To nobody’s surprise, Biden & Co. have decided to forgive $500 million in loan debt for students who had enrolled in the now-defunct ITT Technical Institute schools. They were all “misled” by pronouncements by ITT about their likely earnings. No doubt, but many nonprofit colleges make similar claims to lure in students.
Forgiving student debt is good politics. The Dems get to look compassionate, and lots of students will be grateful at not having to pay off their loans. As for the taxpayers, well, a tiny increase in the federal government’s budget deficit won’t be noticed. What did not happen and certainly will not happen is any move to solve this problem.
Reason‘s deputy editor Mike Riggs has a good article making that point.
Riggs writes, “While inducing low-income people to borrow money they can’t repay for an education they can’t use is likely the worst consequence of federal higher ed subsidies, we also know now that easy lending has inflated the cost of ‘good’ colleges and universities, which compete with each other by upping costs in order to suck up subsidies that they can invest in prestige points rather than workforce preparation: nicer buildings, fancier dining services, more extracurriculars, and an abundance of non-academic staff to make attendees—particularly those at nonprofit liberal arts colleges, which progressives seldom criticize for their ever-increasing sticker prices—feel like they’re staying at a resort with the occasional class.”
He’s correct. Federal student aid is at the root of the prodigious expansion of higher education and the vast inflation in its cost. There isn’t any constitutional warrant for federal largesse, but, sadly, the Constitution’s limits on federal spending were swept away long ago. We will keep wasting resources on needless college degrees at huge prices as long as we keep on subsidizing them.
Riggs continues, “There is so much else we should be doing differently. Many for-profit programs would likely not exist without occupational licensing requirements, such as those for the [cosmetology] industry; other for-profit programs, such as those that train students for administrative roles in medicine, are the result of the American health care system’s metastatic need for paper-pushers who can manage labyrinthine billing operations and regulatory compliance.”
Indeed. Let’s whittle away at the inflated demand for higher-ed credentials. That would help at the margin. Ultimately, though, we must strike at the root of the problem and get the feds out of the business of college finance.