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Monday, November 25, 2013

Student Loans

If you still need further evidence that government interference in a formerly private market is bad for consumers, let's take a look at student loans.

In 2007, student loan rates for many kinds of students including med school and law school jumped from around 2% to 6.8%. It's gone higher since. That's a big difference - going from approximately inflation  rates (or less) to a loan that can full out double in size after ten years or so of interest. The next year government took over student loans, guaranteeing that student loan rates would stay high, even though in the private market we would most likely have seen those rates come crashing back down with the passing of the financial crisis and adjustment of other loan rates such as mortgages.

Therefore it is absolutely no surprise to me to read this Drudge headline today:
Federal government books $41.3 billion in profits on student loans...
The $41.3-billion profit for the 2013 fiscal year is down $3.6 billion from the previous year but still enough to pay for one year of tuition at the University of Michigan for 2,955,426 Michigan residents.
It’s a higher profit level than all but two companies in the world: Exxon Mobil cleared $44.9 billion in 2012, and Apple cleared $41.7 billion.
And you really want government in health care?

On the one hand, it's actually nice to see that the government can turn a profit somewhere (as opposed to the Post Office, say, or Obamacare itself) but on the other hand they don't use this profit towards the deficit. They won't use it to lower the budget for whatever department manages student loans.

You see, federal budgets increase annually by as much as 10% regardless of federal revenue, need, or even sense. This is precisely why we have such a big bloated government - they have a hard time spending all the money they get each year, while we struggle to pay for it all, not that taxpayers even begin to cover federal spending that has increased such that trillion dollar deficits have become the norm. Sad. And scary.

Bigger government is definitely not the solution to big government.

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