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Government-guaranteed student loans: an incidence of corruption


A few days ago the New York Times online reported a curious series of events involving the Administration and its attempts to regulate vocational schools.  There has been a dramatic increase in the number and enrollments of these schools that teach such skills as medical assisting and computer repair.  Without any publicity, certain Wall Street speculative investment firms have bought up a proportion of these vocational schools and are expecting further growth in profits.

The problem is that a proportion of graduates from these schools are unable to find a job, and thus unable to repay the loans with which they went to school.  In cases like these, the federal government is on the hook because the loan was federally guaranteed when it was made.  So the investors expect a sure profit one way or the other.

The federal government is on record as deploring the useless degrees handed out by some of these schools and promising a regulatory solution.  A plan was formulated and put out for comment.  There was a storm of protest, some of it financed by $16 million from the investor group (according to the NYT story) and the staff at the White House was buttonholed by certain friends of the schools.  As a matter of fact, in order to avoid new federal antilobbying rules, a mentoring process was developed.  A recent alumnus of the WH inside staff hired by the investors advised those who were to meet with current WH staff rather than meeting with them directly.

As a result of protests to the original plan, changes were made that eventually reduced the proportion of schools that would be put under sanction from 16% to 5% (Again, these are figures from the NYT story.)

Frankly, the whole system of vocational schooling is rotten to the core.  Young adults, who have not been taught a vocation in high school, have to borrow tens of thousands of dollars to go to a vocational school that teaches them skills (how well it teaches is open to question) and then find that there is no job market for those skills.  The unemployment rate now among young people is much higher than the national average and often approaches a quarter of recent high school graduates.

The compassionate answer to this problem is to teach children vocational skills in high school, skills that prepare them for further training in high level technologies that are in demand because there is a large amount of research going on; and the research is funded by the federal government, all to stimulate the economy.

This means a deliberate emphasis by the federal government on funding education and research.  The reason for this change is to prepare the population to compete on a high level with the populations of other countries that threaten to outdo us.  There should be a vast flow of research discoveries coming from the United States, discoveries that lead to lucrative patents for new processes that out compete the rest of the world.  If we don’t compete, we will become a failed state.

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