Another Misguided Bailout

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There seems to be no limit to the number of ways President Obama can think of to unilaterally dole out subsidies to voters. His latest: the expansion of the “Pay As You Earn” college student loan program. Until now under Pay As You Earn, student borrowers who took out loans between October 2007 and October 2011 had their monthly payments capped at 10% of discretionary income. The loans will be forgiven in ten years for borrowers who work in government (give me a break!) or the non-profit sector, and over 20 years for borrowers who work in the private sector—regardless of how much of the loan has actually been repaid. But by signing a presidential memorandum yesterday (he told us he has a pen, remember?), the president expanded the program to cover basically everybody, even pre-October 2007 borrowers.

This is a travesty. First off, it’s totally unfair to borrowers who’ve worked hard to pay off their loans early and so who, by dint of their own industry and thrift, will miss out on this government giveaway.

But more to the point, the president’s action yesterday takes what’s already a big problem and makes it worse. The reason the federal government is in the education-lending business in the first place is that the cost of tuition has risen by so much over the past few decades that the typical family can’t afford it on their own. But (to no one’s surprise) the more the feds have subsidized education spending via program like guaranteed loans, the faster tuition costs have risen. By now they’re stratospheric. Some numbers: since 1978, the cost of college tuition and fees has risen by 1,152%, compared to an increase in the cost of medical care of 610%, and a rise in the CPI overall of just 264% according the Bureau of Labor Statistics. You read that right. College tuition is rising at twice the rate health care spending. This is the last sector of the economy, in other words, that needs an added subsidy from the government. And yet that is what the president’s move yesterday provides. As it is, education loans outstanding, most of which are guaranteed by the federal government, top $1 trillion. And how much will this new subsidy cost taxpayers? No one seems to have a clue. “We actually don’t know the costs yet,” the Education secretary told reporters yesterday. “We’ll figure that out on the back end.” Wonderful.

In the meantime, all this added taxpayer-backed spending on college doesn’t seem to be turning out a product—an undergraduate degree—that’s any better than it was before. One reason may be the the bulk of the money seems to be going to build out bureaucracies. Since 1975, the faculty-to-student ratio at higher educational institutions has stayed relatively flat at around 16 to one. But the number of non-teaching administrators—assistant provosts,vice deans, chief diversity officers—has ballooned. In particular, colleges had one administrator for every 84 students in 1975; by 2005, they employed one administrator for every 68 students. I have no reason to think institutions haven’t kept on adding new bureaucrats since then.  On the academic side, colleges themselves seem to be offering majors in ever-more-outlandish (and academically dubious) “subjects” such as gender studies and peace studies, while at more than a few schools, even study of the traditional humanities has been hollowed out by relentless politicization by a uniformly leftist faculty. The end result is that students are paying more and more money to learn less and less. The president’s move yesterday simply perpetuates this.

For better or worse, a college degree today is more a needed credential than it is a mark of true academic achievement. (Do you doubt it? Try taking Harvard’s 1899 entrance exam. Good luck!) What the higher education industry ought to be doing is worrying about maintaining academic rigor rather larding its pockets. A good first step for that to happen is to get the federal government less involved in higher education rather than more so. I’m not holding my breath.

What do you think? Let me know!