Among the many costly campaign promises making the rounds in the early stages of the 2020 presidential race, Sen. Elizabeth Warren’s plan to forgive much of student loans, and also to make public higher education free, seems to be generating a lot of discussion.
The ideas aren’t new, and neither are the sound arguments against them.
Student loan debt is approaching $1.5 trillion nationwide. It is a figure higher than either credit card or auto loan debt. For many young people, the monthly payments on these loans inhibit the purchase of a home or the ability to achieve other financial goals.
But while simply forgiving this debt may sound attractive, it would not make higher education any less expensive. It would simply transfer the cost from one set of people — those who incurred the debt in exchange for a degree or who dropped out before obtaining that goal — to all American taxpayers.
People who have worked hard to cover costs and minimize the need for debt would be hurt the most. Meanwhile, as many critics have noted, a debt forgiveness program would help many people who obtained degrees that will allow them eventually to be among the highest-paid people in the nation. Warren’s plan to tax the rich to pay for this seems a bit counterproductive.
While she is suggesting an income cap of $250,000 for loan assistance, few students earn such salaries in the years immediately following college. A lot of up-and-coming wealthy Americans would receive the subsidies.
A better solution would be to attack the problem of runaway education costs.
This won’t be easy, given how multifaceted the problem appears to be, but it is the only effective solution.
Increases in administrative overhead is one of the problems, as are the costs of facilities and construction. The lack of a successful disruptive model from outside traditional education, in the form of alternative low-cost, accredited online courses, has kept competition from reducing costs. Meanwhile, society’s elevation of a bachelor’s degree as the minimum standard for success has increased demand.
States would do well to examine the costs of higher education and devise strategies for making their own schools more competitive in terms of tuition. That may not be as thrilling as a presidential campaign promise, but ultimately, it would be more effective.
Meanwhile, the idea of free tuition comes with its own set of challenges, in addition to the enormous price tag. Tuitions at public colleges and universities are set by states, not Washington. If the federal government were to pick up tuition costs, states would be incentivized to artificially increase those costs. Meanwhile, free tuition would increase demand, leading to pressures on enrollment, facilities, faculty levels and housing.
Yes, higher education ought to be a public policy priority. A vibrant education system enriches all of society through research and innovative discoveries. Students, meanwhile, benefit from the tempering effects of knowledge and the broadening of horizons.
However, the path toward helping more people obtain an education must lead through the causes of runaway costs, not attempt to cover them up by placing them on all taxpayers. That is especially true at a time of growing annual budget deficits in Washington and a burgeoning national debt.