The Stylus

Student loans – a conservative view

The new student loan reform legislation that was passed with the health care reconciliation bill is another liberal travesty to pile on board previous legislation that attempts to deal with higher education (along with education, in general). With this bill, the federal government becomes the primary lender of student loans, replacing the private industry. Like most other problems, liberals believe the answer is either the replacement of private industry with the government, or to make the private industry utilities of the federal government (as seen with the recently passed health care legislation).

In doing this, liberals can expand power and pretend to attack a problem, while in reality, they are only addressing the symptoms. Rather than focus on the rising costs of education, they go after private industry.  (This is, again, seen similarly with the health care bill, in which liberals deal with insurance companies rather than deal with the costs of health care).  Now, Congressional Democrats’ only accomplishment is in making it easier for students to take on debt that will plague them and the American taxpayer. Unless one takes the noble step of going into public service (in which case your debt will be forgiven after 10 years), it will still be a burden to the American taxpayer.

The growing influence of the federal government over higher education has produced a negative result rather than a positive one. From 1965 to 2007, federal spending on higher education rose from $7.5 billion to $36.6 billion. From 1982 to the present, education costs have risen 439 percent. Throughout this time, the cost of higher education has skyrocketed. The answer to the cost question of higher education may very well lie in rolling back federal support for institutions, as a report by the Cato Institute argues.

The key issue comes down to supply and demand. More and more Americans want to acquire a college education. As demand increases, a shrinking supply means that prices also increase. New colleges are established, and older schools will be expanded to meet the growing demand. In the meantime, some Americans will postpone college, since one can go to college at any time in his or her life. Eventually, the supply expands to the point where it exceeds demand and prices begin to fall.  Now, those who could not afford to go at an earlier time period are now able to get the college education they desire.

However, when third parties, such as the federal government, interfere with student aid, prices are distorted, the budget constraints are not as great and colleges and universities need this cushion to continue raising costs. Students are still willing to attend because of aid or easy credit, putting them at a distinct advantage, finishing school with massive debt. William Bennett, secretary of education under President Ronald Reagan, argued in 1987 that “increases in financial aid . . . have enabled colleges and universities blithely to raise tuitions, confident that federal loan subsidies would help cushion the increase.” That statement remains true as aid continues to increase along with tuition rates.

An elimination of federal aid, one could argue, would prevent those who are college ready and lacking in funds from attending postsecondary education. But, as the Cato’s 2006 Handbook for Policymakers argues, aid-induced inflation may hinder the college-ready poor from attending college in the first place. Indeed, many private philanthropists are all too ready to help students who cannot afford to pay for college.  Eliminating federal aid would also allow private lenders to become much more efficient, and also more willing to help low-income students since the value of a college education is recognized by most in today’s society.

The Heritage Foundation put out a piece recently that also presents methods of lowering the costs of attending college. Heritage argues that an effective way to lower college costs, alongside reducing federal aid, would be to increase competition amongst higher education by “harnessing the power of technology and online learning.” Many schools are placing course content online for free.  Heritage also points out that credit-by-examination programs are on the rise, such as Advanced Placement and the College Level Examination Programs. They present two ways of “popping” the education bubble. One is through lowering costs by improving efficiency, and another is through state governments encouraging innovation.

It is time that we take personal responsibility to deal with the actual problem of rising college costs, rather than lay our every burden at the altar of Leviathan.

Daniel Jeskey,  Stylus Correspondent