Politicians are forever looking to pass bills that purport to solve problems, even though those problems are over-hyped.
In North Carolina, there is bipartisan support for a bill that would establish state oversight over the small number of private loan servicers who handle non-governmental student debts. In today’s Martin Center article, journalist Emma Schambach writes about it.
How would this work? “Specifically, the state Commissioner of Banks will be required to create licensing and regulatory systems for student loan servicers which will highlight the responsibilities and prohibited behaviors of those servicers,” she writes.
Almost everybody has heard the stories about students who are drowning in debt, but to what extent are these private loan servicers responsible for that? Doesn’t matter — creating a new state bureaucracy is, for most politicians, a costless way of looking like they care and are doing something. A new system of state oversight will imposes costs on the taxpayers, and bureaucracies have well-known tendencies to perpetuate themselves and grow even if they have little to do.
As Schambach points out, 92 percent of all college borrowing is done through the federal government, which does nothing to discourage unwise and extravagant borrowing. This bill seems very questionable.
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