Profits and Loss


Each of the half-dozen or so times I’ve reread “Federal Student-Loan Sharks,” William Quirk’s article in this issue, I’ve gotten angry all over again. He demonstrates just how systematically the federal government exploits college and graduate students for its own unseemly profit, and how eagerly it works to create profits for banks and the utterly out-of-control for-profit colleges. Forgive me for repeating the word profit, but that is the heart of the matter, and concepts such as educating the citizenry or preparing young people for a competitive and uncertain future are only secondary. A new bill signed by President Obama this summer, which the press hailed for reducing the cost of student loans, actually increases the rates. This means more money flowing out of the pockets of students or their parents and into the coffers of the U.S. Treasury, which already makes 36 cents on every dollar it lends to undergrads, and 64 cents on each dollar lent to graduate students. If a borrower falls behind on payments, the penalties are severe, and the federal government paid $1.4 billion in a recent year to collection agencies to hound those in arrears. Unlike other loans, student loans can only rarely be absolved through bankruptcy. They are forever.

Quirk, who teaches tax law, also shows how the IRS goes out of its way to give those seeking an education a bad deal. But the feds are not just exploiting students on their own behalf; they are—big surprise—abetting private banks, which are making risk-free high-profit loans, and also underwriting for-profit colleges, most of which are owned by large corporations or private equity firms.

But traditional nonprofit colleges and universities are also mining the bonanza of student-loan debt—the trillion dollars in unpaid loans is only a fraction of what colleges have been able to charge students, as tuition rates have risen even faster than the cost of medical care. As Quirk writes, the numbers predict a bad ending unless something is done.

Quirk invokes Jefferson’s vision of a government that promotes the education of its citizens, and Jefferson could equally appear in Lincoln Caplan’s compelling cover story, “Leaks and Consequences.” Jefferson’s dramatic (and dangerous) opposition to the Alien and Sedition Acts might be interpolated to suggest some sympathy for Edward Snowden if not Bradley Manning, but there is little doubt that the third president would abhor the federal government’s evolving view that journalists who publish classified materials are guilty of criminal acts, or even espionage. Caplan takes us through the history and shows us what is at stake. Ever since the Nixon years, all three branches of government have chipped away at First Amendment press freedom, which Jefferson always considered central to the survival of the republic.

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Robert Wilson's most recent book is Barnum: An American Life. He was the editor of the Scholar for more than 17 years.


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