In my view, there are at least three lies behind President Joe Biden’s “student loan relief” plan: a bare-bones lie, a half-lie, and a lie of omission.
First, in its August 24 “fact sheet,” the White House advances the lie that college is the “ticket to middle-class life.” It’s wrong.
The ticket to a middle-class life, today as always, is to finish high school, work full time, and get married before having children. A recent report from the Institute for Family Studies by researchers Wendy Wang and Brad Wilcox presents the data brilliantly. An astonishing 97% of adults who follow these steps are middle or upper income.
A middle-class life is perfectly achievable without a college degree.
Why would the White House want to be wrong? Perhaps because he prefers to put forward a narrative of government dependency rather than a narrative of personal agency. But it’s a pity. Why not tell young people, as author Ian Rowe does, that it is in their power to rise above their circumstances through hard work, savings and wise lifestyle choices?
If young people are victimized in higher education, it is as victims of political rhetoric that short-sells the good effects of old-fashioned virtue while grossly exaggerating the benefits of degrees and diplomas.
How about going to college? Studies show that high-priced degrees do not add value to life outcomes. Students are equally successful in attending low-cost institutions and high-profile colleges, but those who attend the latter are more likely to be in debt.
So the Biden plan looks like a taxpayer-funded bailout for those who chose expensive schools over cheaper ones, insulting frugal elders and creating moral hazard for the next generation of student borrowers.
Second, the White House “fact sheet” states that “the total cost of public and private four-year colleges has nearly tripled” since 1980, and that federal support “has not kept pace.” In this case, the lie is in the second part.
Although the total costs did indeed explode, it was not a proverbial “act of God”. Instead, federal support that the White House says “hasn’t kept up” is actually the main reason tuition prices continue to rise. Economists estimate that 60% of federal credit given to student borrowers through subsidized loans is “passed on” in the form of higher tuition fees.
Colleges and universities view federal guaranteed student loans as cash on the table, and tuition fees are raised to recoup those dollars. It’s a vicious cycle: the federal government provides student aid in the form of grants and loans; that the aid supports an artificially high demand, given the tuition fees; and lo and behold, tuition fees are rising again. Rinse and repeat.
But reading the White House “fact sheet” would lead you to think the government has barely dipped its toe into the murky waters of high college prices.
After reporting that Pell Grants now only cover a third of the cost of a four-year public college degree (compared to 80% in 1980), the “fact sheet” gravely points out that federal student loan debt has skyrocketed to $1.6 trillion.
So the federal government is not a spectator after all. He has eagerly provided student loans for degrees many of them won’t even complete, helping to create degree inflation and burdening adults with decades of monthly payments.
Since degrees aren’t necessary for a middle-class lifestyle, and all that debt is negatively affecting student borrowers (as the White House admits), one might conclude that we should cut everything. Admit we lied to kids and made them pay for it. But the conclusion from the White House is that we should cancel loans for those who don’t make enough money and keep the whole system running.
The third lie is more difficult to spot because it is not stated.
The whole loan relief package is going ahead as if there is no other solution to the student debt problem than this giant, unfunded $500 billion giveaway to taxpayers (which is inflationary at a time of still uncontrolled inflation). It’s ridiculous. There are many other solutions, ranging from refinancing to private charities.
But the simplest solution is probably the best: First, acknowledge the fact that colleges and the federal government have been in cahoots to impose unconscionable debts on millions of Americans for degrees of dubious value. Second, back off and let universities find a way to deliver their goods and services without special grants clouding the waters.
For students who are now least likely to graduate, that will likely mean no college and no debt. It’s a clean slate as they begin their professional lives. For those who are most likely to graduate but can’t afford it, this will point to more private loans, like the ones I just co-signed for two of my sons this year, with interest rates higher and, after necessary regulatory reforms, better loan selection. to find out who is likely to graduate.
Finally, it would shift the burden from taxpayers to colleges to figure out how to pay the students who deserve to be there. Such a change could prompt some colleges to channel a larger share of endowment funds into student aid. But it might just spur other schools to cut back on bloated administrative offices and theme-park-style amenities for students, and try a new approach: price competition.
In a few decades, two problems could be solved at once: the student loan crisis and the growing tuition crisis.
Reprinted with permission from – The Daily Signal by – Catherine R. Pakaluk
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