Tags: Student | loan | program | scam

WSJ Editorial: Government Student Loan Program a 'Scam'

Thursday, 04 Jul 2013 02:54 PM

By Dan Weil

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A new report from the Congressional Budget Office (CBO) shows that the federal government's student-loan program is a "scam," a Wall Street Journal editorial states.

"If you think the federal student-loan program looks like a bad deal for taxpayers, imagine how it would look with honest accounting," Journal editors write.

"And now you don't need to imagine thanks to a new [CBO] report that's receiving far too little attention. Turns out that the official 'savings' for taxpayers of $184 billion over the next decade really add up to $95 billion in losses."

Video: Economist Predicts 'Unthinkable' for 2013 

The "scam" is that Congress has enabled a huge subsidy for universities while claiming that student loans create huge tax savings, the editorial says. It can make that claim because a 1990 law "requires a deliberate under-counting of the cost of defaults," the editorial says.

"To its credit, the Congressional Budget Office has noted on various occasions that while the law forces it to use this Beltway math, CBO knows it's not accurate under fair-value accounting."

The new report analyzes the costs of student loans to be issued over the next 10 years and puts the under-counting by $279 billion.

On Monday, the interest rate for many student loans doubled, and experts say students' heavy
loan burdens will hold them back as adults.

"You could have generations that never get in the economic mainstream," Ted Beck, president of the National Endowment for Financial Education told USA Today. "We could have a lot of people who just never really come anywhere near their potential."

Video:
Economist Predicts 'Unthinkable' for 2013 


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