Bright ideas: Solutions for student loan debt

Enough with the subsidies

Federal subsidies of education are driving up prices.

As is the case with most contemporary economic concerns, the conventional wisdom is almost totally wrong on the issue of student loan debt.

In response to news that students are graduating with increasingly onerous debt, most assume the problem has been caused partly by greedy colleges and universities and partly by tight-fisted voters and politicians who won’t let taxes rise high enough to fund education as generously as they do in Europe.

On the basis of this erroneous assumption, too many reach the conclusion that what we need is more government involvement in both the provision and the financing of education. Such an analysis overlooks the detrimental effects of government involvement in education (and economic affairs in general).

As Reason magazine senior editor Jacob Sullum explained as congressional Democrats were just beginning to advocate the recently passed student loan reform, our current policy is effectively creating a bubble in higher education.

As Sullum put it, “When someone else is paying part of the tab, consumers do not worry as much about the cost, so the cost tends to be higher. This phenomenon creates a vicious circle in which subsidies push up prices, leading to demands for increased subsidies, which push up prices again.”

If we really want to see high-quality education and widely affordable ways of financing it, we should start by paring back Uncle Sam’s role in the student loan business.

-Jarrod Lowery

Fund higher education

Public education’s effects are widespread. When a people receive higher education, they not only benefit themselves, but also generate significant positive externalities for all members of society.

Higher education improves the chances that the recipient will be a more informed, more literate and hopefully, more compassionate citizen.

So why is ostensibly public education appearing increasingly privatized? Soaring tuition rates mean students are now forced to privately acquire obscene amounts of funding for their educations at state universities.

In other words, state universities are increasingly providing less public education and more state-run education, for which consumers directly bear the cost.

As a society, we should make a priority of cutting less necessary programs or raising taxes to provide reasonably priced public education. “Reasonable” is, of course, a slippery term. But a good place to start might be to cap tuition and living expenses at the amount a student could earn by working a summer job.

Truly public education maximizes the number of people in our society who acquire post-secondary training. And it makes for a more just society, in which the resources of a person’s family does not constrict social mobility.

When the public funds higher education, it thus provides for a three-fold ideal outcome: workforce productivity, a cultured society and a more economically just society.

Put simply, public higher education is, for taxpayers, a necessary investment.

-Nick Wallace

Community colleges

It should come as news to no one that college students are drowning in debt.

A large part of that has to do with the increasingly higher rates of tuition for a degree that means less and less. But taking out astronomical loans to get through a four-year university is not the only way to landing a job.

Community colleges offer affordable opportunities for students looking for education alternatives. In fact, President Barack Obama has tapped into this niche as a way to rebuild the middle class.

Having already put forth a proposal for a $12 billion grant aimed at improving community colleges, education experts consider this reinvestment plan the “moon shoot” of the era.

The proposal calls for higher graduation rates and encourages partnerships between the colleges and employers offering work force training.

Historically, community colleges have targeted low-income students with limited options. But now, with the recession taking its toll on the public at large, many are seeking out education to better their career prospects.

So why not consider a community college, where tuition is cheap and the opportunities are becoming better?

-Danielle Fleischman