The Wall Street Journal reported today that the Obama Administration’s actions to allow student to defer repaying their debt has, wait for it, reduced the lenders’ willingness to make loans. You see, when banks make student loans, they expect them to be repaid, just like in the rest of the world, where we have to repay our home loans, car loans, and credit cards. But in Obama La-La Land, government fiat can make student loans more “affordable” by simply allowing the borrower to defer payments, or not pay them at all if their job doesn’t pay them enough. We should all be so lucky.
Alas, the Obama fantasy story does not have a happy ending. Now, the lenders can’t see the student loan debt they have on their books. For those in Rio Lindo, the next step will be for them to stop making the loans that they can’t be sure will be repaid.
Government controls of the free market do not work. Not in healthcare, not in education, and not in student loans.