CNN: Biden’s Academia bailout masks the real problem

Source: Hot Air

Hey, maybe CNN really is trying to get away from its previous tilt as a “Democratic mouthpiece,” as Jazz put it this morning. Many media outlets have covered Joe Biden’s massive new spending plans on student-loan debt forgiveness on the White House’s preferred terms of “justice” and “fairness.”

CNN’s Allison Morrow, however, points out the nasty truth of the Biden plan that has only gotten notice at more conservative outlets. “Tuition costs are out of control,” her analysis is headlined, and “canceling student debt won’t fix that.” Morrow doesn’t quite get to the real problem, however:

First: Relieving up to $20,000 in student debt per borrower is a financial tourniquet that will help 43 million people who’ve been swept into a complex and undeniably broken system. Second: It doesn’t even begin to solve the problem. Once the debt is wiped away, what we’re left with is the gnarly reality that tuition costs are out of control, with no magic bullet to rein them in.

Indeed, and all this only provides a temporary respite from student-debt growth. Some models have student debt rising past the current level in as little as four years even with this massive bailout. And as Morrow points out, the “reforms” attached to this bailout actually set up perverse incentives for schools to raise tuition costs at an even more accelerated pace:

What feeds tuition inflation has more to do with the scale of the higher education system. The United States has a massive decentralized system of hundreds of nonprofit colleges, where the national government does not control prices. The country also has a large upper middle class that’s willing to pay top dollar for their children’s education.

Every one of those institutions is competing for talent. And for funding.

That’s why some critics of the Biden administration’s student debt relief worry about the precedent it sets. If the government creates an expectation that debts are likely to be forgiven, universities won’t hesitate to raise tuition. Students may take on more debt, expecting some of it will eventually be wiped clean.

Why shouldn’t students expect that now? It’s not just that Biden launched his proposal last week, but that Biden promised to do this for two years and that his progressive allies have been demanding a mass student-debt write-off for a decade or more. That set up a political expectation that became too strong to resist when Democrats took nominal control over Washington — even though they couldn’t do it legally, they had to take a stab at it anyway through an illegitimate abuse of executive power.

That won’t be a one-off event, not while the underlying problem exists. When we get back to the same levels of debt, the same people who insisted on debt forgiveness won’t admit that it was a failure; they’ll just claim that Biden didn’t go far enough. Some progressives are already making that argument, in fact, either out of conviction or as a way to shift the political debate away from the illegality of Biden’s actions.

Morrow misses the one big factor driving tuition costs to their current unsustainable level, though. It’s the federal student-loan programs that subsidize Academia, driving consumption and demand through the roof and showering colleges with cash. Tuition costs have gone up far faster than the rate of inflation since the implementation of the Federal Family Education Loan (FFEL) program, passed by Congress in 1965 as a program for the disadvantaged but expanded thereafter into a massive subsidy for anyone. Federal loan guarantees created free money for schools but debt for students, and tuitions skyrocketed with the demand until they eventually reached a level where the economic advantages of a college degree no longer outweighed the debt.

As I wrote last week, when “thousands” of Laurence Tribe’s Harvard — Harvard! — graduates are trapped by their student debt, it’s evidence of a total market failure. And worse than that, it’s evidence of exploitation of both students and taxpayers by these same colleges and universities — and politicians that support and protect the Academia gravy train. The pressure to make forgiveness a repeated and expected event will be enormous after this instance, and schools will have more reason than ever to jack up tuitions and maximize the benefits of that gravy-train subsidy.

Biden’s plan doesn’t solve the underlying problem, as Morrow points out, but it’s actually worse than that. It perpetuates the scam.