Good morning fellow Connected Entrepreneurs!

I am so glad that it’s Friday!

I am actually headed-up to College Station this weekend to attend our second to last football game of the season as we (Texas Aggies) face-off Kansas at Kyle Field and given that I am spending my weekend up at the University I graduated from, this post could not be more fitting.

College Loan Plan

Last week I shared with you an article on the governments new college loan plan it has established to “help” college students pay off their student loan debt when they graduate.

Under the current law, students with federal student debt are capped at paying 15% of their discretionary income per year in student loan repayment and have full student debt forgiveness after 25 years.

Well, the White House just recently announced a new law that will throw the current law (which didn’t even exist prior to the Obama administration by the way) out the window and replace it with a new law to go into effect on 2012.

Under the new law, students with federal student debt will be capped at paying only 10% of their discretionary income per year in student loan repayment and be eligible for full student debt forgiveness after only 20 years.

In my post last week, I explain how the numbers simply don’t add up and how the White House has effectively piled-on more debt to the already danger zone levels of  debt we are carrying, ultimately to be paid by the taxpayers. That’s right – You!

Bad Mistake

If there is one area in which I believe we need less Government, it’s in the free-markets!

As you may have already suspected the White House made a HORRIBLE mistake by getting even more involved in this new student loan plan it will put into effect next year.

Just when free-markets were getting ready to take effect and a real conversation was starting to brew, on whether or not a college education was even worth it anymore given the cost, here come’s the Government to “save” the day.

Instead what the government did was:

1. Give college student an incentive to take on more federal student debt – because no matter how much debt they stockpile they will only pay-back 10% of they discretionary income per year and have full student debt forgiveness after only 20 years, often times only paying back a fraction of what they borrowed.
2. Give colleges an incentive to raise tuition at even faster rates – the general rule of thumb is that tuition rises 8% per year or double the rate of inflation. Now that schools know students have the printing presses of the federal government behind them to fund their education, schools are only incentivized to raise tuition even faster.
3. Give another blow to the middle-class – Any part of the tab that is not repaid after the 20 years has passed and full student debt forgiveness has been granted will have to be picked up by the government, but of course by the government I mean, you – the American taxpayer. Of course, the current administration will have been out of office for two decades and by the they’ll have someone else to blame for making your children and your children’s-children, poorer.

Free Markets Do Work!

Guess what? According to CNN Money, some colleges are slashing tuition after all.

Resource: CNN Money

Notice anything all these schools have in common?

They are all Private schools, which get no federal funding whatsoever  (no federal student loans for students)!

These Colleges and Universities are slashing their tuition because it’s too expensive and they are losing customers! Hello – It’s economics 101!

Here is an excellent example that free-markets do work after-all and perhaps if the government would not have intervened in the public universities with their new college loan program, maybe… just maybe tuition would not have increased at the astronomical rates at which I foresee it to increase in the coming years

Mastermind: What do you think about the college loan plan? Is it good? Is it bad? How much are you willing to finance you education worth?

Related posts:

1. The Sky is the Limit on Tuition Rate Increases With This New College Loan Plan!
2. Frightening Student Loan Debt For First Generation College Graduate
3. Student Loan Repayment In Todays Economy
4. Entrepreneurship or Contract Work? You Decide.
5. 5 Ways to Ditch your Student Loan Debt and Pay-off Debt of Any Size