A Sane Solution to the Student Debt Crisis
How the GOP can use debt relief to destroy the Academic Industrial Complex
Republicans should support student loan forgiveness…with some important caveats.
For the record, this is not a self-interested call to action. I have zero student loans and never did. Nor did I receive financial assistance from my parents; I do not come from a wealthy background. I paid for my private school college education using academic scholarships and cold hard cash that I earned from summer work. My argument here is political, not personal.
After three years of the COVID panic induced interest rate freeze, the 43 million Americans with student loans are set to begin paying on their loans in less than a month.
At a time of sky-high inflation and economic uncertainty, that additional financial burden will hit millions of households hard, as the average student loan borrower owes $37,000. It is no wonder that Joe Biden and the Democrats are eager to try and find a way to stave off this financial hit. The minute the economy stops limping along and plunges into full-on recession, there will be an enormous price to be paid by our political class. Resuming student loan payments could very well hasten that day of reckoning.
The conservative response to this situation has been to flip the bird to the student loan borrowers: “you took out loans, so you pay them back.”
That’s right, suck it up cupcake!
This response might be emotionally satisfying (“take that, you avocado toast-eating, Prius-driving, Joe Biden-voting, college-educated libtards!”) but it papers over key considerations. For one, student loan holders are a huge voting bloc, and a politically diverse one at that. Telling any group of voters to shove it, even if they have no intention of supporting you, is politically risky.
It’s also bizarre to see conservatives on the side of big banks and the federal government. Why is the complaint always directed at the borrower: “you took out a loan, so pay it back” and never directed at the banks: “you loaned out money to an 18-year-old who wants a gender studies degree; you’re an idiot”?
Mainstream conservative commentators like Ben Shapiro treat student loan debt as more sacred than marriage vows. This is an inversion. Making sure banks get their pound of flesh is far less important than ensuring families stay together.
Many have rightly pointed out that student loan forgiveness is unconstitutional, which is true. But it was unconstitutional for the federal government to loan out that money in the first place. There is no provision in our founding documents that says the feds are supposed to subsidize higher education for the whole population.
Indeed, it was the federal government pouring money into the university system that caused the price of college to skyrocket to such absurd levels. From 1963 until now, the price of a college education has tripled, after adjusting for inflation. Meanwhile, the inflation-adjusted starting salary for college graduates has remained flat at around $55,000 per year.
At the same time, mass immigration and outsourcing has hammered wages for non-college educated jobs. This economic situation has placed young people in a vise grip: either take on massive amounts of debt in order to have a shot at a middle-class life, or accept a place in the unstable and often grueling world of blue-collar work. Even today, a bachelor’s degree confers a 75% boost to lifetime earnings over a high school diploma.
Colleges have become the government-sponsored gatekeepers to economic wellbeing. The point of college in the modern degree-mill university system is to gain the social and political capital necessary to have access to high paying and high-status work. What is respectable today is liberalism. College is where young Americans acquire the social skills to navigate the politically correct world. In order to get a high paying job in finance, law, government, media, or the non-profit world, you need to know how to speak fluently about how much Black Lives Matter, “female penises,” and the pandemic of “disinformation.”
America doesn’t need re-education camps; we already have them in the form of our colleges.
The American Right, therefore, has an enormous incentive to shatter the stranglehold that a college degree holds on economic success. Student loan forgiveness offers a powerful tool on this front.
Republicans should support forgiving the vast bulk of the publicly held student loan debt in this country with the condition that the federal government stop giving out student loans altogether. Congress should forgive all of the current student loan debt AND pull all future higher education funding. That means no more Pell Grants, no more FAFSA, no more earmarks for colleges.
Right now, the federal government holds $1.65 trillion in student loan debt. Leaving the taxpayers holding the bag on these notes is fiscally painful, to be sure. But there are ways of meliorating that blow. For one, the total value of all college endowments in America is $800 billion. Along with student debt relief, Congress should pass a one-time 100% endowment tax that affects all colleges and universities that take federal aid (my alma mater, Hillsdale College, would be one of the very few institutions of higher education that would not be affected, because it takes zero dollars in federal aid).
This one-time tax would cut the taxpayer’s burden in half. Cutting all federal aid to higher ed would save another $150 billion per year. That means that in less than 6 years, the combination of the one-time endowment tax and the savings from future student aid would make the student loan forgiveness pay for itself. Instead of punishing non-college-educated Americans, my plan for student loans would punish the people responsible for putting so many students into debt: the colleges and universities themselves.
The upside of this tax and cut plan is that our institutions of higher learning would have to figure out how to survive without suckling on the taxpayer teat. A lot of schools would go bankrupt. Good. I say this as someone working on his PhD: the best thing that could happen to American higher education would be the complete elimination of all state money from the education system.
The influx of taxpayer cash has corrupted academia, turning the whole enterprise (with the exception of a few holdouts) into a repulsive grifting operation. Our country would be a better place if we razed every college in this country to the ground and started over.
Most people do not need college degrees. The best way to learn how to run a business, for instance, is not by getting a business degree but by working in a business. The same is true for most trades. The system of credentials and government licenses that dominate our lives are shackles on the creativity and productive power of the American people.
The massive debt burden on the college-educated gives corporate human resources departments a powerful tool to wield against politically incorrect employees. Without a high paying job, most college- educated Americans cannot afford to pay the mountain of debt that comes along with access to middle class life in modern America.
In medicine, the massive debt load that doctors must take on ensures compliance with the regime’s edicts. Much of the corruption in the medical field that we’ve witnessed over the last several years is traceable to the rigid political enforcement that flows from financial dependence.
A free market in education would make America’s colleges much healthier. In reality, the only type of person who needs college is the sort of young person who wants to read Plato in the original Greek, or who wants to dedicate years of their lives working through the more complex and pressing questions connected to human learning. The inducement to higher education should not be salary and compensation but spiritual fulfillment.
In turn, the quality of American high school education would become better if more colleges closed. An army of unemployed PhDs from the implosion of American higher ed would mean that the worst scholars would have to get jobs more fitting for their natural talents…such as cleaning toilets, picking crops, and sweeping streets. Better teachers would find a place in America’s public schools, providing high quality education to high school students free of charge.
Forgiving student loans might not make college-educated voters support the Republican party, but it could very much weaken the motivation these voters have to go to the polls against the GOP.
More importantly, forgiving student loans now—with the right caveats attached—would severely weaken the liberal academic stronghold. That means electoral payoffs down the line for the Republican Party. Democrats don’t have an answer to this proposal. If they refuse to go along with debt forgiveness, then they lose face with their voters. If they allow future cuts to higher education, they weaken their ideological grip on the populace. Either way, the Left loses and the American people win.
Originally published at American Greatness.
The Federal government should have never gotten involved in Student Loans. For years, the banks did this and it was structured like a regular loan. You took it out, you used it, you paid for it. When I was in college, Pell grants and Sallie Mae did the school loans and people paid them back.
When you start giving people money for free, they'll waste it.
Colleges are no different.
nationalizing endowments = yes
outright forgiveness = no
there should be some plan that's a little more reasonable.
Part of what's going on is that the conservative chattering class is bereft of ideas and creativity. You are offering a potential solution. But back in the pre-Obamacare era, the conservative answer was similarly: 'dont get sick' and that's a total non-starter for people with chronic diseases. It's a policy answer that ultimately is lazy and reactionary.
The conservative answer here, "pay yer bills" is similarly stupid. It also avoids any details about how stupidly the whole system is currently structured.
The grad plus loans are artificially set at 8% for no good reason. Why not let the rate float? Because then uncle sam can't make $30-50 billion per year off of grad students.
Why are student loans not priced for risk of default, like every other loan issued? A doctor's risk of default is 1000% less than a general studies degree, and yet the profile risk is treated the same. Price the risk accurately within the student loan.
And as Eugine mentioned: keep the institution on the hook for defaults.
Let people discharge the debts in bankruptcy. That little change was a Democrat priority in 2006 or so. For some reason they never have to pay any price for that handout to the banks. Make the banks accept the actual risk of issuing debt to 18 year olds by losing their shirts when people default. That will change behavior as well.
Make people put a down payment of some amount on the issuance of each loan. Again, like every other financial obligation.
Allow institutions to 'repossess' the degrees by invalidating their academic credentials upon default. Prevent people from using the academic credentials if you default on the debt. That will cause people to adjust their behaviors.
Incentivize the issuance of cheaper degrees to create price competition.
And the biggest elephant in the room possible: fix employment discrimination law so that employers can screen people without using 'college degree required' as a way to evade the chronically litigious employment applicants who game the system to prey on white collar employers who can't afford to fend off lawfare.
This regime is propped up by a thousand little decisions meant to subsidize bullshit degrees from degree mills. Change the equation and it will change the outputs.