflation, that doesn't leave much hope.

Especially for those of us who believe in liberty and want to restore it. It is a sticky spot. How do we get tuition to drop at the same time we cut government funding?

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I don't think Shedlock or (hopefully) anyone making these arguments is arguing for an immediate shut down of all such funding.  That would, as you noted, leave many people in a difficult position after being promised that they would be given funds. 

I'd suggest you take a look at Ron Paul's article in the latest issue of the YAL magazine, which explains in general how this sort of assistance program should immediately stop growing and then be gradually drawn down in a way which will not catch anyone by surprise but also effectively allow government to return to a more appropriate size.

Bonnie Kristian's picture