May 7 2012
An old adage begins that if you are young and conservative, you have no heart. But it may just be that you simply have no student loans. Opposing a government handout is easy, until you get one. This is a vital part of President Obama’s reelection strategy: Promise as many people as possible an entitlement, and then yell, “We’ve got each others’ backs!” as he did to a group of students last week in Chapel Hill, NC.
But Americans—including American students – should think twice about the Administration’s push to subsidize student loans with below-market interest rates. Instead of improving the prospects of American youth, this policy could be saddling them with a debt they can’t afford to repay, and is creating an entitlement mentality destructive to our country.
By subsidizing student lending, the government has proven that if you subsidize something, you get more of it. Aggregate student debt is at an all-time high of $999 billion. The assumption used to be that this debt financed a sound investment: A college degree leads to better employment options, and higher lifetime earnings. But that assumption is increasingly suspect. A shocking 53.6 percent of new college grads are jobless or underemployed.
In reality, facilitating student loans probably isn’t even making college more affordable. Tuition costs have skyrocketed in tandem with student debt. These are not independent events. More college loans equals more college students. This increase in demand for degrees has allowed universities to raise rates. Are the current below-market interest rates enough to offset this increase in tuition? Students may find it counterintuitive, but the best way to encourage lower tuition may be to actually decrease tuition subsidies by raising interest rates.
Colleges should be facing pressure to cut costs, since the value of their key product—a bachelor’s degree—has gone down. Employers are increasingly finding that while more and more students may leave institutions with a diploma in hand, that does not signify that any real learning has taken place.
This is devastating for those who paid (or have taken out loans to pay) college’s high bills. Our universities should be held to account for the quality of their product. This is harder to do with the federal government indirectly but blindly injecting more money into the system.
Yet there’s another argument in favor of getting government out of student loans. And the president is going to love it: Fairness. Yes. Basic fairness.
First of all, not everyone wants to go to college. Why should these taxpayers be forced to subsidize the choices of other people? That’s not fair. This amounts to taking from the working class to subsidize the educational pursuits of the elite.
But President Obama’s unfair student loans policy doesn’t stop there. He continuously refers to “helping professions,” which he defines as social nonprofit work in education, health, or government. These workers can lend on better terms and receive forgiveness more quickly.
Besides influencing the career decisions of young people (and encouraging them away from the private sector, for-profit industries that make our economy strong), this policy reflects the president’s narrow view of what is “helpful” to our country, and his propensity to pick winners and losers based on that standard. That’s not government’s role.
It is a privilege to have a college education. My grandmother, who graduated as valedictorian of her high school class, chose not to go to college so that she could find work as a typist and help my grandfather pay his tuition bills. They sacrificed and worked together (they had each other’s backs) and didn’t incur any debt. This used to be the American way, and still is, for some Americans who continue to embrace the idea of personal responsibility.
But Obama’s way is different. He will simply divide Americans into voting blocs and make promises to each: young adults, seniors, poor people, small businesses, women, African-Americans, unions, environmentalists, lobbyists, government employees, and even Wall Street. He says he’s got all their backs. But this only means he will create and expand government handouts, putting the real burden on the backs of hardworking Americans, who, despite their own sound financial decisions, will pay our nation’s debts through ever-increasing inflation and, of course, taxes.
Tragically, Obama’s political strategy is just that: political. It’s not economically wise, it’s not fiscally prudent, and it’s not fair. Some Americans may like the idea of their own taxpayer-provided entitlement, but they should be warned that ultimately we will all end up paying for it.