Student loans worthy of government protection

With America’s new financial reality, how do you pay for college? It’s a question that is probably only just beginning to haunt students, whether they’re a high school senior applying for their future or a current student wondering where the money for the next semester is going to come from.

Students are not exempt from the current financial crisis gripping the U.S., and it’s hitting students in one particularly tender spot: Student loans. While the federal government is still willing and able to give out money to those students who need it, the private loan industry has been hit hard by the same economic malaise that is currently affecting Wall Street.

According to the financial aid Web site Finaid.org, 37 lenders have stopped offering private loans and those that still do have tightened the credit requirements for applicants. Thousands of college students depend on loans to fund their education, and the drying up of the market likely means that future plans must be dramatically altered.

The U.S. government is aware of this plight and recently announced a plan to expand purchases of student loans. They hope to calm the fears of lenders — who typically finance the loans by selling bonds to private investors — that they won’t be able to find buyers for the loans’ bonds. The capital from the sales also would help fund additional loans.

The problem of lenders being unable to find buyers is one that has been around for a while now. Several lenders have already been forced to keep loans on their books for years with no buyers in sight.

Some would like to blame students who take out loans as the essential problem, arguing that they were the ones to put themselves in a position to be unable to afford college.

The problem with that thinking is simply that, in many cases, it would punish a student for the sins of the parents. Should teenagers watch their future disappear simply because their parents were unable to properly plan for their future? Not to mention the numerous parents who have watched their college funds disappear in the stock market downturn and falling housing prices.

If the country is to have a healthy future, it’s crucial that it has an educated workforce. If the student loan industry disappears, the U.S. will find itself with a massive amount of uneducated workers, all of which would be positioned to make far less money in the future than they would if they had a college diploma. That’s countless tax dollars left unclaimed, not to mention all the innovation and development left to other countries.

Perhaps colleges should step in and help. Rather than investing in the stock market, as MSU has done, maybe they should begin their own student loan program, to help those students struggling to keep up with the constant tuition increases.

The complexity of the problem means no one solution will be enough to fix the problem and that’s something the government should keep in mind, as it continues handing billions of dollars to various companies. But something must be done. Failing to shore up the industry will simply lead to ruin down the road.