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SImple, Obvious and Wrong
Jun. 26th, 2019 11:57 amThere is a proposal floating around the US to forgive all student loans for college. Although attractive, this proposal is wrong-headed. And it's unfortunate for those that have taken on debt for college.
The real problem is not people being in debt to go to college. The real problem is the high cost of college, which is caused by two interrelated factors. First, states used to fund state universities by money appropriated from tax income. Now they mostly fund those universities via tuition. Second, student loans are easy to get and well-funding by the Federal government.
Thus, colleges have no incentive to keep the cost of education low. If they don't get it from the state, the students will pay. The taxpayers who don't have students in school have no incentive to insist on state money going to state universities. Private universities can use the sticker price of their programs as a prestige factor and a way to control admission. The only loser in this is the now-indebted student.
Forgiving student loans is a one-time benefit which will, at best, do nothing to fix the cost of higher education and at worst encourage price inflation. If we'll forgive debt once, maybe we'll do it again.
The real problem is not people being in debt to go to college. The real problem is the high cost of college, which is caused by two interrelated factors. First, states used to fund state universities by money appropriated from tax income. Now they mostly fund those universities via tuition. Second, student loans are easy to get and well-funding by the Federal government.
Thus, colleges have no incentive to keep the cost of education low. If they don't get it from the state, the students will pay. The taxpayers who don't have students in school have no incentive to insist on state money going to state universities. Private universities can use the sticker price of their programs as a prestige factor and a way to control admission. The only loser in this is the now-indebted student.
Forgiving student loans is a one-time benefit which will, at best, do nothing to fix the cost of higher education and at worst encourage price inflation. If we'll forgive debt once, maybe we'll do it again.
