In the strange and faraway nation of Donkeylandia, people who own donkeys generally do better than people who don’t. The cause is unclear but the correlation is real.
Donkeys are expensive though, so some people borrow money to buy a donkey. Donkey prices are constrained by buyers’ credit limits.
Somehow it becomes conventional wisdom that donkey ownership is crucial to success in life. This message is propagated by donkey salesmen, banks that make donkey loans, and donkey owners themselves.
Donkeylandia politicians announce that society as a whole would be better off if more people owned donkeys, and declare donkey ownership a Basic Human Right.
Citizens are inspired to buy more donkeys. They don’t know that the banks making donkey loans paid politicians to deliver that message.
But many people still can’t afford donkeys. To encourage ownership, the government provides tax breaks to those who take out donkey loans.
Aided by government subsidies, banks make bigger loans. As a result, people can buy increasingly expensive donkeys on credit. Donkey prices go up.
More donkeys are bred to meet demand. Some of these donkeys are retarded or have three legs, but people borrow money to buy them anyway.
As loans get bigger, people struggle to pay them back. Distressed donkey owners complain about their debt burden. Many default. This becomes a societal problem.
To address this, Donkeylandia leaders announce: Everyone should be able to own a donkey, but nobody should go into debt to own a donkey.
This is great news for the banks, who receive repayment for loans that would have otherwise defaulted.
This is great news for donkey salesmen, who now have access to an endless stream of federal dollars with no strings attached.
The debt-stricken donkey owners get the creditors off their backs, but are no longer sure how their three-legged donkey will lead to success in life.
Whether it’s real estate, health care, or post-secondary education, government-assisted access leads to abuse.
If an asset is unaffordable, the solution isn’t to encourage borrowing; it’s to make the asset cheaper!
That’s what online courses were supposed to do: provide an affordable alternative to a college education.
But last week, the Department of Education announced a pilot project that makes students enrolled in coding boot camps and online courses eligible for federal financial aid, including student loans.
I didn’t even know that coding courses cost money.
What happens next is that shady for-profits enter the coding camp business, market their services to the uninitiated, and drive up the cost of previously-free education. At no benefit to the students.
For $149, you can get a fake college diploma and transcript online. I’d rather have my tax dollars subsidize those.
1. New Federal Program Offers Students Aid for Nontraditional Education –NY Times
2. Student debt’s subprime problem –FT Alphaville