Student loans for higher education has become a very profitable racket. From Wolf Richter at wolfstreet.com:
The University-Corporate-Financial Complex is going to squeal.
OK, I’m going to wade into this debate. And I’m going to do it with my boots on.
The student loan fiasco – the pile of debt that has ballooned to $1.6 trillion – and what to do about it – particularly how much of that student debt to forgive at the expense of taxpayers – has now entered the list of presidential campaign promises.
These promises of student-loan forgiveness are efforts to buy votes at the expense of the rest of the taxpayers, whose money this is, on the principle that whoever proposes the biggest debt-forgiveness will get the most votes from those graduates and their parents.
I can’t blame them. It’s just too juicy a low-hanging fruit. If I were a politician running for office, I’d promise the same damn thing, and that’s why I’m not running for office.
But this $1.6 trillion is an asset on the government’s books. It was funded by tax receipts and debt that the government issued. If hypothetically, all students paid off their federal student loans today, the gross national debt would drop by 7%, from $22.5 trillion to $20.9 trillion.
Forgiving these student loans wipes out that asset, but the national debt that funded these student loans remains. That’s how that would work. There are no freebies, when it comes to debt.