Forcing Our Youth Into Servitude

Rule for Radicals, in which Obama & his cronies know word for word, cover to cover, states very clearly that the way to radical change is through the youth, so what better way could there be for them to implement their plan than to ‘require’ servitude for student loans.

via HotAir via American Issues Project:

With all of the attention paid to the health-care overhaul plans of the Obama administration and the cap-and-trade bill coming next from Congress, political observers can be excused if they believe that all of the government interventions and takeovers have been addressed.  However, statism rarely sleeps, and in this case the statists have become adept at multitasking.  The House has already passed a bill that will nationalize the student loan industry, and the Senate Committee on Health, Education, Labor, and Pensions now has it under consideration.

This bill proposes two major interventions from the federal government.   The first is rather straightforward: it proposes to loan money directly to students and eliminate private-sector lending.  Section 201’s summary makes this quite succinct:

(Sec. 201) Prohibits any new loans from being made or insured under the part B Federal Family Education Loan (FFEL) program after June 2010.

Decades ago, the federal government decided to encourage students to attend colleges and universities by subsidizing and guaranteeing loans for tuition and other expenses.  That encouraged banks to lend to what normally would be a high-risk constitiuency — teenagers without jobs.  That allowed many more students to access higher education, and lenders had little risk in the transaction – and for a while, everyone was happy.

However, that large increase in demand created pressure on prices, too.  As more students flooded into colleges and universities, tuitions increased as supply strained to meet the demand.  The size of loans had to get larger, which meant more risk transferred to the federal government as it continued to encourage lenders by making the programs nearly fail-safe.  The scope of lending also increased under federal pressure and incentives, so that more loans failed and Washington spent more on its guarantees.

If this sounds like a familiar pattern, well, it should.  The same mechanisms that inflated the housing bubble were in play in the student loan market. (snip)

That plan has one very large problem, as Rep. John Kline (R-MN) explained to me in an interview this week.  The private-sector lenders actually have the money to lend.  The government, on the other hand, had to borrow $1.4 trillion in order to fund itself in FY2009, and the deficit projection for FY2010 is another $1.4 trillion.  Even if one was inclined to believe that the government could run a loan program better than the private-sector lenders – which, given the debacles of the TARP program, among others, is highly suspect – the money just doesn’t exist. (snip)

continue reading here             read HR 3221 here

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