COLLEGE LOAN PROGRAM
Hispanics would also benefit substantially less than balances suggest.” Andrew Gillen and Thomas Lindsay of the Texas Public Policy Foundation and I have similarly confirmed this finding using new data from the U.S. Department of Education. RADICAL REFORM IS NEEDED Given the fundamental problems with federal student loans outlined above, ideally our nation would move to eliminate the programs. Already, new federal lending has been declining as potential borrowers question the value proposition of college and as more hear horror stories about the burdens of student loans. In the absence of federal lending, private lending – already rising in recent years – would grow substantially. Moreover, a new method of financing college that is already in limited use, income share agreements, might take hold, where individuals give up a share of postgraduate earnings to private investors for a few years in return for help in paying college bills. In the current political environment, reform likely will not happen. Universities, even private ones, are largely wards of the state, and the Democratic party benefited hugely from donations from university staffs who have also provided many of the ideas and personnel who will be running the executive branch of the federal government. They like the status quo. A less radical but useful modification of current programs might be politically feasible,
Richard Vedder is a Distinguished Professor of Economics Emeritus at Ohio University, where he has taught since 1965. A graduate of Northwestern University and the University of Illinois, he has authored numerous books including his 2019 Restoring the Promise: Higher Education in America (Independent Institute) and his opinion pieces have appeared in numerous printed media, including the Wall Street Journal, Investors Business Daily , and Forbes . He also served on the Spellings Commission on the Future of Higher Education. The federal government cannot even devise a simple form for those applying for federal student financial assistance (the FAFSA form has over 100 questions). Therefore, it’s probably asking too much to have them meaningfully change a disastrous system, and loan forgiveness is an especially inappropriate approach to reform. particularly if the Republicans continue to control the U.S. Senate: make colleges have some “skin in the game,” sharing in the financial burden currently born by taxpayers when borrowers of student loans default. If colleges with a history of having high levels of students default on their obligations had to pay part of the defaulted loans, it would incentivize them to show greater care in who they admit.
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December 2020
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