Further Socializing the Cost of Education

Socialized Costs – Privatized Benefits – The Modus Operandi of the State

President Obama, by executive order, announced “reforms” to the federal student loan debt repayment program.  Of course his words apply to federal student loans directly, but also affect other loans and loan policies (through regulation and pressure tactics).  Isn’t that Barack Obama a nice guy?  He “really cares” about the people of this country.  What a nice thing for a student who is heavily indebted.  This is very helpful to those who have “invested in their own education”.  These are just a few of the reactions heard regarding the president’s changes made to the federal student loan program on Monday.

The American people continue to take on the financial burden created by others with barely an objection.  This is in part a result of most commenters on the media (politicians seeking reelection and pundits seeking more opportunities to speak and greater access to the state) who largely speak of the benefits of these policy changes to indebted students – not of the costs to the taxpayer.  So the public is mislead.

Let’s shed some light on what is really going on here.  To place this executive order in political context, the president may be attempting to deflect criticism from the Bowe Bergdahl prisoner exchange ordeal; which may have been an attempt to divert attention from the Veterans’s Administration fiasco which is a result of continuing an unjust war…  Not to mention the favor Obama gains from those who got the loan relief.  I apologize, for a fleeting moment I had the thought that politics may play a role in this, but I digress…

The citizenry must understand that the organization of the state has massive authority over it.  By signing a document and without any other approval, the president has determined that those who explicitly and contractually obligated themselves to debt in exchange for “an education” no longer have to fully repay that debt according to the terms to which they agreed.  Terms of such contracts with the state can be changed unilaterally, by the state only, of course.  Further people who had not obligated themselves to such debt are now obligated to it and with without agreement.  The state indeed has vast authority over the citizenry – an authority to which freedom supporters object.  But there are more consequences to the action taken by the president.

Students, knowing that they will not have to fully repay their loans will be incentivized to borrow more.  Why wouldn’t they?  And as a result, there will be more money available to pay for college education.  And likely the cost of education will rise as a segment of students (those who take on loans) will be willing to pay more (as they won’t have to pay it all back).  More people will likely take loans, therefore increasing the total number of students (demand).  The public universities and colleges will clamor for more federal, state and local dollars as more students are drawn to the perceived lower cost (even as tuition rates rise).

The politicians will support their case for more higher education dollars on the basis that all of society benefits from a better educated populace.  This is in part how the masses are duped into bearing the cost of “public programs”.  Even the argument of benefit does not obligate another to pay.  Suppose you enjoy the flowers I plant within eye shot of passing by;  should you be obligated to pay for them?  In the case of contemplating higher education, only a prospective student can evaluate the cost/benefit analysis with validity.  Only he who bears all of the costs (direct and opportunity) can justly weigh them against the benefit.

This is simply a case of socializing costs (which are relatively small to each tax payer) with concentrated benefits to a few (the students who took out these types of loans).

In a private law society no such mechanism would exist capable of “legally” taking from one person to provide goods or services to another.  Such coerced exchanges would be subject to sanction.  Only voluntary exchanges (where both parties to such an exchange would benefit – otherwise the exchange would not take place) would be undertaken.  This is largely what happens every time you purchase a product or service from a private entity.  If you want more people to attend institutions of higher learning, encourage them to do so; even offer them a loan yourself, even at a reduced rates, or outright offer to pay some or all of their tuition costs using your own resources.  This is a virtuous act.  Such actions become immoral, however, when one makes these offers legally binding on another who has not provided explicit agreement to do so.

In a free society, students seeking a higher education would have the incentive to economize their educational needs.  They would have the incentive to tightly control all of their costs as they alone would bear the burden of repayment measuring this burden against the advantage of gaining a diploma.  And when the individual improves efficiency, the whole of society benefits.  A free society with free markets – a society that does not engage in systematic aggression – benefits the individual and all of society.  This lies in stark contrast with the statist society that benefits the few, the favored, the elite at the expense of the many.



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