Activist students are often protesting tuition hikes and demanding more government funding for their education.
This is frightening because it reveals how ignorant most students are about how the student loan system operates.
First, student loans drive up tuition. Peter Schiff explains this in detail here.
He asks, “What would happen if we immediately cancelled government-guaranteed student loans? Students couldn’t borrow money? Would that mean that they wouldn’t go to college and the colleges would have empty classrooms? Of course not! The colleges would immediately have to react to this drop in demand by slashing their costs and their overheads so that they could bring tuition down to a level where people could actually afford to go.”
Students are scrambling for and then gambling with government money to finance their post secondary instruction.
The cost to attend college or university is steadily increasing, and the interest rates on student loans are not as modest as they used to be.
Most students don’t know that interest starts accumulating on loans immediately upon graduation, even during the so-called “grace period.”
Adding to the problem, the government encourages debt by awarding bursaries to students who take out student loans and by promising loan forgiveness programs.
In the latest federal election, student loan forgiveness was a policy in the platforms of the Conservative, Liberal, and New Democratic parties.
Even the Wildrose Alliance, normally a fiscally hawkish party, has student loan forgiveness in their education policy these days.
The government student loan systems (provincially and federally) urgently need to be reformed, and progressively curtailed if not eliminated.
So much more can be said about the ramifications of student loan policy. But let me close this short post with this recent warning from Robert Kiyosaki:
“The coming crisis will not be the real estate bankruptcies.
The next debt crisis will be defaults on student loans.”