This story was written by Sean Lutzmann, The BG News
Your name doesn't have to be Fannie Mae or Freddie Mac for you to be concerned about the recent economic news.
Although it may seem that the economic collapse that we are hearing about will not have much of a direct impact on college students as much as it is effecting the shareholders of recently bankrupted companies like Lehman Brothers and AIG, there will most definitely be a change in how easily and how cheaply students will be able to apply for loans, especially from private institutions.
We ought to keep this issue in mind as we consider who we vote this November so that the country doesn't see a repeatof what happens whenthe government allows for unfettered capitalism.
First off, I hope we as young people can now realize what made senior citizens so upset when the Bush administration and Republicans like John McCain proposed privatizing a portion of Social Security Insurance (SSI).
Though it should never be depended on as one's sole source of income once retirement rolls around, this safety net created as a result of the Great Depression (brought about in part because of banks making unwise investments in people and businesses who couldn't pay off their debts) ought not to depend on the whims of the stock market with a potentially unwise and nearsighted mentality spread throughout the country's lending and investing class.
But retirement and SSI checks are a bit further down the road for those of us in college or just starting our careers. A more immediate effect will be our ability to pay for the education that is so crucial to our future careers.
According to The New York Times, most economists are not as worried about access to state- or federally-subsidized loans as much as they are concerned with loans from private institutions, which about 10 percent of all students have to resort to taking if they are not given enough financial aid from government sources.
There is a possibility however, that as the federal government gets deeper and deeper in debt -- it has just added over $400 billion to the trillion dollar bill this year alone, according to the White House (and that's before the extra supplemental funding to the Defense Department as the wars in Afghanistan and especially in Iraq rage on) -- financial aid funding may be threatened by the urgent need to restore fiscal sanity to this nation's budget.
Of course, there has been an urgent need to restore fiscal sanity to the budget for a while now, ever since we've been engaged in a war that some economists believe will cost us $2 trillion. We've had irresponsible tax cuts primarily benefiting the top 5 percent of income earners in this country, which according to the Congressional Budget Office will have cost us $2.6 trillion by the end of 2010, and with the upcoming mass-retirement of the baby-boomers that will drain Social Security, we're only one more big spending splurge away from being faced with some really serious spending decisions.
That one "splurge," I believe, just happened to come in the form of a $700 billion bailout our government will so generously provide.
Now for the Ron Paul libertarians out there who think one of the first things to be cut in the federal budget should be the Department of Education (followed closely by a massive cut in defense spending), this won't be a problem. "Let the private sector be in charge of lending money," they might say. But the core reason behind all of this financial chaos is the fact that lenders gave a lot of sub-prime mortgages to people most of them knew darn well would not be able to pay them back. Odds are good that banks in the future are going to learn from this and overcompensate by avoiding risky loans to students.
Sowhat we are seeing here is a potentially perfect storm for financial aid scarcity, with potentially less government funding meeting up with a much more conservative lending environment,which leavescollege students caught right in the middle.