"What he couldn’t know was that this drive to increase attendance would grossly enrich banks and universities while tossing students into life-altering debt, creating what Josh Mitchell, in his history of the student-loan crisis, “The Debt Trap,” calls a “monster.”
Mitchell’s monster is the student-lending industry, including the banks, private corporations and government agencies that arrange the financing, along with the colleges that take the money. Today, we see the trail of destruction this monster has left. A million borrowers owe more than $200,000 each in student loans, and the total amount of student debt held by the federal government, $1.6 trillion, is about equal to the gross domestic product of Canada. While university endowments swell to billions, thousands default every day.
To lend without appearing to raise the government’s debt, Congress created Sallie Mae, a government-sponsored corporation that facilitated the process. Bowing to pressure from lobbyists, Congress agreed to cover 100 percent of defaults on student loans made by Sallie Mae, guaranteeing profits for Sallie Mae and its bank partners. Unfortunately, Congress neglected to enact any oversight of the lending process. Sallie Mae had no skin in the game and gave out loans to almost anyone with a pulse. College admissions exploded and universities jacked up their tuition in response. “The student loan program,” Mitchell writes, “is the quintessential form of crony capitalism.”
Today, universities are the third-largest source of lobbyists in Washington and, with others, they have a vested interest in keeping the easy money flowing. Students can still get approved for huge loans without so much as a credit check. Mitchell, never one to mince words, declares this to be “predatory lending” on par with the subprime mortgage boom that caused the 2008 crash."
In Lithuania, the efforts of conservatives and liberals have created exactly the same disastrous system of student loans.
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