Now here's where the real immorality kicks in. The skyrocketing cost of a college education is a classic unintended consequence of government intervention. Colleges have responded to the availability of easy federal money by doing what subsidized industries generally do: Raising prices to capture the subsidy. Sold as a tool to help students cope with rising college costs, student loans have instead been a major contributor to the problem.
In truth, America's student loan problem won't be solved by low interest rates—for many students, the debt would be crippling even if the interest rate were zero.
If we want to solve the very real problem of excessive student-loan debt, college costs need to be brought under control. A 2010 study by the Goldwater Institute identified "administrative bloat" as a leading reason for higher costs. The study found that many American universities now have more salaried administrators than teaching faculty.
Actually the major problem in universities and colleges is that states have made massive cuts to university system budgets since the 2007 financial crash. If they were serious about lowering tuition and loan costs, states would invest more in higher education, not less. That's pushing college tuition up.
Second, student loans were, until recently, a massive cash cow for the same banks that nearly collapsed our economy. They were profiting handsomely on student debt and will still continue to do so for older loans for some time. Also pushing prices up.
Third, the influx of H-1B visas used to recruit science, technology, engineering and math graduates from other countries isn't covering any shortages. If there were shortages, engineers would be making tons of money. They're not. What's going on is that firms that hire these folks are hiring them at garbage salaries and then complaining they can't find anyone to fill the positions except for immigrants. That's pushing prices up too.
Fourth, for-profit higher education universities continue to push prices up by again using profit motive on an oligopoly to move prices higher. His fixes address none of these issues:
A serious student-loan fix would change this incentive. First, federal aid could be capped, perhaps at a national average, or simply indexed to the consumer-price index, making it harder for schools to raise tuition willy-nilly. Second, schools that receive subsidized loan money could be left on the hook for a percentage of the loan balance if students default. I would favor allowing students who can't pay to discharge their loan balances in bankruptcy after a reasonable time—say, five to seven years, maybe even 10—with the institutions that got the money being liable to the guarantors (i.e., the taxpayers) for, say, 10% or 20% of the balance.
You can bet that under this kind of a rule, universities would be much more careful about encouraging students to take on significant debt unless they are fully committed first to graduating, and second to a realistic career path that would enable them to service that debt over time. At the very least, schools would be more likely to warn students of the risks.
What Reynolds's recommendations would do is make college completely unaffordable and unavailable for Americans who don't have $150,000 or so to attend a university. In fact, his plan would be to shut down all but the most profitable college degree programs and get rid of most university faculty. If we only send people to college because of profit motive rather than to learn, universities stop becoming universities, and start becoming even more of a barrier to income equality than they are now.
Which is the point: to limit universities (and the ability to land an upper-class job) to the rich and the rich only. That's immoral, but don't tell Instadouche here.
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