The Case Against H.R. 1330 – The Student Loan Fairness Act

Michael Lux Blog, News 7 Comments

The arguments against the new legislation proposed by Karen Bass (D-California) center around two main themes.  The first argument is that this is the government sticking its nose where it doesn’t belong, and financing another bailout that the country can’t afford.  The second argument is that Student Loan Fairness Act is merely an expensive band aid that doesn’t fix the problem of the high cost of college education.

(Our previous article on The Student Loan Fairness Act Basics)
(Also check out The Case For The Student loan Fairness Act)

Our Country Cannot Afford H.R. 1330

One of the key components of The Student loan Fairness Act is that it limits the interest rates on private student loans and that it provides the opportunity for people to pay off their private loans with Federal Loans.  From a legal standpoint, this is the government modifying the terms of a contract agreed upon by two private parties.  Imagine if you sold a car to one of your friends and then the Federal Government said, “your friend cant afford the car you sold him, here is some of the money you planned on getting, but not all of it, by law your friend owns the car and owes you nothing.”  This sort of activity sets a dangerous precedent and moves us one step closer to a Nanny State.

Not only is the government sticking its nose where it doesn’t belong, but we cannot afford this legislation.  Right now Americans owe more in student loan debt than they do on credit card debt.  Upon passage of the Student Loan Fairness Act, billions of dollars owed to private lenders would be eligible to become federal government loans.  Given the generous forgiveness terms, much of the debt would never be paid off.  In a way, this legislation is not much different than a politician saying, “Vote For Me, and I’ll help you pay off your credit cards!”

The fact is that our country spends far more than it brings in each year.  This legislation is simply an expenditure that we cannot afford.

The Student Loan Fairness Act doesn’t solve the problem

The root problem with post-secondary education in this country isn’t that people have too many student loans (though it is a major problem), the root problem is that college costs way too much.

Cost of College vs. Inflation

Cost of College vs. Inflation

The Student Loan Fairness Act does not fix this problem.  Today, millions of college students go to college because they feel it is a necessary step in life.  They take out massive loans, because it is necessary to pay for college.  Only when they graduate do they realize how expensive their education truly was.  Colleges and Universities are making a fortune, and its getting so expensive that it is nearly impossible to attend without student loans.

If the legislation proposed by Karen Bass were to become law, colleges would have no incentive to reign in college costs.  In fact, they could keep increasing them.  Students wouldn’t complain because most of them would never pay back the full cost of their education, the university makes a handsome profit, and taxpayers are left footing the bill.

Finally, this legislation fails to address the lack of consumer responsibility that plagues the United States.  Repayment of Student Loans is something that each and every borrower agreed to do.  They signed contracts that explained what was required of them.  If the student loan bubble bursts as feared by some economists, it will be because people did not take the steps necessary to make sure they could pay back the loans.  Just like the mortgage crisis, this is another problem caused by people not planning ahead and relying on the government to bail them out.  This is not the type of behavior our taxpayers can afford.