Student debt and skyrocketing college tuition are terrible burdens for young adults, and to win their votes Sen. Bernie Sanders promises to forgive their loans and make public colleges free.
Sen. Elizabeth Warren and other former Democratic candidates offered similar though less ambitious plans that all come down to taxing the wealthy to subsidize America’s aristocrats — university faculty that propagate left-wing ideologies and intolerance.
College should not be terribly expensive. The cost of hiring decent instructors for principles of economics, thermodynamics or Western literature is not high as compared to a good lawyer or physician. The problem is federal student loans have relieved universities of virtually all market discipline and accountability.
In 1972, the Federal Higher Education Act made government-guaranteed student loans through banks and the Department of Education widely available. That put tens of thousands of dollars in the hands of teenagers to select colleges and programs of study.
Opportunities that were mostly reserved for the wealthy and professional classes, veterans through the GI Bill and working-class families that made Herculean sacrifices were made available to anyone with the ability and persistence to complete a four-year course of study. Fringe benefits included Saturday football, fraternity and sorority parties, and opportunities to act out youthful rebellion by demonstrating and attending teach-ins that railed against the capitalist system and middle-class values that made these amenities possible.
For the majority of young people, student loans offered a great investment. College graduates earned more and worked in more pleasant conditions than the factories, farms and supporting services that employed most of their parents during the early post-World War II decades. Aspirants could pay off loans much as businesses do on new equipment and still be better off in the bargain.
Unfortunately, universities never perceived themselves as trade schools but rather as places that prepared an enlightened managerial elite that could impose its liberal agenda on race, wealth, public ownership, gender, global warming, animal rights or whatever else is chic this week in faculty salons.
Easy access to money borrowed by 18-year-olds permitted universities to enroll too many unqualified students, spawn huge bureaucracies and offer faculty light teaching loads, while promoting majors in fields like sociology, gender studies and English literature that offered few real employment opportunities upon graduation.
Subsidizing these irresponsible people drove college costs through the roof. Over the last two decades, tuition is up 37% more than health care and 77% more than the general rate of inflation.
Colleges and universities enroll about two-thirds of all high school graduates, but about 40% of those drop out without a earning degree and are saddled with student loans their $15-an-hour jobs can’t service. And about 25% of college graduates earn no more than the average high school graduate.
Consequently, about half those who enroll as freshmen make a bad investment. Either they wash out or earn a degree that leaves them no better off and are saddled with loans no reasonable banker would have approved but for government guarantees.
Certainly, something should be done for all the young people who were duped by the flim-flam artists that run our universities. Heavy student loan debt is keeping young folks from buying homes, marrying and starting families, and taking the plunge to start businesses.
As the federal government now holds or guarantees 90% of all college debt, it can wipe away those loans by issuing more bonds — something capital markets are more than willing to absorb — and then suing colleges that defrauded students to fetch back some of the losses.
However, market discipline must be brought to the academic aristocracy. To enroll students with federally guaranteed loans, universities should be required to freeze tuition until the inflation-adjusted cost of college is in line with health care inflation over the last two decades. And universities should be required to borrow against their endowments, buildings and land to provide half the funds for student loans — and take losses if those are not repaid.
Gone would be the political correctness enforcement bureaucracies and offices that promote academic tourism — winter break courses in Spain — and majors in social protest. A lot more unqualified applicants would be turned away and instead encouraged to enroll in the Labor Department’s apprenticeship programs, where participants earn while they learn and garner starting incomes that beat those of college graduates.
Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.