The day after Christmas, Bernie Sanders posted on Twitter: “You have families out there paying 6, 8, 10 percent on student debt but you can refinance your homes at 3 percent. What sense is that?”
I can’t imagine a more representative comment from the Dunderhead School of Economics (DSE). Is it possible that he really doesn’t see why there is a difference? Suppose he was making such loans from his own pocket, and not as a charitable contribution. Would he really charge the same rate for a secured loan to someone with a solid financial rating as he would to a young person with no resources and uncertain prospects? If so, he wouldn’t do it for long. And soon it would be he who would need to find a charity to buy his “three hots and a cot”.
If we are speaking of charity, why charge any interest rate at all? Why not take these loans out of private hands and dispense the funds directly from government coffers. After all this is an investment in one of our most precious resources, one that could return a large profit to the community in years to come.
But then one might ask if that is really the best use of our finite resources. Should we invest in the relative few who are educating themselves for a likely prosperous life or should we provide vital support to the many in dire need of food, housing and medical care? If you say we should do both, I can safely assume that you are also an alumnus of the good old DSE. Try taking a short refresher course in Opportunity Cost. Or better yet, read the original source material in Austrian economist Friedrich von Wieser’s book Theorie der Gesellschaftlichen. I am sure an English translation of this classic is in your local library.