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It’s really, really easy to get loans to attend college. And going to college is, as it seems everyone in America knows by now, really important. And so the federal government offers generous loans to people who want to attend college. And private banks offer generous (though higher interest) loans too. But these things don’t result in merely more college graduates; it also means a lot of crippling debt.
According to a really interesting article by Katherine Mangu-Ward in Reason:
When the government subsidizes something, we wind up with more of it. When it subsidizes something heavily—and combines that subsidy with an aggressive campaign encouraging consumption of that thing from the presidential bully pulpit—we wind up with a lot more of it.
For-profit schools have low rates. But the new “gainful employment” rules—which are supposed to crack down on for-profit career-focused degree programs with low loan repayment rates—would scarcely make a dent in the record-low numbers above. Those rules dissolve programs that have repaymemt rates below 35 percent, a figure that falls conveniently between the abysmally low repayment rates for traditional two- and four-years schools and the abysmally low repayment rates for-profit two- and four-year schools.
When this many students aren’t able to pay back their loans, there’s something wrong with the overall system. Students of all kinds, at schools of all kinds, are getting loans they can’t reasonably anticipate paying back.
There’s definitely something wrong with the overall system but it’s peculiar that Mangu-Ward thinks the problem is that the government subsidizes higher education. In fact the United States isn’t nearly as generous with higher education subsidies as other developed countries are. The American government merely offers students low-interest loans. In most countries the government simply pays most of the cost.
As recent protests in the United Kingdom and Italy have demonstrated, this system doesn’t exactly work perfectly, but at least it doesn’t leave students in horrible debt (yet).
The problem isn’t too much higher education; it’s the fact that students and their families have to pay for most of it themselves, plus interest.
Some 66 percent of American college graduates now owe an average $23,186 in student loans. The title of the Reason article was “Easy Money For College Can Mess You Up, Man.” The trouble with this is that it’s not really easy money; it’s just easy debt. And that’s messed up.
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Marktropolis on December 30, 2010 9:41 AM:
"it’s peculiar that Mangu-Ward thinks the problem is that the government subsidizes higher education"
It's not peculiar at all that someone from Reason thinks the govt shouldn't subsidize something. Reason is a libertarian organ.
That said, this has all the trimmings of the housing debacle, with the same set of folks making money and the same set of folks left holding the bag. In housing, it was the banks who found new and interesting ways to make money, (and yes, the the govt. was pushing home ownership) as well as finding new and unique ways to give loans to folks who shouldn't have them. When the house of cards came down, it's homeowners (and taxpayers) who have to pay the price, while the bankers go home to their bonuses. In the student loan industry it's very similar.
And it doesn't stop there (as you can see from commentary from folks like Richard Vedder and Charles Murray). In housing we now have this myth that ACORN is to blame for pushing home ownership, and *forcing* banks to give loans to all those undeserving poor people (many of whom have brown or black skin). In student loans, we're now getting down to the "who *really* deserves to go to college" debate. And the for-profits continue to place blame on the students.