-- Posted Monday, 4 June 2012 | | Disqus

Although we have come to expect every program created, touched or tweaked by the fine hand of government to eventually bog down in scandal, waste and bureaucratic inertia, the Obama administration has outdone itself with the student loan program. Recently it came to light that this trillion-dollar boondoggle is producing more and more borrowers who fail to graduate. Not only are they deeply in hock when they leave, they also lack the college degree that might enable them to land the jobs needed to pay off their loans. Fully 30% are dropping out these days, compared to less than 25% a decade ago, according to think tank Education Sector. Even worse news for taxpayers is that dropouts are far more likely to default on their loans, falling behind at four times the rate of graduates.

Over the years, the Federal Government has become increasingly immersed in the student loan program, slowly pushing private lenders out of the picture. Loan rates are now set by politicians who in an election year have been tripping over themselves in their eagerness to pander to students and their financially strapped parents. Still worse is that Obama has promised to loosen the terms of repayment to the vanishing point, and to forgive debt so generously as to all but encourage borrowers to skip out on their loans. There is also an election-year-stimulus factor at work, since few conduits for pushing money into the economy are as efficient as those that funnel cash to the “customers” of colleges and universities. The schools have responded as we might have expected, adding country-club amenities for students while ignoring dramatic shifts in the job market that have made the humanities degrees they churn out all but worthless. The schools have also worked diligently to weaken for-profit competitors such as University of Phoenix, siccing accreditors on them whenever possible and ratcheting up the snob factor.

A Bust Lies Ahead

Meanwhile, the huge federal subsidies to colleges and universities continue to mount as the “clients” of these institutions sink deeper into debt. Because this cannot continue indefinitely, it is predictable that a bust lies ahead, presumably tainted by more than just a mere whiff of scandal. The good news is that for-profit colleges that actually teach skills that students can use are about to enjoy a resurgence, even as the heavily politicized humanities departments of leading universities receive their fair share of blame for turning out students ill-equipped to enter the real world.

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indication of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2011, Rick Ackerman. All Rights Reserved.www.rickackerman.com

-- Posted Monday, 4 June 2012 | Digg This Article | Source: GoldSeek.com

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