Because federal student loans are nondischargeable. It’s not comparable to an auto loan or mortgage at all, and certainly not some unsecured free ride. And from a policy perspective, would it really be that great to underwrite student loans like other consumer loans? How would a low-income student ever qualify? And god forbid you choose a major that’s not engineering…
ETA: Forgot to add that “the federal government will loan up to whatever tuition the university is asking for” is also untrue. The aggregate federal loan limit across the entire degree program is $31,000 for a dependent undergrad and $57,500 for an independent undergrad.
Walmart occasionally uses eminent domain to get land to build stores on. Why should they get rights that colleges don’t? Education is more important than yet another place to buy the same things you can get everywhere else.
Your argument is nuanced and thoughtful, cutting straight to the heart of the issue, clearly and cogently identifying the important points, and offering measured and reasonable solutions.
Wait, no it isn’t. It offers specious claims, makes bad comparisons, and draws false equivalencies.
I did not know that last point; thank you for informing me.
But the main point is this. The purpose of student loans is to make an education affordable to everyone. But the programs are poorly designed and thus are having the opposite effect. Before Stafford Loans were created 50 years ago, there were many good, affordable options for higher ed, even for the poor. Schools were good at keeping costs reasonable. Of course at the time, living on campus was a bit more frugal than it is today.
But once the federal government steps in with subsidized loans, then the schools don’t have any motivation to keep costs down. If they raise prices, the government is there with more money, so students can still afford to attend. Prices are soaring, as everyone knows, and even government research confirms the obvious: more loans lead to higher costs. Instead university administrations compete to spend on more and more luxuries for students as well as hiring more administrators who don’t really do much of anything. We have more students than ever entering college, but poor students who need loan money to cover almost everything leave with large debts, and maybe a diploma but maybe not. So the net effect has been bad for poor students.
A smart student loan program would focus on students who actually need aid and are planning to spend the money on something useful. You mentioned engineering. Engineers are well paid. The loan program should, at least, try to nudge students towards high-paying majors and away from English Lit and Sociology.
Ah, the Bennett Hypothesis. Has historically been a controversial idea, but the evidence does seem to be trending in that direction lately. It’s definitely not a perfect program.
Should it, though? I think it’s good for society that we still encourage less remunerative pursuits, even if it costs society some extra money. But you are correct from a pure underwriting perspective.
I notice that he’s apparently only willing to take his economic analysis so far.
I wonder, for example, if he would be supportive of a differential pricing scheme, whereby degrees that lead to higher incomes also attract higher tuition fees? After all, in many cases those degrees are more competitive in terms of entry, and we already have something like that for professional graduate degrees like law and medicine and business. Why not extend it to engineering and computer science, for example?
Australia’s university system, which is essentially a national system run by the government, has a three-band cost system. It costs just over $A6,000 (about $US4,500 at current exchange rates) per year for a humanities or education degree, almost $A9,000 per year for an engineering, mathematics or other science degree, and about $10,500 per year for economics, accounting, law, medicine, and a few others (law and medicine are generally undergraduate degrees in Australia).
Or just make all those displaced home owners and apartment tenants live in the campus office lobbies and empty (by night) classrooms or the gym; and put them to work cooking in the dorm cafeterias or in the dorm laundries.