Government spending is out of control. It has been for some time as lawmakers continue “borrowing” for programs taxpayers cannot afford. The federal student loan program is one such endeavor. Originally proposed to “pay for itself,” a recent federal student loan report has revealed that this program is $300 billion over budget.
The Federal Direct Student Loan Program took effect in 1994. At the time, the Department of Education projected that the venture would provide $114 billion in federal government revenue. Some opposed this measure noting that the government is funded by taxpayers and shouldn’t be creating additional programs to make money off of student debt. It was likened to a college tax.
Well, the government did not end up meeting its revenue goals. In fact, their federal student loan program is costing taxpayers billions of dollars. The government has estimated that it has drained $197 billion from taxpayers. When considering the amount it was supposed to make, that’s a difference of $300 billion.
How could a program like this fail to such a degree? Many will blame the pandemic, but in truth, the federal student loan program was experiencing a crisis before the lockdowns and excessive mandates crippled an already troubled higher education system. In 2019, the Department of Education’s Office of Inspector General released a report which revealed that the whole endeavor was not being properly overseen. The companies hired to manage this trillion-dollar operation did not follow the proper protocols to ensure safe lending practices, and instead, executed predatory measures that piled unwarranted debt onto unsuspecting borrowers.
These findings dated back to 2017 and led to a drastic increase in student loan program defaults. The Student Borrow Protection Center reported on the fact that over a million American students defaulted on their loans in 2019. This was a 14% increase from 2018 when over a million more students previously defaulted on their federal student loans.
This is why student loan forgiveness programs have gained support. Too many young adults were led to believe that they had to go to college in order to succeed. Lenders working to award and distribute federal loans took advantage of the situation and encouraged borrowers to accept high-risk amounts, without warning.
The federal government failed to properly represent student loan programs. It failed to give students the information needed to make educated decisions. Then the pandemic struck and lawmakers in many states quickly hindered society’s ability to function properly. While student loan payments were paused, the debt continued to loom over the nation, and now that the economy has crashed into a recession American taxpayers are paying the price — whether they signed up for college loans or not.
For over a decade Dr. Ron Paul has been warning economists, fellow politicians, and the American people of the need to end federal student loan programs. The costs of running such a large operation have far outweighed the proposed revenue (that was never made) for years now. Despite the warnings and the reports, the very government that was supposed to properly oversee these loans is now forgiving some student loans.
Student loan forgiveness is another risky endeavor. It too will cost taxpayers, and so solving the student loan program crisis cannot be done easily. Unfortunately, the federal student loan program itself is still running. If Americans wish to cut down on this massive spending, they must first demand an end to all federal student loan programs. Once that is done, working to aid students who have been manipulated into crippling debt can find more support within their communities.