Thanks for the thoughtful response — I’m glad you decided to look into what I said before jumping the gun. :-]

The student loan issue varies by country, so it is an issue that requires quite a bit of examination (both current and historical). Like you said, Congress eliminated the federal guarantee for privately issued student loans in April 2010. Honestly, I wish I had been paying attention to this issue back then because it would have been an easy way to make a killing in the stock market. Consider Corinthian Colleges Inc, which is one of the largest for-profit higher education institutions in the US: http://www.google.com/finance?q=corinthian+college

And, just take a look at what happens to the stock price after April 2010. One thing worth looking into is how students are paying for these for-profit colleges now. To my knowledge, students are able to receive federal loans to attend these for-profit colleges, which means the default risk has been transferred to the federal government (granted, the default risk always rested with them since they guaranteed the loans, but yeah). If one were able to find a for-profit college that was providing its own students with loans, it would probably be good to delve in the books a bit because they probably have quite a few bad loans that will materialize on their books. Just an idea I suppose…

And yes, I can recall when I attended the University of Texas at Austin that I obtained my loan through Bank of America. That was in 2007. But, in 2010, I began to obtain my loans through the Department of Education instead.

If you aren’t aware, the interest rates for federal loans have also been reduced from 6.8% to 3.4% in the past several years. To be honest, I don’t think there was anything wrong with the law that was passed. In the end, the default risk rests with the government anyways (since they guaranteed the loans), so why allow the banks to collect these profits if the government is going to have to pay out in the end anyways? It’s better for the government to take the profits as well, at least when they have to bail the program out, they will have made some money off of it. There’s a good chance they will end up losing money though.

And yes, it did not solve the underlying problem because Congress essentially did not change anything. All they did was transfer the profits from the bank to the government. The default risk always rested with the government.

As for the root cause of why education is so expensive, I tend to believe it is because it is so highly subsidized, but I’m not going to bother writing more as to why I think that is.

Also overlooked is the @ $1800pa HELP rebates/forgiveness for teachers and nurses (all you need to do is work as a nurse or teacher for 2 weeks in the year to qualify).

Another factor in the rise is the “melbourne” model which increases the cost of doing a professional degree by almost mandating a masters as the only “useful” profesional degree — I also now see 1 year GradDips deprecated in favour of masters degrees.

Sadly what has happened is that in my field (teaching) the unis in all are pumping out many times the primary and secondary PE and art & music teachers than can be reasonably employed. The last I heard from a lecturer who taught me & is now in Qld) is even if every primary teacher over 50 left tomorrow in Queensland and had to be replaced there would still be some 1500 graduates excess to need, and that is even before the class of 2012 graduates.

This means that there will be many graduates who will easily reach the threshold working in say, retail, who will be repaying a degree they receive no “considerable personal private benefit” (a quote form Amanda Vanstone when interviewed on HECs on tv many years ago) from.

Also overlooked is the fact that the loan is repaid through the taxation system ie as my income increased the repayment has also increased (actually swallowing up half of of my 2.5% increase)

If this was a 4 corners style article, then the finer details would be discussed from various perspectives. Today tonight takes snippets of information and massages them into a story, often creating false implications to feed the sensation starved audience.

Create a society of debt-slaves and people will rationalize away any– and every damn thing.”

Correct.

And that (slavery instead of freedom) is just another reason for a debt jubilee/reduction/elimination. It also points up the superiority of a mandated option for a Dividend paradigm for most if not all of consumer finance.

Consumer debt and an enforced loan paradigm actually IS, emphasis IS a black and white, freedom versus slavery issue. The only question is what is the appropriate balance of BOTH loan AND dividend.

It truly is a BOTH/AND universe. So lets wake up to that fact and craft our systems accordingly.

You’re welcome.

Create a society of debt-slaves and people will rationalize away any– and every damn thing.

Where is the leadership within the professional classes that must take responsibility by finally declaring that this insanity end?

I was preparing to blast your comment with both barrels for its factual inacuracy.

But upon doing a little bit more research I discovered that, due to a change in U.S. Federal law in April, 2010, your comment appears to be quite accurate. I need to get up to speed on this issue!

Wikipedia gives a short blip on the background of student financial aid in the United States. As Wikipedia states,

As of April 2010, Congress voted to eliminate the Federal Family Education Loan Program (FFELP) which had allowed private lenders to make student loans guaranteed by the federal government.

http://en.wikipedia.org/wiki/Student_financial_aid_in_the_United_States

Before that time private lenders did originate the majority of student loans in the United States.

Readers might find the political sparring over the change in law interesting. It was a hard fought battle, with the banks lobbying fiercly against the change:

Four months ago, it appeared all but certain that the White House and Democrats in Congress would succeed in overhauling the student loan business and ending government subsidies to private lenders.

President Obama called the idea a “no-brainer” last fall, predicting it would take billions of dollars from the profits of private lenders and give it directly to students, and many colleges were already moving to get loans directly from the federal government in anticipation of the next move by Congress.

But an aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business.

[.…]

The money that would be saved by cutting out the private-industry middlemen — about $80 billion over the next decade, according to a Congressional Budget Office analysis — could instead go toward expanding direct Pell Grants to students, establishing $10,000 tax credits for families with loans, and forgiving debts eventually for students who go into public service, administration officials say.

http://www.nytimes.com/2010/02/05/us/politics/05loans.html?hp

So I would say your conclusions are correct. Private lenders were all but eliminated from the student loan loop in 2010, but this did not solve the underlying problem, which is that education costs are growing much faster than wages and salaries.

I think the second part of your conclusion, the causality that education costs are being inflated by easy credit and a debt bubble (a conclusion which seems very much in agreement with Lawson), is not as clearly demonstrated, but I nevertheless agree.