In response to an FT article by Barney Jopson and Sam Fleming on 28th February 2016, entitled 'US student debt: Lessons to last a lifetime'
Student loans are an example of Washington pork barrel politics at its most predictable. The proliferation of courses, the erosion of standards and the 'marketing' that the article refers to are an example of what happens when the federal government throws money at something.
In this case the money went into creating and propping up zombie colleges and courses, which would not have been offered in an unrigged market. The prices went up, the standards went down, the cronies in the 'education business' got richer, and the poor sucker at the end of the supply chain got a raw deal - in this case students who wound up with a sub-standard education and a large debt. Meanwhile aggregate demand went up and the fools who think debt is the same thing as wealth patted themselves on the back.
Of course, this is not true in all cases - there are many good courses, which may become even better when they are not lost in a sea of rubbish. This is a case of 'if the mortar board fits, then wear it'
The other issue, which is rarely mentioned by the media, is that the last time there was a Clinton in the White House, student debt was exempted from bankruptcy. This was a bone thrown to the banks to protect their interests in the event of it going belly-up.
Now of course, Mrs. Clinton will spring forward with a solution, as will every other super-hero politician, anxious for an opportunity to wear his or her underpants outside their trousers. What might it involve? Here's a good 'tooth fairy solution' they may well come up with:
The Fed monetises the debt, the banks get paid, the students heave a sigh of relief and celebrate by running up some fresh debt. We get the first case of helicopter money and hey presto - the God of Aggregate Demand is temporarily appeased. The government will pretend that they've solved the problem, when in fact they will have merely applied a fresh coat of paint to a can they created over a decade ago, in the hope that people won't recognise it's the same can...and thus they may continue to kick it down the road for another few years.
In case anyone thinks I am singling out the Democrats - the Republicans tend to offer their pork to the 'defence' industry, and both parties feather the nests of Wall Street - the choice is 'Guns and Butter' or 'Butter and Guns'...(Banks come as standard on both menus).
Finally, if the seemingly bewildered 'establishment elites' are still confused as to why voters are abandoning them in droves and voting for previously unimaginable 'populists' like Donald Trump and Bernie Sanders, this is one of the myriad reasons why...which if they had an ounce of sense, they would have figured out by now. In short:
Because you create unfunded 'schemes' (AKA bribes) to get elected, make sure your 'mates' get rewarded in the process, screw up the implementation, protect your 'mates' when it goes belly-up, transfer the bill to the tax-payer, and then bound back onto the stage with another 'solution'...Go home.