G.L.Piggy [at] gmail.com
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The other day President Obama unveiled a plan to tackle the trillion dollar student debt bomb. It was an arm tackle though, and student debt trucked through Obama’s plan like Christian Okoye on twice as many steroids as he already was on.
Student debt – with the help of Owsers – has become a hot-button issue being discussed by many pundits and commentators. But nearly all of them avoid the elephant in the room. They chalk high tuition inflation up to increased spending on facilities and lack of funding at the state level. But private college tuition rates are far outpacing inflation too. Something else is perpetuating this bubble, but hardly anyone sees the writing on the wall.
None of the economics professors who have blogs address the issue head on. None of them tell us that student debt has skyrocketed because tuition prices have skyrocketed because of this perverse system whereby the federal government, through granting such easy money to students, signals schools that they can basically jack up their tuition rates without having to worry about the market forces of supply and demand. The schools get paid, and the students are left with two things: the bill and (hopefully) a degree. But a degree is becoming less of a sure ticket to a job – a worse paying job at that.
The schools know: if they charge it, students will still come. It is a royally fucked up system, but it is damn near impossible to get a prominent blogger or newsman to state it in such clear terms.
Tyler Cowen at Marginal Revolution has barely any posts dedicated to the topic. EconLog touches on the issue, and some of the commenters know what time it is, but even for a “liberty-loving” outfit, Bryan Caplan and company have ignored this issue – something that is in the Hayekian and Austrian wheelhouses. It makes me wonder, do professors have a conflict of interest in pointing out exactly what is causing this tuition-debt spiral? I mean, they and their institutions benefit from this scheme. Not saying that they are purposely being dishonest, just that they may be so tied into this educational-industrial complex that they look for every other reason to explain the tuition increases before even glancing at the obvious.
Tom Woods, an Austrian economist with no learning-institution affiliation, is one of the very few who continually harp on the issue. Of course, this makes him a kook. He excerpts from his newest book Rollback:
Of course, it is the subsidies themselves that push tuition costs ever higher. Here’s the obvious point everyone pretends not to realize: colleges know the students have access to low-interest loans courtesy of government. Aware that prospective students enjoy artificially increased purchasing power, college administrations raise tuition (and cut back their own aid programs) accordingly. When tuition thus continues to rise, as any fool could predict, we hear huzzahs for the government – for however could students pay this high tuition without government assistance? It is the classic case, as Harry Browne said, of the government breaking your leg, handing you a crutch, and saying, “See? Without me you couldn’t walk.”
The solution is relatively simple. A dual-headed change in which the bankruptability of student debt is reinstituted and in which loan guarantees are immediately revoked. Let the chips fall where they may. Some creditors won’t get paid as more students default, but those students suffer the long-term consequences of declaring bankruptcy. Going forward, tuition prices decrease to their natural level, and kids have to either get loans through other means, work to pay for school, or rely on scholarships. And hopefully, this will also weed out some of the folks who were sucked into college by the cheap money and probably should have sought other means to develop work and life skills.
OWS could actually do something here, but they’d rather yammer on about getting student debt completely expunged. But that is their true leftist nature.