People like free stuff

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Article Highlights

  • How should students prepare for changing student loan rates? Borrow responsibly.

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  • Warren’s proposal appeals to students because it disguises enormous public subsidies in the nomenclature of “loans.”

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  • What's up with the student loan bonanza? @Rickhess99 weighs in.

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Editor's Note: This piece is part of a debate on the National Journal's Education Experts Blog.

I don’t think there’s much mystery here. People like free stuff—especially when a] they’re told they’re entitled to it, b] it’s thought to be good for both the individual and the community, c] it’s described as a “loan” and not a “handout”, and d] it’s paid for by just sticking the tab on the national credit card. Warren’s proposal appeals to students because it disguises enormous public subsidies in the nomenclature of “loans.” The bonus is that here figures offer up a surface plausibility to those who don’t understand monetary policy or why it’d be insane for the feds to commit to loaning money out at the Federal Reserve’s current rate.

Subsidized, capped variable rates can be readily justified because they reflect a sensible shared burden between taxpayers and borrowers. Students can prepare themselves for changes by doing what all borrowers ought to do anyway—borrow responsibly, keep an eye on their total debt burden, and know the terms on the loans they choose to take.

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About the Author

 

Frederick M.
Hess

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