The House Committee on Education & the Workforce, chaired by Rep. Tim Walberg, has shown serious interest in reforming the system. Ideally, the government would get out of the loan business. Private businesses and entrepreneurs would make loans and maybe even other financial arrangements, such as income share agreements. They want to put limits on the number of years of college for which one can receive loans, and reduce individuals borrowing large six-digit sums of money to just those pursuing high-paying professional degrees. They want colleges to share in the burden arising when students default on their loans—schools should have “skin in the game,” which the Trump ED seems to support as well. (All of these things and more are things I advocate for in my new book Let Colleges Fail: The Power of Creative Destruction in Higher Education.)
In a nation where the rule of law is of transcendental importance, I have been uneasy as of late at the Trump Administration’s aggressive use of executive orders and administrative rulings to alter public policy, even when I agree with the policy. But some recently announced administration policies regarding student financial assistance are highly welcomed because they try to undo some of the damage caused during the Biden years.
[RELATED: A Private Student Loan System Should Not Mirror the Federal Family Education Loan Program]
We learn, for example, that the Feds will start putting some pressure on individuals who have simply ignored their loans, knowing the government was unlikely to collect overdue funds aggressively. A recent TransUnion research report says over 20 percent of student borrowers are “seriously delinquent” or 90-plus days overdue on their loans. People are starting to realize that their credit scores will sink unless they start making payments; that their ability to buy a car or house will be imperiled by their failure to repay student debt. The financial damage from mounting federal student loan debt is compounded by a broader attack on property rights and the rule of law by letting millions of Americans believe that debt obligations are something that can be ignored. Property rights and the rule of law have been degraded in an attempt to win votes from indebted former students.
There are some major equity arguments against the federal student assistance programs that seldom get articulated. Most Americans do not have college degrees; on average, they tend to have lower incomes than college graduates. Yet we make federal loans to those “investing” in a college education, trying to get a piece of paper, a diploma usually connoting at least a modicum of intelligence, knowledge, personal discipline, and integrity. At the same time, however, we do not offer such opportunities to young people who want to open an auto body or coffee shop—they have to go to the bank or other financial institutions for assistance. Why do we support students getting degrees in gender studies that likely will yield little economic benefit when we won’t help hard-working individuals wanting to help people get their cars fixed or provide them with needed coffee and donuts to begin the day?
Injustice builds upon fiscal irresponsibility. Our federal government is borrowing unsustainable amounts during a period of relatively high employment and prosperity. A future generation of Americans will face the burden of meeting huge federal debts, endangering our nation’s seldom-recognized advantage of having the world’s most trusted currency and highest-quality government bonds. Why should we increase the national debt with a student loan program that’s racked up nearly two trillion dollars in unpaid obligations? Isn’t it immoral to imperil our children’s futures just to maintain these costly student programs?
For more on student loans, go here.
Cover image created by Jared Gould using Grok’s AI image generator, inspired by the cover art for Richard Vedder’s article, Eliminate or Radically Restructure Federal Student Loans, published by the James G. Martin Center for Academic Renewal.
“Richard Vedder is Distinguished Professor of Economics Emeritus at Ohio University.” It seems that he did well for himself, then discovered — late in the game? — its drawbacks.
Sure, reduce or eliminate the federal loans. Professor Vedder is old enough undoubtedly to remember the days when the number of students who went to college was a fraction of what it is now. We can go back to those days. For that matter, there are people alive still who remember grandparents who stopped at 8th grade.
Are you saying that less people in college is a bad thing?
First, I’ve always thought that “College for All” was an insane idea. I think it was dreamed up by Education types. Everyone I know in the sciences either haven’t heard of it and/or thinks its crazy.
Probably having fewer of the current students would be a good thing. More of the students who are qualified but aren’t going would be a good thing. Give me nontraditional students of all kinds who are talented and eager.
Back at the end of WW2, about 7% of the population of college were getting degrees. Then things ramped up in the GI Bill. That was a great thing, in my opinion.
Now it’s probably 30+. That is probably too many. Certainly it includes quite a few who are marginally qualified and/or motivated.
The student loans partly got out of hand largely because there was a shift of college expenses from state universities to students. As states shifted, e.g., to programs like Medicaid.
But — college costs are actually, on average, going DOWN. Adjusted for dollar inflation, net tuition (i.e. discounted), real scholarships. I think the College Board has information on this in stunning detail.
If people would stop trashing the colleges over costs, often ignorantly or maliciously, and instead put the effort into helping students (and naive parents) understand and navigate the system, including loans — then people would be better off.
One thing that is needed is a neutral source of information about college finances, including student loans. Students need information about financial resources. They also need to have an understanding of what they are getting into.
” reduce individuals borrowing large six-digit sums of money to just those pursuing high-paying professional degrees.”
The problem with that are the presumptions that (a) all will graduate, (b) pass the relevant licensing exams (e.g. bar exam), and (c) be successful in the profession. I am not willing to make any such presumptions. Let’s take law:
I couldn’t find an average graduation rate of all law schools (not all of which are ABA accredited), but New York University’s Law School only has an 88% graduation rate, Suffolk University Law has a 7% first-year attrition rate, and a 3% second-year attrition rate which theoretically gives them a 90% graduation rate. Stanford and UC Berkley both have a 93% graduation rate.
So let’s keep it simple and call it a 90% graduation rate.
The ABA says that “[f]or the class of 2023, the aggregated school data shows that 30,160 graduates, or 85.6% of the 2023 graduates of the 195 ABA-approved law schools, were employed in full-time, long-term Bar Passage Required or J.D. Advantage jobs roughly 10 months after graduation.” This figure, calculated by the law schools, is as liberally applied as they dare.
So that’s 77.8% who actually graduate and find a job where the degree gives them an “advantage” (not all of whom have passed the bar exam), and then over half of this cadre are women in their prime childbearing years (25-35) and a lot of them are going to “do the mommy thing.”
And we’re already talking about nearly a quarter of those who took out loans to pursue this high-paying career not making it…
I think we are using the wrong model here — a 77.8% chance of success, while better odds than one will get in the casino, is still not a guaranteed ROI. And are we really going to tell young women that they can’t get pregnant?!?
Are we essentially going to establish debtors prisons for the 22.2% who take out loans for law school but don’t have the high-paying professional degree? The Romans understood the concept of “Bread & Circus” — if you have a significant underclass with no opportunity for advancement, it is going to create instability and eventually ferment revolution. (The American Revolution is an example of this…)
And I dispute the argument that those with college degrees earn more — those born in this century don’t…