Last updated on June 28, 2020
History of Student Loans
A friend of mine has a sister my age.
She’s a cool, pretty, single, sober, smart and normal girl.
The only weird thing is she hasn’t had a job since she was 24 (we are both 34).
Recently I asked my friend: What does she do all day?
Ummm, she watches a lot of YouTube, I guess.
Does she have plans to do anything with her life?
She’s thinking about going to school for video editing. She’d be good at it, and there are lots of jobs apparently.
This annoyed me.
People think school is a turnkey solution. Just pay pay tuition, attend class, and POOF! you land a dream job and life is golden. This is not how the world works.
Why do people think this way?
Cultural Paradigms and the History of Student Loans
One reason people think this way is because we are told we are “set up for success” with a college degree.
This messaging is a cultural paradigm that benefits the economy and country as a whole, but hurts the individual.
Our society has several cultural paradigms. They are collective beliefs or theories about how something should be done or thought about. Cultural paradigms are different than personal paradigms because the purveyors of a cultural paradigm profit from its adoption.
For example, homeownership as a “sign of success” is a cultural paradigm. The truth is though, that most homeowners purchase a home using a 30-year mortgage (and don’t pay it off early). Products like the 30-year mortgage, retirement accounts and federal student loans benefit the economy as a whole, more than it does the individual.
So who benefits from the “college is the key to success” cultural paradigm?
Per usual, the answer is the government.
Related Reading: Homeownership is Overrated
The History of Student Loans
In 1958, the government wanted Americans to excel academically.
World War II was over and it was important to compete intellectually with Japan, Russia and Germany.
To help Americans enroll in school, the government launched a federal loans program that encouraged banks to issue student loans to young people.
Before this program existed, banks were hesitant to lend to students because they might not be able to pay back the loan. The government’s program eliminated this risk by guaranteeing to pay the bank back the full loan amount for any student that defaulted.
The program worked.
By 1986, student loan origination in America rose to $10 billion. More Americans than ever were graduating with 4 year degrees and the message that “you need a college degree to succeed” was further ingrained into our culture’s psyche.
But college tuition was reasonable in the 1980’s. The average cost for a four-year public school degree was $2,100 (using 2018 dollars) and students rarely borrowed more than a couple thousand bucks.
Skip forward to 2009.
The financial crisis had hit. To boost morale and keep Americans busy, President Obama passed legislation that allowed the government to lend money directly to students.
The government had cut the banks out of the student loan business.
According to a piece written in 2010 by the National Association of Scholars:
[Obama] wants the United States to have the highest percentage of college graduates in the world by 2020—a plan that would double the current number of students currently enrolled, from 18 million to 36 million.
Well he got want he wanted!
By 2018 the total student loan debt outstanding in America reached $1.2 trillion and student loan origination that year increased to $120 billion.
And by 2018 the average cost of a four-year public school degree rose to $10,300….
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College is Expensive and the History of Student Loans Explains Why
For the first time ever, thanks to Obama, US colleges and universities were paid tuition directly from the US government (via federal student loans).
What was the problem?
The problem is the legislation didn’t come with a single regulation. No tuition caps, no spending caps, no oversight whatsoever, the colleges could spend the money however they pleased.
If the government offered you trillions of dollars, you would spend as much as possible to absorb the free money. Why would a college be any different?
And we’ve seen this playbook before:
In the late 90’s and early 2000’s, the government mandated banks to issue more mortgages. Two government agencies, Fannie Mae and Freddie Mac, guaranteed all qualifying mortgages. The government would pay the bank for a mortgage even if the borrower defaulted. This resulted in banks issuing millions of mortgages to low income Americans, because the bank itself no longer carried the risk. The government, being incompetent, never analyzed the mortgages it purchased from the banks.
Same thing with colleges.
College and university presidents moved quick to absorb all the money coming from the federal loan program.
Brand new football stadiums, state-of-the-art facilities, million dollar salaries…the money was rolling in.
When the government wants to be socialist, it gives away free money. When it remembers America was built on capitalism, it refuses to regulate.
Related Reading: Why Are Liberals So Stupid?
The History of Student Loans and the Psychology of Debt
I’m one of the lucky ones whose parents who paid for my college.
That said, I never fully grasped (at the time) how lucky I was.
After graduating, I waited tables, traveled the world, volunteered, moved to different cities, chased dreams and learned how to fall down and pick myself up again. It took me about 4-5 years to grow up.
When I finally joined the corporate world, I realized my adventures were unique, and that they wouldn’t have been possible if I had graduated with debt. My peers had gone directly from the classroom to the cubicle.
What the fuck?
Don’t get me wrong, a job can provide invaluable experience and teach us a lot about life.
But how is a 20 year old kid supposed to appreciate that without perspective?
What is our government really doing to young people through the federal loans program?
By reinforcing the cultural paradigm that college is the “key to success,” and then making it beyond easy to borrow federal loans to go to school — the government is stripping young people of their freedom and stealing their dreams.
The government wants us all to be slaves to debt. First up is student loans — then credit cards and auto loans — then you’ll be “successful” and take out a 30-year mortgage.
You own the debt and the government owns you.
You awake yet?
And let’s be real, anyone who cares about you isn’t going to let you take out a $75,000 loan at age 18 to major in art.
Related Reading: What is Anarcho Capitalism?
The Government Is Not Your Friend.
Here is a snapshot of Americans’ debt:
Notice that the more debt we take on, the stronger the economy. This is the government’s agenda.
The national minimum wage, in year 2020 is $7.25. How is someone making $7.25 supposed to survive without debt?
And you think the government cares about you?
According Psychology Today:
When a person has $100,000 in student loans, they’re more likely to give into temptation and buy that designer watch or those expensive concert tickets. A few hundred dollars doesn’t make a difference to a debt that big.
The government makes getting into debt easy because people in debt consume more and that is good for the economy. They want us to stay in soul-sucking jobs because we are in too much debt to live creatively.
The government is crushing your spirit. And why?
Because deflated, depressed people don’t fight authority.
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The History of Student Loans Determines The Future
Obama’s direct federal loans program cut out the “evil” middlemen (banks) to give more young people access to capital.
The real motive, however, was money.
Why let the banks profit off student debt when the US government can?
According to an article from 2013 in USA Today:
The U.S. government projects to make more money off student loans this fiscal year than ExxonMobil, Apple, J.P. Morgan Chase or Fannie Mae made on their respective businesses last year.
How does it feel to know the government never had the education of the student in mind?
The problem is Obama’s plan backfired.
The government never assessed the quality of the student borrower, other household debt, the school being attended, the student’s major, credit score, etc.
So the default rate on federal student loans skyrocketed. And instead of profiting from student loans, the federal loan program now costs taxpayers $307 billion a year.
What is the future of student loans?
For starters, the future needs to include a shift in the narrative. Every human life comes with the objective of connecting with his soul and expressing his soul’s authentic desires. In doing so, that human is sharing their gift with the world and contributing to the healing of our collective soul.
No one is going to tell you this in college. And no government official is going to support this venture.
The cultural paradigm that a college degree is the “key to success” is a government-sponsored lie.
The future of student loans needs to start with the government getting out of the way. Let the banks assess the risk of the borrower, complete due diligence, and do their job. And perhaps the government can do its job to regulate corrupt industries instead of taking them over to expand the corruption for itself.