Student Loans

Student Loans Aren't Working

But free college won't fix this slow-moving catastrophe

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This article is part of a feature package on how the American Dream became unaffordable for millions of working-class and middle-class Americans. For more on Reason's autopsy of how things veered off track, read "How the American Dream Became Unaffordable" or the other two features in the package, "How Doctors Broke Health Care" and "Can't Afford Your Rent? Blame Herbert Hoover."

On the day he signed the Higher Education Act of 1965, President Lyndon B. Johnson declared that the law would "swing open a new door for the young people of America" and provide "a way to deeper personal fulfillment, greater personal productivity, and increased personal reward." Johnson wanted Americans to know that his government would do whatever it could to help "every child born in these borders to receive all the education that he can take."

Signed at Southwest Texas State College, Johnson's alma mater, the Higher Education Act authorized federal scholarships and federally funded part-time jobs for students who could get into college but couldn't pay for it. But the real catalyst for increasing college enrollment was a provision that allowed the government to directly lend students money for tuition and to guarantee loans made by other entities. This new lending authority, Johnson said at the signing ceremony, would allow the federal government to issue to "worthy, deserving, capable students" loans "free of interest and free of any payment schedule until after you graduate."

The modern approach by which students finance higher education grew on and around these three policies—federal scholarships, federal work-study funding, and federally guaranteed loans—like vines around a trellis. Yet half a century later, many young Americans feel that Johnson's signature education initiative has saddled them with excess debt and delayed their graduation into middle-class adulthood.

The Occupy Wall Street protests of 2011 started as a cacophony of disparate complaints against the financial sector but eventually coalesced around college debt. The idea of forgiving student loans has since moved from poster boards on the streets of Manhattan and D.C. to the campaign websites of Democratic presidential candidates, with Sen. Bernie Sanders (I–Vt.) promising to wipe out student debt for all borrowers and former Vice President Joe Biden pledging to expand existing loan forgiveness programs.

Johnson wanted future generations to think of the Higher Education Act of 1965 as a promise from the federal government: "Tell them that we have opened the road and we have pulled the gates down and the way is open, and we expect them to travel it." He and the 89th Congress paved that road with the best intentions, and many millions of young people have indeed traveled along it. Why, then, do so many Americans who have participated in our system of financing higher education feel like they've been ripped off?

Because many of them were.

The first student loan crisis occurred more than 20 years before Occupy Wall Street protesters set up camp in Zuccotti Park. Yet it "followed a strikingly similar path to the more recent experience," the Brookings Institution's Adam Looney and the University of Chicago's Constantine Yannelis wrote in a January 2019 working paper titled "The Consequences of Student Loan Credit Expansions: Evidence From Three Decades of Default Cycles."

In the 1980s, an alarming number of student loan borrowers began defaulting on their payments. In 1985, the default rate for federally guaranteed student loans—the percentage of borrowers who had failed to make a payment within 180 days of the repayment period—jumped to 11.7 percent from 10.7 percent the year before. The federal government's payments to lenders who couldn't collect from student borrowers rose from $749 million to over $1 billion. "The financial implications…are staggering," U.S. Education Secretary William Bennett said in August 1985. Without major policy reforms, he projected the default rate would increase to 13.6 percent by 1990.

He was wrong. The student loan default rate for all borrowers was roughly 22.4 percent in 1990. By 1992, the federal government's annual cost for default payments was nearly five times what it had been in 1985. The agency then known as the General Accounting Office (GAO) estimated in a 1993 report that the Department of Education the year prior had "paid about $5 billion in default claims and interest subsidies."

But the student loan default explosion was not occurring across the entire education sector. The Department of Education's data suggested, and the GAO and the Office of Management and Budget would later confirm, that students of for-profit or "proprietary" schools—then and now the largest providers of technical and vocational training to American workers—were defaulting at much higher rates than other types of students, largely due to bad federal incentives.

"While proprietary school students comprised about 22 percent of all Government Student Loan Program borrowers who received their last loan in academic year 1983, they accounted for 44 percent of defaulters as of September 30, 1987," read a bipartisan 1990 report from the Senate Permanent Subcommittee on Investigations. "Over that period, the student default rate for proprietary schools was 39 percent, as contrasted to a 10 percent rate for four-year public and private schools."

The rate of default was essentially eating the Government Student Loan Program (GSLP) program from the inside. "The cost of defaults, as a percentage of all GSLP program costs, rose from about 10 percent in [fiscal year] 1980 to 36 percent in [fiscal year] 1989, and to more than 50 percent in [fiscal year] 1990," the Senate report said. "In other words, currently more than half of the government's GSLP cost is going to pay for defaulted loans from the past rather than to subsidize education and training for today's students."

In their paper, Looney and Yannelis trace the default crisis of the late 1980s and early 1990s to Congress' 1972 reauthorization of the Higher Education Act, in which it allowed for-profit or proprietary colleges to participate in the GSLP. When it reauthorized the act in 1976, Congress extended eligibility to applicants who had not completed high school and encouraged states that hadn't done so already to create their own "guaranty agencies," which would partner with the federal government to initiate and guarantee student loans for low-income students.

In hindsight, allowing high school dropouts to borrow federally guaranteed money in order to attend for-profit colleges was disastrous for a large number of borrowers. But you can see the nobility of the idea if you squint. The federal government was already subsidizing the education of future teachers, lawyers, doctors, and accountants; what about mechanics, electricians, plumbers, and welders? Didn't they need training, and didn't that training cost money?

Bennett, who served as education secretary from 1985 to 1988, did not mince words about for-profit schools, telling Congress in 1988 that his department found "serious, and in some cases pervasive, structural problems in the governance, operation, and delivery of postsecondary vocational-technical education."

But he also trained his criticism on state guaranty agencies, which were intended to serve as paternal co-signers for students but ended up being something else entirely.

First authorized by Johnson's Higher Education Act of 1965, such agencies were supposed to "partner with the federal government to co-sign the bank loans" and serve "as ambassadors at the local level, educating high school students about college opportunity and the availability of loans," the progressive Century Foundation's Robert Shireman and Tariq Habash wrote in a 2016 report on the legacy of guaranty agencies. These supposedly benevolent bodies would not only share the risk of default with the federal government; they would provide the Department of Education with a network of partner organizations that could help implement the Higher Education Act on the front lines.

"The idea," Shireman and Habash wrote, "was that by putting their own donated resources on the table, guaranty agencies would have a stake in a humane and successful loan program, helping low-income students attend quality colleges." Ideally, "they would operate as charities do, with an approach that hinged on more than just the bottom line: when borrowers did default, rather than immediately engaging in aggressive collection tactics, the agencies could assess the situation and provide assistance and advice as appropriate."

But states were not eager to take on the risk of loan defaults, as evidenced by the fact that only half of them formed any kind of guaranty organization after the passage of the Higher Education Act of 1965. To incentivize the formation of guaranty agencies in every state, Congress in 1976 made the federal government fully responsible for reimbursing lenders in the event of default.

"In essence, the federal government was issuing a blank check to cover the cost of operational expansion by any guaranty agency that decided to take advantage of that opportunity," Shireman and Habash wrote. "The system boomed, but rather than having risk-sharing partners, the federal government instead had a set of guaranty agencies that, like a sole-source contractor, earned more money with every loan they guaranteed rather than contributing anything at all."

In its 1993 report, the GAO noted that the structure of state guaranty organizations was fundamentally problematic. They operated with a federal charter as a co-guarantor of student loans, yet they "assume[d] little financial risk and are not compensated in a way that provides sufficient incentives to prevent defaults."

In fact, guaranty organizations were compensated by the federal government in a way that encouraged risky lending, according to the 1990 report from the Permanent Subcommittee on Investigations. To cover their operating costs, guaranty agencies were allowed to charge both student borrowers and the Education Department a percentage of loan values. When students defaulted or died or declared bankruptcy, the Education Department reimbursed lenders for 100 percent of the default amount, with state guaranty agencies acting essentially as a conduit. Yet when guaranty agencies managed to collect defaulted payments from borrowers, they had to give the Department of Education only "65 percent or 70 percent of any monies collected." That combination of incentives resulted in assembly line lending, not prudence.

By the late '80s, the federal government's efforts to educate more low-income students had resulted in a mad dash to lend as many poor people as much money as possible. Bennett sought to reduce taxpayer exposure to the federally guaranteed student loan market by submitting a host of reforms to Congress, many of which were later enacted. New rules and regulations passed by Congress in 1989 and 1990 capped the amount of revenue proprietary colleges could derive from federal student aid programs at 85 percent; the guaranty agencies were tasked with paying a larger share of default costs; and schools whose students had default rates above 30 percent were barred from receiving federal aid.

These policy changes shrunk both the for-profit college sector and the student loan default rate, according to Looney and Yannelis. When Congress loosened the rules in the mid-1990s and again in the early 2000s, the number of for-profit colleges increased, as did the default rate.

All told, Looney and Yannelis estimate that this process—federal credit expansion, default rate increase; federal credit contraction, default rate decrease—has happened three times, with the most recent credit contraction cycle occurring just as Occupy Wall Street was finding its footing. Considering that we're now in a period of relatively tight credit for higher education, it should come as no surprise that default rates are down.

The unintended consequences of federally guaranteed loans to students of for-profit institutions has been a major policy topic for decades now. But what about the attendees of traditional academic institutions, such as public colleges and nonprofit private universities? Have they been fleeced as well?

Bennett argued in a 1987 New York Times op-ed, "Our Greedy Colleges," that federal aid was actually making all forms of college more expensive. "In 1978, subsidies became available to a greatly expanded number of students," he wrote. "In 1980, college tuitions began rising year after year at a rate that exceeded inflation. Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible."

The "Bennett Hypothesis" has been a source of conflict among higher education policy makers and economists, largely because it's been so difficult to test. What's not in dispute is that college costs have increased dramatically over the last three decades. Between 1981 and 1995, the average tuition and gross fees for full-time undergraduate students across all institution types increased 88.7 percent; between 1996 and 2014, the increase was 70 percent. In short, every type of institution is significantly more expensive now than it was three decades ago in today's dollars, though public institutions remain the most affordable.

How much of that cost increase was driven by federal aid? It's difficult to determine. The current consensus is that private colleges, both nonprofit and for-profit, respond to federal aid by reducing the discounts they offer to students. Less federal aid, bigger discount; more federal aid, smaller discount.

Proving causation is tougher. David O. Lucca, Taylor Nadauld, and Karen Shen noted in a 2015 report for the Federal Reserve Bank of New York that researchers "only have reliable time series data on the sticker-price of tuition rather than the net tuition paid by students after accounting for scholarships or discounts to lower-income students." Their paper, which looked at the impact of credit expansions on tuition increases, found that "expensive, private, or sub-four-year programs are associated with larger tuition responses to loan maximum changes."

The difficulties of proving the Bennett Hypothesis reflect the complexity of figuring out exactly how much college costs, particularly at private nonprofit institutions. As Lucca et al. note, the actual cost of college is often not the same as the advertised price of college. This phenomenon is also a result of federal intervention in the higher education market.

To determine the cost of attending any particular school, students can't just look at the coming academic year's "sticker price," which at private nonprofit institutions can exceed the median U.S. household income, and which very few students pay in full. Instead, applicants must fill out a Free Application for Federal Student Aid (FAFSA), which the federal government uses to determine a student's "expected family contribution" as well as what types of federal aid the student is eligible for. That information is shared with the schools that the student designated in her FAFSA application. The schools then determine how much "institutional aid"—essentially, merit- and need-based discounts off the sticker price—to offer the person. Eventually, students receive a tailored aid package from their selected schools informing them how much it will actually cost them to attend.

In 2017, economist Lesley J. Turner looked at the impact of need-based Pell Grants on the final cost students paid. Across the entire higher education sector, she estimated that between 11 and 20 percent of Pell Grant aid is "passed through" to schools, meaning that the schools find a way to capture a portion of the aid without charging students any less out-of-pocket for their educations. While Bennett claimed that all types of schools capture aid without lowering costs, Turner found that the phenomenon occurs most notably at private nonprofit institutions. Some selective private nonprofit schools, Turner found, manage to capture as much as 75 percent of Pell Grants. In short, needy students attending these schools are unable to increase their purchasing power by the total amount of the Pell Grants they receive.

My own experience is instructive. After I filled out and submitted my FAFSA in spring 2004, the private nonprofit university I ended up attending informed me that I would be receiving a merit-based and a need-based scholarship from the university, a merit-based scholarship from the state of Florida, and a need-based Pell Grant from the federal government. The remaining amount I owed in tuition and fees that first year was roughly as much as I was eligible to borrow in federal loans as a first-year college student. The following year, my alma mater increased its tuition and fees, but my Pell Grant dropped slightly with the federal schedule. Rather than increase my discount, my university kept my discount the same and informed me that I owed slightly more—but still roughly as much as I was eligible to borrow in federal Stafford loans as a second-year college student. This process repeated in my third and fourth years, when, due to tuition increases, I also became eligible for an additional need-based federal Perkins loan.

There are, of course, alternative theories to explain why the increase in college costs has far outpaced inflation. In a 2014 report, the Congressional Research Service suggested that colleges may have "ineffective centralized control of costs, suffer from various types of productivity issues, and have institutional orientations and incentives targeted toward raising and spending considerable amounts to enhance students' experiences as opposed to orientations toward using resources efficiently." But even if other factors are driving up costs, federal aid makes those cost increases possible. Which means that financial aid for private nonprofit university students looks a lot like health care, wherein the customer, the third-party payer, and the service provider all have varying amounts of information and the sticker price is never the actual price.

Just as expensive health care keeps you alive, expensive college increases your earning potential. In 2015, researchers Christopher R. Tamborini, ChangHwan Kim, and Arthur Sakamoto published a paper in Demography that measured the 50-year lifetime earnings gap between high school graduates and bachelor's degree holders at $896,000 for men and $630,000 for women. Considering that only 2 percent of students borrow more than $50,000 for an undergraduate degree, most of us are getting a good return on our education.

But what if you borrowed money for college and did not get a degree? What if you borrowed more than you can afford to pay back? In other arenas, people who lose everything on a bad bet have the option of discharging their debts and starting over by filing for bankruptcy. Student loan debts, however, are "presumptively nondischargeable." That means that it's possible to get rid of them by declaring bankruptcy, but most people can't.

The Bankruptcy Reform Act of 1978 prohibited borrowers from discharging student loans in bankruptcy for the first five years of repayment. Later amendments changed that to seven years, and then to the entire life of the loan. In 2005, the Higher Education Reconciliation Act made even private loans nondischargeable in bankruptcy.

In a 2012 piece for Reuters, the progressive writer Maureen Tkacik highlighted fearmongering in the 1970s, when Los Angeles Times reporter Linda Mathews wrote about "underground newspapers urging students to use bankruptcy to avoid paying loans." The Wall Street Journal and The New York Times also published pieces warning of a looming generation of college-educated deadbeats who would rather plead poor before a bankruptcy judge than pay a penny for their own education.

A GAO report commissioned by Congress supported the claim that student loan borrowers were not abusing bankruptcy, but "the evidence of a lower than 1% discharge rate of federally insured student loans in bankruptcy did not block the nondischargeability provision from entering the Bankruptcy Code," University of Michigan law professor John A. E. Pottow wrote in 2005. After all, the fact that borrowers were not then fleecing the federal government did not mean they wouldn't eventually try. Rep. Allen E. Ertel, a Democrat from Pennsylvania, claimed during the 1970s bankruptcy debate that the effort to preserve dischargeability was "almost specifically designed to encourage fraud."

So why has Congress continued to make student loan debt presumptively nondischargeable? The two main objectives, according to a 2019 report from the Congressional Research Service, are protecting the availability of student loans for future generations and protecting the "public fisc," i.e., the federal purse, from the forgiveness of debt owed to, or guaranteed by, the government. What's more, there's little to no collateral for creditors to liquidate in the event of bankruptcy. My diploma is not worth what it cost to print it, and my degree is nontransferable. Human capital is not like other kinds of capital—think of a factory or even a patent, which a bank could seize and sell if the borrower failed to pay.

But there are two very good reasons to reinstate dischargeability. The most libertarian reason is that bankruptcy is a market signal, and the higher education sector badly needs more of those. Treating student loan debt like any other kind of debt would make lenders more cautious; schools would need to demonstrate to both banks and potential students that they can equip the latter to repay the former, making it harder for students to indebt themselves.

That said, if we did require banks to assess a borrower's credit risk and an institution's ability to help students find work that will allow them to meet their financial obligations, it would likely result in restricted credit access for low-income and minority borrowers. Such a market might offer them no credit at all or interest rates significantly higher than those available to their less risky peers. That's not an ideal future.

But the same students who might lose access to funding in an exclusively private credit market are also the ones who suffer most under the current system. As University of Michigan economist Susan Dynarski noted in a 2015 piece for The New York Times, students who have the smallest debt loads also have the highest default rates. "Defaults are concentrated among the millions of students who drop out without a degree, and they tend to have smaller debts," she wrote. "That is where the serious problem with student debt is. Students who attended a two- or four-year college without earning a degree are struggling to find well-paying work to pay off the debt they accumulated."

Preventing those borrowers from discharging their loans in bankruptcy is not helping the American economy, but neither is lending them money to finance degrees they can't complete. Those students need a different route to increasing their earning potential.

The gainfully employed college graduate who has to delay buying a home or starting a family by a few years because of student loans from undergraduate school may not seem like a sympathetic character. He has a job, after all, and is likely making more money than he would be if he hadn't attended college. The working adult who borrowed money to attend a sham for-profit school is also not blameless. But the status quo will not hold forever, and the alternative to what we have now is not necessarily a free market for higher ed.

If elected president, Sanders would "cancel the entire $1.6 trillion in outstanding student debt for the 45 million borrowers who are weighed down by the crushing burden of student debt," according to his campaign website. His plan calls for canceling all debt currently held or guaranteed by the federal government in addition to purchasing and canceling all private student loan debt. Biden has proposed a less ambitious debt forgiveness plan and a doubling of the maximum value of the Pell Grant per student. Both candidates want to use federal funds to provide two years (Biden) or four years (Sanders) of free public college.

Voters seem open to further federalizing higher education funding. A Quinnipiac University national poll released in April 2019 found that 57 percent support a debt forgiveness plan proposed by Sen. Elizabeth Warren (D–Mass.) that is more radical than Biden's but less radical than Sanders'. (Support fell to 44 percent when pollsters asked about funding the Warren plan with "a new tax on the wealthy.")

The Democratic Party, meanwhile, is highly receptive. In a 2019 survey from the New America Foundation, only 17 percent of Democrats strongly agreed and only 28 percent somewhat agreed with the statement, "Americans can get a high-quality education after high school that is also affordable." When asked "who should be more responsible for funding higher education," 80 percent of Democrats chose "the government, because it is good for society." Only 19 percent chose "students, because they personally benefit."

American colleges are not going to endorse reforms that would require them to do more with less. Despite the mountain of evidence that its programs have made college more expensive for the middle class and jeopardized the financial security of nontraditional students and the working poor, the federal government is not going to cede its role atop the system. But current and future debtors are up for grabs. And convincing them to endorse a radical market-based proposal over a radical socialist one starts with acknowledging that our current system did them dirty.

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  1. But even if other factors are driving up costs, federal aid makes those cost increases possible.

    Yes, this is obvious and likely true rebuttal of claims that anything but subsidization drove up the cost of higher education. If it can, any business will charge its customers more.

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    2. It’s very good to know about Students Loans, Thank You!
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  2. The answer is to get the Federal government out of the student loan business altogether.

    1. The answer is to get the federal government out of the education business altogether.

      1. The answer is to get the federal government out of all business altogether.

        1. Now, now. The history of privatized military is not at all encouraging. The Post Office might be privatized, but it IS one of the few functions written into the Constitution. Enforcement of contracts on the Federal level would seem to mean that the Federal courts have something real to contribute.

          I’m not a Big Government fan, but there are parts of the Federal Octopus that are probably preferable to its absence.

          1. The military is arguably not a business.

        2. The answer is to get all government out of existence altogether.

    2. Hey, all those Deans of Diversity and Inclusion aren’t going to pay for themselves! And without the leverage of federal underwriting, how are schools supposed to be coerced into eliminating that foul legacy of the white cis-male patriarchy? You know—due process?

    3. Failing that, Trump should invalidate the use of federal funds or loan guarantees for useless degrees. Reserving the for STEM, business, etc.. Garbage like ‘gender studies’ would disappear overnight.

      And here’s a fun fact. A friend of mine is a chemistry professor at Eastern Washington University. He informed me that their gender studies professors make MORE money than chemistry professors.

  3. Mr. Riggs,
    This is the most comprehensive review of the problem I have read to date. The history of how we got here is significant and I’ve never seen it outlined so fully before. (And I have read a lot of articles on student debt).
    It’s interesting how markets work and how the wrong or misguided incentives can create new problems.
    I’m lucky. I’m able to pay my kid’s debt for them. The problem is it will take me 20 more years of payments before I’m done. If I live that long. All that time my interest rate is 7.9%. I pay $1000 a month. Only $100 goes to principle. The bulk of my payment goes to interest.
    I took the loans. I’m willing to pay them. But, for the life of me I can’t understand why the interest rate is so high? If the rate was 4% and I continued to pay $1000 a month I would have it paid in 10 years (half the time.
    First step before forgiving loans is just lower the interest rate I think.
    Thanks for writing this. Keep on top of this topic, you have a good handle on the problem.

    1. Perhaps you have looked into using your home equity to get a loan to pay off the student loans immediately, and use the lower mortgage rate to pay it off in 10 years instead of 20.

      1. College no longer teaches how to do anything.

        1. A college degree and many-many years of med school plus residency will allow you to make the BIG bucks, writing prescriptions to allow mere medically ignorant peons to blow on cheap plastic flutes! See, education IS worth something!

          And in these troubled times, do NOT forget to stay safe from the flute police!

          To find precise details on what NOT to do, to avoid the flute police, please see http://www.churchofsqrls.com/DONT_DO_THIS/ … This has been a pubic service, courtesy of the Church of SQRLS!

          1. Not only that, those med school graduates can engage in physician assisted suicide and send you on your way!

          2. Thank you for your “pubic service”.

            1. You’re welcome for my services! Pubic lice, and others elsewhere and everywhere, agree with you!

        2. Does this person own a home? Is paying off the loan like that allowed?

      2. Is that allowed? I tried to pay off a small student loan with an unsecured line of credit that would earn me cash back points. I was just going to pay that off with cash. The lender wouldn’t allow it. I could only pay it off from a cash bank account.

        1. Cash is fungible; put the cash in a bank account and pay it off.

    2. I’ve heard that as a reasonable compromise on the student loan crisis.

      It is perverse and wrong to give blanket forgiveness. This punishes the responsible and rewards the irresponsible. However, an across-the-board reduction in interest rates would help.

      That being said, you should be able to get a straight refinance or consolidation of your student loans. Even if you have marginal credit, you shouldn’t have to pay nearly 8% interest. It can’t hurt to look around.

  4. “The remaining amount I owed in tuition and fees that first year was roughly as much as I was eligible to borrow in federal loans as a first-year college student. The following year, my alma mater increased its tuition and fees, but my Pell Grant dropped slightly with the federal schedule. Rather than increase my discount, my university kept my discount the same and informed me that I owed slightly more—but still roughly as much as I was eligible to borrow in federal Stafford loans as a second-year college student. This process repeated in my third and fourth years, when, due to tuition increases, I also became eligible for an additional need-based federal Perkins loan.”

    Doesn’t this sound like a racket to anybody else? The college is tailoring the cost to match the sucker. The sucker being the student and us, the taxpayer.

    1. This is pretty much exactly how my student financing worked when I went to college, which was from 98-02.

      I’m also pretty sure that the IRS shares your personal financial data with the DOE and other student loan institutions, which is another racket. In 2009, I spent about half of the year in deferment programs for the loans due to unemployment, but got a new job and was back into repayment by the time my W-2 was released in early 2010.

      Within a week, all 3 of my loan providers contacted me to inform me that I had been selected for (non-voluntary) accelerated repayment programs, that basically doubled my monthly contributions. I spent the next 3 years paying more for my loans than I did in rent.

      Coming so soon after an extended period of near poverty, that kept me pretty lean for a good portion of my late 20’s and early 30’s.

    2. “Doesn’t this sound like a racket to anybody else?”

      Nope. No different than how automobiles are priced.

      1. Or houses. House prices tend to hover around where the monthly payment on a 30 year mortgage would be assuming certain interest rates and down payment levels.

        1. Given the wide range of median home prices across the US, that one doesn’t pass the smell test.

  5. I had the good fortune of attending a college that had two economics professors who were more or less libertarian and 20 years before you noticed that tuition somehow magically managed to equal whatever you could contribute plus the amount you could borrow, they were already teaching that as an object lesson in perverse incentives because it was going on long before your time. College tuition has long been a matter of “how much you got?” instead of “how much are you willing to pay?” Other people’s money.

  6. Or as PJ O’Rourke put it, given that you’re probably pretty good at doing what’s for his own good, any time the government has to pay you to do it, it’s almost certainly something stupid they’re trying to get you to do.

  7. “colleges have ineffective centralized control of costs, suffer from various types of productivity issues, and have institutional orientations and incentives targeted toward raising and spending considerable amounts to enhance students’ experiences as opposed to orientations toward using resources efficiently.”

    Colleges are given a free pass on this. Therein lies the real problem. FYCS

    1. I went to a research university. The engineering and sciences were always scrounging for grant money while humanities keeps expanding their buildings and teachers, and assistants since professors of humanities cant get real jobs. Then they force those who went to college to learn something to keep taking more idiotic classes like the history of lady gaga.

      Colleges and universities have become a joke.

  8. My own experience is instructive.

    Yes. Why did you choose an expensive private college over a state school? You qualified for both merit and need-based grants and scholarships yet you still went out and incurred non-dischargable debt for a “luxury” credential. Matt Welch used to run this joint and he dropped out of a state school.

    1. This can’t be emphasized enough. We want higher education institutions to compete on price, then individuals actually need to make long-term financially sound decisions when shopping colleges/universities/tech schools. Obviously, subsidized loans and grants disincentivize that, but the government interventions are as much a result of of individuals making poor financial decisions as they are a cause.

      1. Woah, woah. Individual responsibility? This is Reason, not some libertarian conspiracy.

    2. You get more value signaling and woke points for the private school.

    3. This is not a bad borrower problem. It is a ,big-government lending problem.

      While you are quick to point your fingers at the borrowers, you are actually defending and serving to perpetuate a nationally threatening, government run, predatory lending monstrosity the likes of which the country has never seen.

      Why would you do that? I thought Reason.com catered to conservatives, not tools for big-government?

  9. To turn a phrase, the government pretended to give you an education, and you pretended to pay for it.

  10. The solution I would propose is that universities are on the hook for 50% for the first 10 years and their liability gets reduced by 10% per year after that. I believe it would put limits on the number of majors both on the majors and the number of students in those majors that lead to jobs as baristas or wait staff. I have nothing against those jobs just that you don’t need a college degree to do them.

    1. “The solution I would propose is that universities are on the hook for 50% for the first 10 years and their liability gets reduced by 10% per year after that.”

      And, of course, this would be enforced by the government, the same government that got us into this, but this time it will be different, right?
      Sevo’s law: Any time a third party sticks its nose in a free transaction between two parties, one, or likely both, of those parties will suffer.

      1. Don’t disagree, but no one is going to end it. Just make sure the biggest beneficiary has skin in the game. It will at least slow down the growth.

  11. Happy Martial Law Easter Sunday, bitches.

    I would suggest to all the Christians here to go to church and pray for our country, but of course you can’t do that right now; the churches have all been shut down in state-controlled Soviet America until further notice.

    On the bright side, I think you’re still allowed to practice and observe your religious beliefs at home without being arrested. At least for now, anyway.

    1. Actually, some of us went, worshiped, prayed, rejoiced, and then went home. Our church hasn’t been shut down.
      These are natural rights, not given by the laws of man, but (supposedly) protected by the laws of man.
      Cops in this area aren’t real keen of violating their oaths just to get close to someone and make a few points for a venal politician.

      1. You’re fortunate. Happy Easter.

      2. Kansas supreme court forgot about that religious freedom thing.

  12. When young folks ask for free college, I tell them my experience.

    I graduated from “free” public high school in 1965. Every year, at the end of January, I go down to the ISD tax office and cough up four figures in property tax to pay for “free” public education. I will do so until I die, and then the school will tax my grave site.

    You can have some hope of paying off even a huge college loan. Whether you went to public school or not, the government payments will go on forever.

  13. It occurs to me that this quote

    President Lyndon B. Johnson declared that the law would “swing open a new door for the young people of America”

    exemplifies what is wrong with Progressivism: it assumes the government has to actually open the door, instead of merely putting the door in place. Or better yet, tear down the walls it built in the first place (and continues building with gusto today). Then it wouldn’t even need to put in a door.

  14. Any organization that thinks giving a non-dischargeable college loan to a high school drop out is a good idea is an organization that needs to be dropped from the federal budget.
    If they insist on providing loans, they should only be available for juniors and seniors. Presumably that would weed out those who have no business in college, and those who want an advanced degree can damn well pay for it themselves.
    Another great idea is to not provide government loans to attendees of colleges with an endowment greater than some countries GDP.

  15. Mike badly under-emphasizes how ruthlessly predatory these loans have become.

    Yes, there was the removal of bankruptcy dischargeability from the loans. But there was also the removal of statutes of limitations, Fair Debt Collection Practice laws, Truth in Lending Laws, and even state usury laws.

    Moreover the collection regime that was put in place for federal student loans, where the servicers (Sallie Mae/Navient, Nelnet PHEAA, and others), where (for example), a defaulted loan could be “rehabilited” into a new, much larger loan, where the aforementioned were (and are) paid a 16% commission, made defaulted loans extraordinarily lucrative.

    When Obama federalized the program in 2010, this took away the interest revenue from the aforementioned servicers (who used to be lenders), and made default/rehabilitation and other collection revenues far, far more lucrative than simply servicing healthy loans (which net them something like $5/month per account

    The perverted financial incentives don’t stop with them, however. Many years (decades, actually) of White House Budget data confirm that even the federal government has been making a slight profit- NOT A LOSS- on defaulted federal student loans. This is something that no other lender (including the federal government for other loans) can claim. This would make a mobster envious.

    Wonder why people are fleeing the country, committing suicide? THIS IS WHY. Wonder why collection companies are now installing 4000 SHARK TANKS in the lobbies of their headquarters? THIS IS WHY.

    This is not a bad borrower problem. The borrowers are as responsible – or irresponsible as they have ever been. They have not changed. WHAT HAS CHANGED IS THE LENDING SYSTEM. The borrowers are thrown into the shark tank. Meanwhile, the colleges pretend they don’pt see it, the Department of Education happily turns a blind eye to the carnage it is supposed to prevent (It now calls the schools and the lenders “Financial Partners”), and the entire lending system launches off the cliff.

    But even as far back as 2000, Sallie Mae (for example) was happily paying multi-millions in fines when they got caught for defaulting loans en masse (and fabricating documentation to make it look as if they had actually attempted to collect on the loans).

    So this lending system was weaponized AGAINST the borrowers. Mike Riggs needs to get this point.

    Having watched this lending hyperinflate from $350 Billion to nearly $2 Trillion over the past 15 years, and having seen many Presidents and Congresses come and go (both D’s and R’s), and do NOTHING to cure this unconstitutionally vicious and predatory lending system, as it became worse, and worse, I can say with confidence today that this is now a FAILED lending system.

    Today, 80% of all current borrowers will never be able to repay their loans. The overwhelming majority of those in the various “forgiveness” programs (at least one of which features a 99.2% rejection rate) will be disqualified before getting their loans forgiven, and will be left owing far, far more than had they never even tried.

    Dead. Done. Finished. Failed.

    At this point, returning bankruptcy protections to the loans will only succeed in pushing twenty or more million people into bankruptcy, Which will overwhelm the courts, take years of trouble, and will only confirm the obvious fact that 80% of the lending portfolio is artificial wealth which would never have been recovered.

    At the same time, it makes ZERO SENSE to raise $2 Trillion in taxes, so that the Department of Education and its crony contractors can be paid full book value to cancel the loans. The federal government OWNS 85% OF ALL STUDENT LOANS. THEY DO NOT HAVE TO BE PAID CANCEL LOANS. The taxpayer ALREADY PAID for these loans many years ago! That is why both Sander’s and Warren’s plans were suspicious in the first place.

    The most rational solution, at this point, is for the President to immediately issue an executive order cancelling all federally held loans, and Congress returning bankruptcy protections to those that remain. This could be done without needing one dime in Congressional tax appropriation, and without adding one penny to the national debt.

    This is truly the lowest hanging fruit on the fiscal stimulus tree.

    Trump said he would drain the swamp. So…here’s his chance to do exactly that. Any lending system that might come after (and I really don’t know that the federal government has any business even being in the lending business after what I have seen), should at LEAST have the uniform bankruptcy protections that the Founders called for AHEAD of the power to raise an army, and declare war in the Constitution.

    Begin again. Remember LBJ’s pledge that the loans would be “free of interest”. If there are to be federally guaranteed, or made student loans going forward, start with that. Frankly, I think it is probably best to end this experiment of Government-as-Lender.

    1. Alan Collinge
      April.12.2020 at 11:46 am
      “Mike badly under-emphasizes how ruthlessly predatory these loans have become…”

      No, he does nothing of the sort. Professional victims like you need to fuck off.

      1. And people who approve of rent-seeking need to fuck off double.

  16. Oh, c’mon! People buy 60k cars all the time and make payments on them, yet they can’t make payments on their student loans? Give me a break!

    Buy an old clunker and pay off your loans, people.

    1. Nonsense. You apparently are not aware of the uniquely predatory, vicious, and hyper-inflationary nature of these loans.

      These are not car loans.

      If a college education was like a car, the analog would be that you buy the car, site unseen, and when you drive the car off the lot, you realize there is no brake pedal. You crash, walk back to the dealership, and they say “hey buddy, you should have read the fine print. THIS car doesn’t come with brakes!”.

      A valid further extension of the analogy would be if you were standing around at the dealership, waiting for your tow, and you overheard the staff snickering, and discussing how they were going to spend the money they were going to get from an insurance policy they took out AGAINST YOU.

      Who’s the bad guy here?

      Yeah. This lending system is not constitutional. To say it’s “not working” is insulting to the people who devised it. For the colleges, lenders, and even the federal government (which has been making a small-but-not-insignificant PROFIT on DEFAULTED loans for decades ), it is working extremely well. Sky high defaults, borrowers being wrecked, and forced to pay many multiples of what they borrowed in the absence of both bankruptcy rights and statutes of limitations) is a FEATURE, not a BUG.

      Inculcate that before wagging you finger at the borrowers. Don’t be a tool for the worst big-government lending monstrosity in world history.

      ps. Sign this petition: https://www.change.org/p/cancel-student-loans-save-the-economy

      1. “If a college education was like a car, the analog would be that you buy the car, site unseen, and when you drive the car off the lot, you realize there is no brake pedal. You crash, walk back to the dealership, and they say “hey buddy, you should have read the fine print. THIS car doesn’t come with brakes!”.”
        And you expect me to be sympathetic to an asshole who would take out a note for that?

        “ps. Sign this petition: https://www.change.org/p/cancel-student-loans-save-the-economy
        Fuck off, slaver; pimps get flagged

        1. Of course, the feds want a nice student loan program like there is now. You get 4 more years of filling their heads with bullshit and propaganda, telling them the gummint is the answer to all their problems (when in actuality it is the source of 90% of them) then they “graduate” as debt slaves to the crony system.

          Works great. And as intended.

  17. The solution to the student loan “problem” is people need to be required to pay them back as agreed … regardless of how long it takes them.

    1. Nonsense.

      Why are you defending the worst big-government lending monstrosity the world (not just the country) has ever seen? I thought this site was for conservatives.

      You should turn in your conservative card. You’ve been played.

      1. “Why are you defending the worst big-government lending monstrosity the world (not just the country) has ever seen? I thought this site was for conservatives.”

        No, this site is aimed at libertarians.
        You.
        Are.
        Full.
        Of.
        Shit.

        1. Sevo is clearly ashamed of his small penis.

  18. I think the best fix is:

    (1) Eliminating federally guaranteed loans on a go-forward basis.

    (2) Allowing student loans to be discharged in bankruptcy after a certain period of time (7-10 years), and only with strict means-testing to prevent the potential for abuse that drove the non-dischargeabilty status in the first place.

    In conjunction, this would move loans back to private lenders—and reintroduce credit risk on the part of those lenders. That would mean lenders would have a strong incentive to engage in legitimate underwriting.

    Susie, with a 1020 SAT, wants $150,000 for an underwater basket-weaving degree at Mediocre A&T? Not happening. But Mary, with a 1530 SAT, wants $150,000 to pursue engineering at MIT? Sure.

    Would this lead to decreased access of funds for college? Yes.

    But that would eventually drive down the cost of most colleges—average schools wouldn’t be able to constantly raise tuition and expenses to pay for useless facilities and armies of administrators.

    1. One major problem is that schools have no accountability for luring in students who will never graduate. Almost everything else people buy has some kind of guaranteed fitness. Buy a toaster which doesn’t toast, get your money back. Sign up for an education you simply can’t finish, and you still owe. What’s perverse is that a university can kick you out days before graduation, and your 4 years minus one day are worthless.

      It wouldn’t be fair to blame this entirely on universities. Some students are just in it for the lols. But university incentives are only in signing up students for class, not for graduating, let alone actually teaching. On the other hand, if you were to charge half for teaching and the other half only for graduating, grade inflation would make a mockery of all degrees. You’d have to separate grading from teaching; but then graders would be so corrupt they’d make the mob look honest.

      The root problem is mandatory education enrollment; very little of what even high schools teach is actually useful to adults. Algebra? When was the last time most people used it? How often does anyone use sines, cosines, tangents; care about valence atoms; or diagram sentences? History would probably be useful if anyone actually remembered it, but considering how many “leaders” remember any lessons from the past, I’d say no one pays attention in history class.

      Schools have become babysitters. I don’t know what the real solution is, but a good start would be reducing the emphasis on classroom education for jobs that don’t require it.

      1. I empathize and agree with pretty much everything you said, but this

        Algebra? When was the last time most people used it? How often does anyone use sines, cosines, tangents…?

        makes me very sad. I use those things pretty much every single day. They were probably the most useful things I learned in high school.

        1. Are you *most* people?

          Most people don’t use squat from algebra, geometry, trig, calculus. Most people barely use multiplication and division, and that only for the most simple cases, like filling a gas tank or comparing single vs bulk prices in a grocery store.

          1. I use algebra, geometry, trigonometry, and occasionally even calculus, on a fairly regular basis, as part of my professional job.

            I didn’t have to take any of these as classes in college.

          2. Any DIY-er that does any kind of projects at home in their yard, hobby sewing, building, or even cooking uses algebra in some form.

            Making a tablecloth for an oblong table required trig. Making a round, flat bottomed, drawstring pouch required geometry.

            Scaling yard projects or furniture arrangements on graph paper requires ratio algebra.

            And normal people do things like this. There are reddits with thousands of subscribers for all of these hobbies. Amazing.

          3. I used algebra just the other day and I am retired. It is useful when you mix things.

          4. That’s what vocational school is for.

      2. also reduce the emphasis on classroom education for kids who clearly aren’t cut out for it.

        Sending some kids through 12 years of primary education is a waste of their time and their instructors time. there should be more alternatives.

      3. “but a good start would be reducing the emphasis on classroom education for jobs that don’t require it.”

        An even better start would have employers train employees in the necessary skills themselves rather than foisting this responsibility on public schools and the tax payer.

        I agree that it seems out of place that a job, say, as a counter clerk in a department store requires a university degree, but education is more than ‘classroom education.’ A successful student is compliant and able to defer gratification, qualities that an employer values.

        I last used trigonometry a couple of years ago. We could probably scrap it but I found it essential for programming the rotation of an avatar in a computer game I wrote. Maybe instead of scrapping trigonometry we could compromise by a law making pi into a more sensible number like 3 or 4.

        1. “An even better start would have employers train employees in the necessary skills themselves rather than foisting this responsibility on public schools and the tax payer.”

          An even better solution is for those who wish to work someplace learn what is required.
          Screw you and your ‘have employers’ do something.

          1. What’s wrong with on the job training?

      4. You use algebra all the time, but don’t realize it.

        One of the major benefits of math, however, isn’t necessarily doing the math itself, but how to solve problems. That is definitely something we need to learn how to do better.
        https://www.mathmedia.com/whystudal.html

        Geometry and related math was explained well by others.

  19. Which means that financial aid for private nonprofit university students looks a lot like health care, wherein the customer, the third-party payer, and the service provider all have varying amounts of information and the sticker price is never the actual price.

    Also remarkably similar to military contracts, whether cost-plus or any other type; the MSRP seldom has any relationship to reality.

  20. First its time to put the blame on politicians and academia who have enriched themselves on the backs of the youngsters…I”m still waiting for left wing profs to march to stop the financial rape of their students…nope haven’t seen it yet. Crony hypocrites.

    Second, if the Feds can help themselves and feel the need for backstopping student loans…some small changes. Colleges are on the hook for backstopping 50% of their student’s loans. Hell I’d make this for private loans as well. This would send a shock wave to the wokes who run colleges…and tuition would fall pretty fast as well as their career services departments would actually try and find the kids a job before graduation. That and useless marxist dumping ground majors like gender studies would disappear (thank you). And I”d even make this retroaction for any student loan made in the last 10 years..time the folks who benefited from this rape pay the price.

    1. “and tuition would fall pretty fast as well as their career services departments would actually try and find the kids a job before graduation”

      Aren’t there head hunters and employment agencies who make it their business to connect job seekers with jobs? College should be about educating students, even in controversial areas like gender, evolution and art.

      1. Since I don’t have a gender studies degree, perhaps you could enlighten us.

        Do headhunters and employment agencies typically get paid to seek out graduates of these ‘woke’ majors? Where’s the demand?

        1. “Since I don’t have a gender studies degree, perhaps you could enlighten us.”

          I don’t have one either but I can certainly enlighten you. I recommend a book called “The Second Sex,” by Simone de Beauvoir. She was French and a companion of JP Sartre, but don’t let that stop you. It’s long but a surprisingly easy read.

          “Where’s the demand?”

          Hollywood, New York. Places like that.

            1. Here I can agree with you.

    2. You’re blaming individuals for systemic issues. The only thing that’s going to change this system is for demand to be reduced. And demand is driven by those in our corporate world who require four year degrees for jobs that don’t benefit from a traditional liberal education. If we can get enough Fortune 500s to rethink their requirements, then that will force change in the system.

      1. “If we can get enough Fortune 500s to rethink their requirements, then that will force change in the system.”

        We just have to convince the Fortune 500 employers that the lazy, stupid and unmotivated make just as good employees as the hard working, clever and motivated.

        1. Or those who spent 4 years drinking, smoking weed, and videoing gnag bangs while earning a bachelors.

          Most college is a freaking joke.

  21. Relax—most colleges will be out of business soon.

    1. Most colleges are state (government) run institutions. They could sit empty for years and not have to worry about going out of business.

      1. But the professors and everyone else still need money for food and all the rest of it.

  22. The problem is that for too many people they do not get enough value from a post secondary education. By this I mean that they do get enough of a return on money they spend (borrowed or otherwise). I also see this as a multiple tier problem. Students have to make good choices. Avoid bad for profit schools, finish on time. School need to use resources better. Classrooms should be in operation day and night. Professors should teach first research second. Government should make sure schools are affordable (not free).

  23. i’d trade a writeoff of all outstanding student loans for a full exit on the part of the feds from the college financing business.

    no loans
    no subsidies/tax deductions
    no grants

    nothing. admit the failure. nuke it from orbit. move on.

    disclaimer: i have no student debt

  24. Buy the end of WWII, the Lefty Intelligentsia had made major inroads into the Universities. They loved the expansion of the Higher Education business brought on by the Baby Boom; more Sinecures for the Faithful! When the Baby Booms passed they fought to keep student numbers up, creating the myth that a degree – just about ANY degree – was a prerequisite for success.

    Now that myth is falling apart. The Intelligentsia are to goddamned lazy to actually teach much of any use, even if they knew anything (and most don’t)

    The Student Loan system was not instituted to make sure the maximum number of students got a necessary education. It was instituted to support the maximum number of Academic parasites.

    1. “Buy the end of WWII, the Lefty Intelligentsia had made major inroads into the Universities.”

      Yes you can find liberal in much of the Liberal Arts Schools. But in Engineering, Science, Business and Agriculture you are going find a pretty broad field of thought. So the idea that college campus are full of liberal is BS (and not the degree).

    2. You should blame the GI Bill. A large number of WWII vets went to college for free, and decided college was something their kids and grandkids needed too, at any cost to society.

      1. The bar slowly slid to the point that modern companies require four year degrees for Accounting Clerks and Purchasing Associates. These and 80% of the rest of white collar jobs “requiring degrees” should be filled via 2 year vocational schools.

  25. Most Americans, and better Americans, will support education and access to education. A program of long-term payments (a percentage of income, likely, over a period of 20 or 30 years) seems the most likely and best prospect. Expanded educational opportunities — a two-year program coupled with training in plumbing, welding, ironworking, and the like — also seem worthwhile.

    We need educated, skilled citizens. I expect America to improve in this area, against the wishes or anti-government cranks and people who prefer nonsense-teaching schools.

    1. I agree that we need and will continue to need educated and skilled citizens. While I oppose free post secondary education, I think we have to make it affordable and of good value.
      I would also say that training program in trades (plumbing, electrical, construction, ironwork, etc,) used to be sponsored by unions. This worked for the economy. Unions trained workers, workers were union members and companies paid union wages. Companies got trained workers and workers got good pay. Companies got rid of unions and now the companies expect tax payer to train their workers.

    2. The best education comes from on-the-job training and apprenticeships. There’s no need to sit in a classroom for two-years to learn to weld.

  26. At risk of being taken to the woodshed by the commentariat, I consider myself fortunate to be a professor at a private college (I teach in the school of business…please be gentle). Part of my benefit package is free tuition for my children, the first 2 of which won’t be entering college for another 8 years.

    I could no doubt be making much more in other non-academic gigs, but this one benefit (plus the love of teaching students essential business skills) keeps me in place for another 16 years, provided the HR policy does not change. I’ve purchased an old house near campus that I use as a rental, that my kids will live in one day when they attend school. I’m doing everything in my power to avoid the monstrous system described in this article.

    Ultimately, they may not be “college material.” And I’ll be fine with that. There is always trade school, entrepreneurship, or the military. This is my responsibility…if I can help my kids avoid this mess clogging up their early adulthood, it’s my duty as a parent.

    1. Sounds like your doing things right. I bet you are a good teachers also.

    2. I like your approach. You’re trying to be responsible and reasonable, and I fully applaud that. Best of luck to you and your kids.

  27. If you absolutely feel the government needs to be involved then make the universities liable for default. No university would underwrite the garbage xStudies and other useless crap that they currently offer to gullible kids.

    Only the brightest should be pursuing degrees anyway. The average Caucasian IQ is ~100. Does anyone here think there is any benefit to paying to send a kid with less than 100 IQ to college. That’s half the white kids kids in America. Mixed race Africans (AKA African Americans) have an average IQ of ~85. Hispanics have an average IQ of ~87. East Asians have an average IQ of ~104.

    We don’t need anymore college “educated” idiots. If this pandemic has taught us anything it is that there are plenty of essential jobs that don’t require an education. The whole system is set up to fleece the young and enslave them in a vicious cycle of debt they can never escape.

    It needs to end.

    1. Setting aside all the IQ stuff, just make the schools liable for the amount that they would not have been able to charge had the government interfered. Start either when the government began backing these loans, or when the inflation rate starts to take off, and mover forward from there. It wouldn’t be hard to figure out the difference between what a school would have been able to charge if their rates had increased no more than a broader inflation rate and what a particular school was charging in a given year. Any excess amounts are the schools liability, and are subject to the normal process of debt collection, bankruptcy, etc.

  28. Student loan forgiveness is a ridiculous solution, as is free college. Both would just exacerbate the higher education problem we have by throwing more demand at a limited supply. Here are a few thoughts on possible government actions that actually might work and still mostly respect the principles of a free market:

    1. Lead the effort to encourage trade schools as an alternative to traditional college. See the Swiss model.
    2. Lead the effort to change the current corporate mindset that you need a four year degree for every job.
    3. Lead the effort to encourage better standards for high-school students. The first two years of college are largely remedial high school.
    4. Set oversight and standards on student loan interest rates. 6-7% Interest rates on an unsubsidized Graduate loan are overpriced considering recent fed funds rates.

    1. All these are good steps, particularly #s 1 and 2.

  29. When I went to college it was around $1200-1500 for full time semester. I saw so many kids take out all the loan money they could every semester to the tune of 4 to 5 times that amount. No way anyone should be paying someone’s debt for their largess of their own doing! I hear the lines about oh they needed housing and food etc. Well get a fucking job to pay for that don’t borrow it! Nothing like paying for that meal today 22 years from now with interest! Give the kid a pencil and paper and if they can calculate how much they’ll owe give them a loan. If they can’t they shouldn’t be there in the first place.

  30. If the government can set doctor reimbursement rates why can’t they set per credit hour rates for anyone who is getting a government backed student loan?

  31. Just end government-backed and government-issued student loans. It’s very simple. Almost nobody will be able to pay the unreasonable tuition rates, and colleges will be forced to reinvent themselves. This will involve a lot of technology and online curricula, and tuition rates can go back to where they were decades ago, adjusted for inflation, when baby boomers could pay for college with their summer wages. It will also involve bankruptcies, administrator layoffs, and downsizing and re-purposing of extravagant facilities.

    The problem is the powerful greedy scam education lobby will stop this from happening.

    As things stand, student loan forgiveness is written into the loan agreements. People will pay 10-15% of their “discretionary” income for a number of years and then the debt goes away.

    1. No, it does NOT “go away” – the borrower receives a 1099 for the discharged amount, imputed as income.

      The most rational things I have read here is lowering the interest rate – charging 7% when they are giving banks money for essentially free is bullshit. And/or making the loan payment a set percentage of income for some number of years after graduation, payable at income tax time, then discharging the rest…WITHOUT a 1099, and socking some of the forgiven amounts back on the schools, who might exercise some judgment and cost control for a change.

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