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June 24 2019

Bernie's "Free College" Plan is Really a Bailout For Universities

by Inez Feltscher Stepman

Presidential candidate Bernie Sanders is teaming up with controversial Congresswoman Ilhan Omar to propose a massive bailout for universities, which continue to hike prices for students while expanding bloated departments.

At least, that’s how the headlines should read about the Sanders plan, which he claims will “wipe out” $1.6 trillion in student loan debt, and make public universities, community colleges, and trade schools “free.”

There’s no doubt that the millennial generation is dealing with a heavier student debt burden than generations past, and that debt is having serious consequences for our generation, negatively influencing everything from home ownership rates to marital stability. But as much as young people clamor for relief from what are sometimes mortgage-size student loan payments, the real winner in any debt cancelation or “free college” plans is the universities themselves.

For several decades, the cost of higher education has skyrocketed well above inflation. In 1985, a four-year degree at a public university cost just $8,500 a year in modern dollars, a cost easily born by a part-time or summer job for many students. Today, that cost has more than doubled to $20,000, and more than $40,000 for private institutions, which when added to the cost of living, textbooks, and other expenses, can approach the median income for an American household. These numbers back up the story told by most students: that cost of college today is often well beyond what the vast majority 18-year-olds can hope to cover without large loans.

A major culprit in enabling that student-crippling cost hike? The federal government, which heavily subsidizes universities directly to the tune of billions in taxpayer cash, and indirectly through over a trillion dollars in student loan backing. Unlike a private bank with an eye on its bottom line, government has no incentive not to give huge checks to students seeking degrees that are unlikely to net them the post-graduation salaries that make paying back large loans doable. Predictable future loan misery for students is ignored, and because the spigot of cash from the taxpayer is always on, universities have no incentive to deliver on their promises to students.

The government is making loans to vulnerable teenagers they know will be difficult or impossible to pay back. In the private context, we’d be looking at the lenders and higher education providers as potentially fraudulent.

Even worse, the constant infusion of “free cash” into the higher education system is a main driver of the ever-greater sticker price. When everyone has access to a loan that will give them $40,000, universities have no incentive to charge any less, and often will charge even more on the assumption that families will be able to pony up a few extra thousand on top of the loans.

The student is on the hook for eye-popping loans, and the taxpayer is the unwitting cosigner to pay back that $1.6 trillion if students are unable to make the payments. The only happy partner in this system is the universities, who have already been paid for their services upfront and are spared the necessity of actually making the case for the value of the degrees they’re selling.

Sanders and fellow candidate Elizabeth Warren, who has proposed a similar plan, promise to relive the pain for borrowers. Instead, their loan forgiveness proposals will shift that pain onto taxpayers – two-thirds of whom do not have four-year degrees themselves – and onto future students. Universities will continue to bear no responsibility for their expensive and oversold product.

And the vicious cycle that has put college out of financial reach for middle-class families will be perpetuated for the next generation.





Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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