The Student-Loan Scam

by Jacob G. Hornberger
May. 16, 2014

The federal student loan program ranks among the biggest scams of the welfare-state way of life that modern-day Americans have embraced.

An article in the Washington Post entitled "College Debt Is Still Keeping Grads from Buying Homes," points out that "young people are still drowning in student loans, and that debt is holding them back from reaching grown-up financial milestones, like buying a house, according to a new report Tuesday."

Here is how the scam works.

Federal officials point to the student-loan program and declare, "Your parents can't afford to send you to college. We can help you go to college by lending you the money. Without our help, you'll have to live without a college degree."

So, both students and parents think to themselves, "Oh, aren't we lucky to be living with such a good and benevolent government? What would we do without it? We certainly couldn't go to college without federal loans. Praise the government for lending us the money! Praise the troops for defending our freedom!"

But neither the parents nor the students ever ask why it is that the parents lack the money to pay for their children's education. That's because parents and students, thanks to public (i.e., government) schooling, have never learned how to engage in critical thinking. They just innocently accept whatever the authorities feed to them.

That's why they don't ask the critical question: Where does the federal government get the money to lend to the students?

The answer? They get it from the parents themselves!

Yes, you read that right: The federals take the money from the parents through income taxation and the ever-present threat of the IRS and Justice Department and then lend it back to the students to pay for their college bills. By the time the students graduate, they're so mired in debt that the course of their lives are significantly altered.

Suppose the American people had decided 18 years ago that we libertarians were right and had gone ahead and repealed the federal income tax and the welfare-warfare state apparatus that it funds. Let's assume that a family has paid $10,000 a year in income taxes during that 18-year period of time.

That would mean that the family would have $180,000 in savings. Let's assume that compound interest would bring the total amount in savings to $200,000.

Now, that's a hefty sum of money.

Let's say that in-state college expenses total $15,000 a year, for a total of $60,000 for four years. Let's assume 3 children. That's a total college bill of $180,000. That still leaves $20,000 left over in savings.

So, that's what parents and students just don't see. They see the federal loans and jump up and down in gratitude because it appears as though the federal government is so good, glorious, and praiseworthy. What they don't see -- and unfortunately don't want to see -- is what a scam the whole thing is.

It's like a thief stealing your money and lending the money back to you, and you expressing how grateful you are for being helped out by the thief.

Adding insult to injury, in order to induce young people to join the military, where they can be sent overseas to kill, maim, torture, kidnap, assassinate, shoot, and bomb people thousands of miles away as part of the warfare-state apparatus, the federal government offers student-loan debt relief to people who join the military.

When that happens, both the students and parents are now doubly relieved and grateful for the extreme niceness and benevolence of the federal government. Never mind that their kid comes back all screwed up in the head or without arms or legs. What matters is that he made the sacrifice "defending our freedom."

And where does the federal government get the money to pay the salary of this new soldier? You guessed it -- from the income taxes imposed on those grateful and relieved parents!

The more I see what the modern-day welfare-warfare state has done to the American way of life and to the mindsets of the American people, the more I'm convinced how wise our American ancestors. Imagine: they established a nation with no income tax and no welfare-warfare state, a way of life that lasted more than a century. Isn't it ironic that they were also among the most educated people in history?
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Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News' Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano's show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.













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