“A billion here, a billion there, and pretty soon you’re talking real money,” Illinois Senator Everett Dirksen said many years ago. With the passage of time and inflation, we might need to update the quote to “a hundred billion here, a hundred billion there…” But even by the debased standards of 2020, the $435 billion that the federal government likely will have to write off as bad student loan debt amounts to real money.
The losses projected by the most authoritative study yet, reports the Wall Street Journal, are far steeper than prior government forecasts. Last year the Congressional Budget Office that the government would have to write off only $31.5 billion.
The problem has long been evident. “We make no attempt to evaluate the quality of the borrower, the ability to repay, the effectiveness of the loans,” said Douglas Holtz-Eakin, a former CBO head who now heads the American Action Forum. Not surprisingly, borrowers with subprime credit scores are among the most likely to default. As with all government excesses, taxpayers will be stuck with the tab — unless the government just monetizes the bad debt and accelerates the nation’s headlong rush to Boomergeddon, the society-crushing collapse of federal finances when lenders finally conclude they will never be repaid.
Sooner or later there will be a reckoning for America’s — and Virginia’s — system of higher education. Even a nation as profligate as the United States — estimated 2020 budget deficit this year, $3.7 trillion, national debt $27 trillion — has to staunch the losses. The nation cannot afford to continue shoveling money into the abyss. Any meaningful reform, however, would be traumatic for the many higher-ed institutions whose business models are predicated on indiscriminate lending to students. Continue reading