Cutting government loans as a solution to the rising tuition and college debt?

The college debt bubble has gotten everyone a little mad and crazed up. So if the government, the largest lender of college loans were to exit college loans what would happen?

This might cause less people to attend college and make paying for college harder on the ones continuing to attend. This would lead to some compounding effects such as; less people enrolling into 4-year universities;  an increase in enrollment of technical/trade schooling,; lowered tuition prices … which doesn’t sound too bad considering the 1.2 trillion dollars of college loan debt and the $30,000 average debt of college graduates.

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Making the decision to go to trade school seems easier now considering that economists describe nurses and teachers as having the most economically sound and guaranteed post-secondary educational investment.

Without government loans I would not be attending a 4-year university. If everyone in my situation were to drop out of school, there would be a severe decline in number of students and future enrollment. With less people attending 4-year universities, schools would not make enough profit to finance their institutional payments (paying teachers, programs, faculty ). This could be a big problem for schools if all of a sudden they were only making half of what they made last year. Even wealthy schools like USC could be hurt considering that if they wanted to keep me and everyone in my boat, they would have to loan each of us  $40,000 a year.

Even if USC had the amount of capital to fund every student’s tuition, it wouldn’t happen without USC programs, teachers and its financial sector taking a hard hit. So maybe USC might give higher grants or just as equally effective, lower their tuition price so to retain as much students as possible. If this were to happen we could  all go back to class with a smile while USC survives the event with a cut in their tuition-based income.

But, what would it mean for students that are entering college next year? Well, there will be less students making the decision to pursue private education over a cheaper tuition. Public schools would get overcrowded and the Department of Education would have to provide greater funds. Which sort of sounds OK. Considering that in 2013 alone the Department of Education made $41 billion dollars from college loans which is enough to pay for 3 million students to attend the public schools that have an average public university tuition price of $13,000. Regardless of that rather pointless hypothetical, there is still no doubt that this would cause private schools like USC to lower their tuition. Then UCLA would have to lower their tuition in order to remain equally as financially attractive as before.

… which might get me thinking about going to school again.

If such an event were to occur, an economist might describe this as a free(er)-market of institutions that are dealing with a shorter number of demand (lower number of enrolled students) and therefore dealing with an abundance of universities that are competing to be the cheaper university. Of course, rankings and brand name universities would allow certain schools to retain some leverage.

Did I just solve the answer to college debt? Nope, probably just my debt. But damn when you are facing $75,000 in debt by graduation you’ll be looking at any solution as the right solution.

… Which brings me to my next thought.

What if the government were to bail out all of our debt just like they did for Wall St.? I should end it here but NO.

The department of education would still have their $41 billion profit from 2013 and Sallie Mae would still have its $900 million. No student would be in debt and could begin to afford buying houses. The public would spend more allowing more circulation of money. This would raise interest rates, but that would make going to college more risky. Maybe colleges might lower tuition to even out the risk. Or…

 

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