Government Should Stop Making Student Loans

President Biden is pondering whether to forgive unmanageable debts owed to the government by students who used them to finance higher education.

It is unclear what Biden should do about these past loans. But it is obvious what needs to be done about the future: the government should discontinue making additional student loans.

Although these loans helped some people, they have greatly damaged many others. They encouraged recipients to dig themselves into financial holes. These unfortunates cannot buy houses or do many other things traditionally done by young adults.

As the saying goes, when people are digging themselves into holes, first they should stop digging.

The loan programs were well-meant, but in addition to harming many of their "beneficiaries" they have caused an incredible increase in the cost of higher education.

When I was an undergraduate at Willamette University in 1960 the tuition at this excellent private school was $600 a year. There has been a lot of inflation since then, but $600 in 1960 would only be $5680 in 2022 dollars. Tuition at Willamette today is $43,500.

As recently as 1973 undergraduate tuition at Oregon State University, a public institution, was $536 ($3490 in 2022 dollars) for in-state students. Today it is $12,188 for in-state students and $31,579 for out-of-state students.

In 1963 one of my students wrote a paper criticizing proposals to finance college studies with loans, just an idea back then. He feared that debt would reduce the "marital attractiveness" of young women.

But debt wasn't needed to finance college then. Most students could earn enough in part-time and summer jobs to finance their studies, perhaps with modest family assistance. At today's tuition levels this is impossible.

Probably a major reason state governments have greatly reduced taxpayer support for public universities is that loans enabled students to pay much higher tuition. Private colleges were able to jack up tuition for the same reason.

Although I enjoyed college teaching, I'm glad that I retired 22 years ago. It seems to me that higher education is evolving into a system in which both students and faculty are increasingly exploited for the benefit of administrative empire-builders.

More and more college teaching is handled by poorly paid part-timers. Tenure track professorships are becoming rarer.

And too many students, living on borrowed money, are partying too much and generally living high on the hog. When we had to pay tuition and living expenses with real money, we were more careful with our spending. I thought twice before buying a Coke once or twice a month.

It is not in the general interest for government to encourage these developments, which continuing its student loan programs would do.

Many loan recipients never graduated. And even many graduates are finding it harder to secure employment drawing on what they learned in college, which makes college a more dubious economic investment and complicates repaying their loans.

On the PBS News Hour experts recently argued that the student loan program should be reformed. But it is the very existence of these programs that has caused the problems leading these experts to call for reforms. It would make more sense to wipe the federal loan programs out completely.

Students for whom higher education is still a good economic investment would be able to borrow from private banks. Those for whom higher education would be too risky for a bank loan would do better to consider apprenticeship programs, special training programs, or on-the-job training. They could then start adult life without debt.

Some of the federal money no longer needed for loan programs could allow greater support for practical education in local community colleges.

And maybe higher education could figure out how to kick out the overpaid administrative racketeers, cut out the frills, and cut tuition back to a reasonable level. There's always hope!