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by The Leasing Group

I usually cringe when I read about Elizabeth Warren advising the Secretary of the Treasury, chairing a Presidential oversight committee or crafting legislation in the Senate.  As chief architect of the Consumer Financial Protection Board and its founding leader, she and the CFPB have harmed community banks, created mountains of bureaucratic red tape, hurt borrowers and done virtually nothing to protect consumers.

 

Now Warren is weighing in on the student loan problem.  On the surface, lowering interest rates and capping monthly payments sounds great.  No one, including me, wants graduates to be saddled with so much debt that they can’t start families, buy homes or create businesses.  But Warren’s proposals don’t address the root causes of this $1.2 trillion crisis.

 

The issue is directly linked to two very bad policies:

 

  1. Easy student access to credit without spending controls.  In other words, students are permitted to borrow for purposes beyond tuition, room and board.  Without controls, loans pay for night lives, smart phones, cars, sporting events and all sorts of non-educational endeavors.
  2. Little oversight of or limits to education cost increases.  Generally, public and private institutions alike do a poor job of controlling their costs.  They don’t have to as long as the government loan program will pay.  Additionally, “for-profits” schools routinely enrich themselves at student and tax payer expense receiving a disproportionately high number of loans coupled with high loan defaults.

 

Warren’s proposed solutions create more problems than they solve because they don’t address the real issues.  If we’re going to deal with our student debt problem, we must address the reasons for the problem, not simply lower payments on loans way too high in the first place.

 

 

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Popping the Student Loan Bubble