When writing legislation to tinker with an already broken system, it’s best to understand which assumptions are flawed. First, the set up:
House Democrats pushed through legislation yesterday that would boost government-subsidized student loans and other college financial aid by $18 billion over the next five years, despite strong opposition from Republican lawmakers and a White House veto threat.
The legislation, passed in a 273 to 149 vote, would cut interest rates on federally backed student loans in half and increase Pell grants for low-income students. It would pay for the measures by slashing subsidies to lending companies by about $19 billion over five years and use about $1 billion of remaining savings to reduce the federal deficit.
Cutting subsidies is always good, but to divert the savings to grants and interest-rate cuts, as if Congress can legitimately and arbitrarily cut them to a desired rate and have the outcome be economic efficiency is folly of the highest order. This plan will no more help students go to college affordably than anything else Congress has tried since it began subsidizing higher education.
But that’s not the fun part. Consider this:
House Republicans also offered a plan yesterday to substitute increased Pell grant funding for the interest rate cuts. They said they favor that approach because more of the money would be targeted to lower-income students, whereas interest rate cuts benefit middle-income borrowers as well.
The most fundamental flaw in higher education is the silly notion that government policy should establish parents as best suited to pay for college. Nonsense. College students are adults, and should be expected to bear the burden. If their parents want to pay, fine. That’s a decision within the individual family. Government should not step in the way.
But undergraduates are almost exclusively lower-income students. They would be lower-income borrowers. If the student’s parents are middle- or high-income, but choose not to pay for college, how is that student any different than the student whose parents would pay for college if they could afford it? The outcome is exactly the same, except the student whose parents are lower-income will get free money from the government. Once again, the government is picking winners and losers based on criteria other than facts.
I wonder why?
[Rep. George] Miller said the changes were necessary to make college affordable to all Americans. “We have an obligation to make sure that students have the maximum opportunity to take advantage of a college education,” he said.
Congress does not have any such obligation. It only has a Constitutional obligation to stay out of the market for college and student loans. If having a college degree is so wonderful, and my two degrees suggest I think it is, supply and demand will sync without help from Congress.
Full disclosure: I received Pell grants all four years as an undergraduate. I also had to repay a significant portion of my student loans early because it was in my mother’s name. Government requirements wouldn’t let me borrow everything in my name, even though I received zero financial support. I repaid the loan early because it was restricting my mother’s access to credit for her needs.