The Biden administration is still talking about delivering on the President’s promise to relieve student loan debt for many Americans. There is continuing discussion on how much debt should be forgiven, how to pay for it, and whether it is fair to all those who have diligently and painfully worked to already pay off their own student loans. After all, if you’re going to eliminate student debt to buy votes, why just limit it to student debt?
Unfortunately for Biden, according to numerous sources including National Review, the executive branch has no generalized power to forgive any amount of student debt. Even
Nancy Pelosi confirmed simply that “the president can’t do it. That’s not even a discussion.” The Department of Education came to the same verdict, determining that the executive branch “does not have the statutory authority to cancel, compromise, discharge, or forgive, on a blanket or mass basis, principal balances of student loans, and/or to materially modify the repayment amounts or terms thereof.”
Of course, even if he had the authority, forgiving student debt doesn’t make the debt go away. Reality has a way of breaking into such “freeloading” dreams. It’s pay me now, or somebody else pay me later. But why should some future taxpayer pay off anyone else’s student debt?
Whatever happened to wise warnings of “student beware.” When you get an education and agree to pay the tuition, you ought to realize that you must at some point pay for that education. You signed on the bottom line. Face your real-world responsibilities. Hopefully, you picked a degree major that will ensure a career capable of paying off your loans. Students clearly have some responsibility, but what about the universities that took advantage of the money coming from those loans?
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After all, there is ample evidence that student tuitions exploded far faster than inflation when government funds became readily available for student loans. Complaints of excessive tuition increases by students trapped in their programs tended to be met with a less than caring response—pound sand!
Since 2008, the tuition cost or a four-year college degree has increased nearly 25%. In that same period, student debt has doubled, increasing by 107%. 2015 study found that a dollar of subsidized student loans results in a published tuition increase of 58 cents at a typical university, An NBER paper suggests that changes to federal student loans are more than sufficient to explain tuition increases at private nonprofit colleges. And a 2014 study found that for-profit colleges eligible for federal student aid charged tuition 78% higher than that of similar but aid-ineligible institutions.
In short, there is no doubt that tuition was rising faster than the inflation level. Evidence has been clear for decades. In 1987, Secretary of Education William J. Bennett argued that “increases in financial aid in recent years have enabled colleges and universities to raise their tuition, confident that Federal loan subsidies would help cushion the increase.”
Bennett pointed out in 1987 that federal student aid had risen 57 percent since 1980, while inflation had been 26 percent. A 2020 analysis by the Congressional Budget Office brought the numbers up to date: “Between 1995 and 2017, the balance of outstanding federal student loan debt increased more than sevenfold, from $187 billion to $1.4 trillion (in 2017 dollars).” What is the lesson? The more federal aid to students is available colleges raise tuition more. Salaries rise and bureaucracies expand. There are more courses, more dorms, dining halls, lavish recreational centers, and more money for endowments.
Far too many students find that once they begin their education, their schools raise the tuition at such a high rate that their debt explodes. The university builds their endowment, and the “trapped” student is compelled to finish what they started at a cost they did not expect to have to pay. In such a situation, should not the university be responsible for any increased cost above the increase in cost of living during the same time? It’s time for universities to take responsibility for their share of student debt.
The universities that benefited from these loans should have a part in footing the bill. That means universities that raked in millions to inflate endowments should be holding the bag for those who can’t afford to pay their loans. With universities holding hundreds of billions of dollars in tax-free endowments, any government program to relieve student debt should be completely dependent on taxing those university endowments.
It's time to counter the Democrats’ vote-buying scheme by making lasting changes to the student loan process. That means putting universities on the hook for their predatory behavior. That will go much further than a temporary payoff that does nothing to solve what is causing the problem.
Terry Paulson is PhD psychologist, author, and professional speaker on Earned Optimism, Making Change Work, Claiming Your American Dream, and Becoming a Conservative Values Voter. Contact him at terry@terrypaulson.com.
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