Thursday, September 23, 2010

THE BARREL HAS NO BOTTOM, PART 1,543,929. I hate to make this Megan McArdle week, but she's been spectacularly awful lately. After her "How to Survive a Layoff" post -- an astonishingly condescending, EST-type exercise clearly meant to be enjoyed by other screw-the-poor types, not by actual jobless people, who probably feel bad enough without McArdle telling them what wasters they are -- she actually composed something called "Why Are The Rich So Rich?" that basically answered the question with Beats me, but it's definitely not because they have some unfair advantage!

Now she's onto school loans. Perhaps to compensate for his frequent logrolling, she quotes Ole Perfesser Glenn Reynolds to the effect that we just make people soft by letting them take subsidized loans to get into college. As anyone who actually walks this planet knows, people take on these ever-more-expensive loans and the years of debt that come with because they want to get jobs -- increasingly scarce jobs -- and live, if not better (who can expect that anymore?), then perhaps almost as good as their parents. But the Perfesser and McArdle treat this motivation like some kind of ridiculous presumption, as if a beggar had come to their door and asked for his tin cup to be filled with mocha latte.

Nonetheless McArdle does acknowledge that the poor students have been exploited -- by the schools, who have upped their tuitions to capture the increased loan money ("It's hardly surprising that colleges began to claim more and more of the surplus created by their college degree"). And of course by the dad-gum Gummint, which subsidizes the loans, thereby enabling the scam.

Guess who never gets mentioned in her post? The banks. Banks whose profits on college loans have exploded thanks to the recent boom market in private loans. From MSNBC:
Private loans reached a high of 23 percent of the student-loan market in 2008. The number has fallen since the credit markets seized up but will probably go up again. These, not federally guaranteed loans, are the ones implicated in the worst stories of student debt. It's not just undergraduate programs but graduate and especially professional schools where this has become a huge issue. That's why the American Bar Association, worried that excessive private loan debt is keeping students out of public-interest fields, has pushed for an increase in the (professional school) subsidized-loan limits.
Wonder how McArdle missed this piece of the puzzle.

My favorite sentence in the whole thing:
Who but a lunatic would loan money to an eighteen year old with no job and no credit record, in the hopes that they will graduate college and begin speedy repayment?
Too bad she wasn't around to say this when FDR was signing the GI Bill. It would have made history more interesting, and then we'd be slightly less likely to miss its lessons.


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