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The “One Big Beautiful Bill Act,” or H.R.1, is stirring up debate. My colleague, Kali Jerrard, provided an excellent summary of the bill on Tuesday: this House-passed bill cuts $350 billion over a decade through risk-sharing, eliminates Grad PLUS and subsidized loans, restricts Parent PLUS loans, and caps student loans based on a program’s median cost. The bill is a robust reform package for higher education, but the left is pushing back hard. They argue that capping student loan lending amounts to gatekeeping higher education for the wealthy. But they couldn’t be more mistaken.
The federal student loan program, ironically, has limited access for low-income students, as economist Richard Vedder recently argued. “The evidence is clear that the program has driven up college costs,” creating a $1.7 trillion student debt crisis.
And what’s the payoff for this financial catastrophe?
The U.S. Department of Education reports that over 5 million borrowers are in default—loans at least 270 days overdue—and 4 million more are in late-stage delinquency, putting nearly 25 percent of the $1.7 trillion loan portfolio at risk. Many borrowers have unimaginably large balances because limitless lending has spurred colleges to raise tuition, capturing as much federal money as possible, with college costs soaring 1,200 percent since 1980.
Additionally, as I noted last week, the program pushed millions, many of whom were unsuited for college, into higher education, fueling degree inflation and rendering many credentials worthless in the job market. With tuition costs soaring, students borrow heavily, expecting financial success, only to find degrees—often unrelated to available jobs—yield no return on investment. To be sure, a college education holds intrinsic value—I studied history myself—but borrowing thousands for fields like history, banking on high-paying jobs to repay loans, is a false promise the government shouldn’t enable.
[RELATED: The Senate Can Strengthen Student Loan Accountability—Here’s How]
I sympathize with the left on the idea that education should be affordable—I’d prefer it be free—but their defense of limitless funding ignores how it inflates costs, pricing out the very students they claim to champion. Colleges charge exorbitant rates because they know the “Bank of the Taxpayer,” as Matt Lamb, Associate Editor of the College Fix, puts it, is “always open.” “Right now, colleges have little incentive to control costs.”
This toxic mix of unchecked lending and false promises has sparked disasters before. “The 2007-2008 financial crisis shows that virtually limitless spending is sure to end in disaster,” Lamb added. In the early 2000s, the government, seeking to increase equity, pressured banks to accept subprime borrowers, resulting in the creation of risky mortgages that were repackaged into safe financial investment tools. Housing prices soared, defaults surged—fueled by Wall Street’s greed and credit agencies’ false ratings—and the crash inevitably followed. “Mortgages at least had collateral,” Lamb noted. Student loan defaults? Taxpayers foot the whole bill.
“Placing limits on how much can be borrowed is a common-sense approach to keeping costs down for higher education,” Lamb told me. “Since we taxpayers bail out defaulted loans, it’s only fair we set a limit.”
If students can’t borrow $100,000 for a degree in medieval poetry, colleges can’t charge it. “The student is the consumer, and if there’s a ceiling on how much money the student has, then other options will crop up to provide education at an affordable cost.”
In Lamb’s words, “money does not grow on trees.” I agree, and it’s high time our federal government acts like it.
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Image: “This Generation is Too Big to Fail (Student Loan Debt, Now $1-Trillion)” by Occupy* Posters on Flickr
This important article underscores a formal and accurate theory in economics called “moral hazard,” which is created from over-consumption of free goods, or when risk is removed. This is what has happened with universities, which have over-consumed risk-free tuition. Moreover, because such tuition acts as a university cost subsidy, along with grants and donations, administrative cost management is not typically conducted on more commercial-like terms, where fixed and variable costs are normally treated as opportunities to constantly realize more efficient operations from continuous cost reduction. See https://www.mindingthecampus.org/2025/01/22/everything-a-university-does-can-be-done-in-half-the-time-for-half-the-cost/
Maybe there shouldn’t be student loans, like in the old days. Students who can pay cash will be free to do so, those who can’t, can do without college.
As I think about this, why not apply to high school too? Why should impecunious students get a free ride?
A good principle too for medical care.
If Trump would apply this thinking, the deficit would not keep increasing, as Elon Musk claims it is.
First and foremost, Jonathan clearly doesn’t know US history — with some exceptions, we did charge for high school until after WWII. It was mostly private “academies” before that. Likewise, universal “free” Kindergarten didn’t arrive until the mid/late 1970s, before that it was mostly run by churches for a modest tuition fee.
As for medical training, there used to be two different ways to get a nursing license — one could go to college (as now) *or* one could apprentice at a hospital. Such “hospital nurses” knew more about the procedures and practices of the particular hospital they trained in so they tended to work there (which is why the hospitals had the programs) while “college nurses” knew more about nursing in general, but needed orientation to the specific hospital they got hired at.
Remember that this was when pregnancy was “considered a resignation”, i.e. they were routinely fired upon pregnancy, sometimes upon marriage, so there was a need for a lot of new nurses to replace those who had thus been removed.
In his book “MASH”, Robert Hooker (Hawkeye) wrote of the character that would become Frank Burns, how Burns “learned surgery from his father, who also didn’t know any” — I read that to be apprenticeship, and to have been drafted as a MD, Burns would have had his MD license by 1951 at the latest.
Yes there was Harvard Med but at least some states still had apprentice training for MDs into the mid 20th Century.
As to law, Northeastern School of Law started with a group of people who arranged for noted lawyers to teach law classes at night. A far cry from the ABA approved law schools of today, but also at a far more reasonable price, and all states back then permitted one to “read law” — to apprentice as a lawyer.
45 years ago, Bill Bennet (Reagan’s ED secretary) predicted that all student loans would do is inflate the cost of college and make it even less affordable and he was right. Now as to the poor, a young Black man in Western Massachusetts didn’t have the money to attend Harvard, but he did — WEB DuBois, you may have heard of him.
And do not forget that both the Normal Schools and Land Grant Colleges — and most public IHEs (including most of the HBCUs) started as one or the other — were (and still are) heavily subsidized by state taxpayers. (The difference now is the loans have permitted the largess that these once-spartan institutions weren’t spending money on back then.
In his biography, GE’s Jack Welch said that he went to UMass Amherst because it was only $50 a year — $550 in today’s money. Not the $35,815 it does cost. And faculty are part of the problem — they are paid a lot more and teach a lot fewer classes than they did in the 1950s.