Right Problem, Wrong Solution

My last post referenced an article in the ABI update newsletter. Now it's been put online here, and there's another story in there people should pay attention to.

The second brief, "Democrats' Proposal On College Loans May Face Funding Problems," shows the danger of letting economic policy be set by people who don't understand economics.

They want to make higher education more affordable. Fine. Do something to address the skyrocketing cost of tuition. But lowering loan rates student loans simply shifts the burden to taxpayers while giving colleges every incentive to increase tuition costs further. The taxpayer-subsidized student loans are the reason college has gotten so expensive in the first place.

Student loan debt is a big part of the picture when it comes to my work, and it's exempt from bankruptcy and debt management plans. The problem is, too many students have been told a big lie all of their lives; just go to college, and everything will be great. Once you have that piece of paper, there will be a great job waiting for you when you graduate.

I've seen more people mired in debt because they fell for that lie... they borrow what they must to get through college (and not just tuition; a lot of student loan dollars go toward rent and food), then emerge with their degree thinking the great life they were promised will be close at hand. And when it doesn't happen right away, they turn to credit cards to get by. Thus the student loans were just the beginning of a spiral into debt that will last the borrower the rest of his/her life.

The truth is, a college degree doesn't mean as much today as it once did. Even the fancy $20k per year college doesn't do as much for you as you've been told. I really do believe the "just get a degree" crowd (which includes 90% of the teachers I had) doesn't care if you get mired in debt for life, since that's a constant incentive to stay in your box and be a productive citizen. If you're free from debt, you might actually have time to think for yourself, and that's no good for the academic intelligentsia.

I don't know how this post got so far off the rails; sorry about that. Bottom line is, lowering student loan rates will ultimately just make college more expensive, offsetting the benefit of this latest scheme. It's just not the answer.