This article is written to find the viable solutions for the US student loans, through scientific and honest analyses based on past publicly available data, published facts and information by other parties such as the Brookings Institute (previously has denied that Uncle Sam is facing a student loans problem) or Wall Street publications. The purpose of writing this article is not against anyone, any group in the society, or any company, but to remind the readers that the final outcome of stretching too far a rubber band will, at one point, to break it. About a week ago, the Association has written an article on the wealth transfers designed by tampering or meddling the purpose of the (NDEA) student loans. Indeed, an article has shown us all, how one company made their way to profit out-of the misery of the students. Needless to say, that this company is a public entity. That means, the investors who own its stock are also enjoy such a profit. Perhaps, this is a clear example that shows why many people may love to see the education cost keeps going up. The higher the price tag, the more people will take loans, which, in turn, will help to fulfil their interest such as making profit.
It is truly amazing to see how the economic system has developed since Adam Smith wrote the Theory of Moral Sentiments. This loan servicing company own about $25 billion student loans, and it collects interest out of those loans. Suppose the interest rate per year is 1%; then it potentially will make $250 millions per year. We have never seen the interest rate charged to any loan is 1%. If, 5% then it will make $1.25 billion interest revenue per year. According to the article, in 2016 this company net profit was $200 million. In the future, however, the company said, it is going to manage $397 billion loans with 13.4 million borrowers. With 5% interest rate, each borrower will transfer about $1,500.00 per year from their wealth to the company for paying the interest only.
The report above presented data, which again confirm the hypothesis that the student loans (NDEA) which first created for a noble goal has become the means to make the borrowers worse-off. Sure, one may argue that the society also receives the benefit through owning the company’s stock. The question is, which segment of the society enjoys such a benefit? How many of the working class has extra money which they can invest in the stock market, while most of them live from paycheck-to-paycheck. Little left for buying any kind of company stocks.
How many of the readers are still thinking that taking student loans nowadays is such a great ideas?