Trump Administration Unveils Plan to Combat Student Debt Crisis

We must be living in clown world, because we live in a country where half of all college graduates work a job that doesn’t require a college degree – and our nation is plagued by a collective $1.5 trillion in student loan debt. While many semi-recent graduates would otherwise be ready to invest in homes, instead they’re siphoning off their paychecks to make interest payments. How in the world did we let that happen?

To a large extent many students let it happen to themselves (as did their parents) – though while they deserve the blame, perhaps it’s not a great system when a teenager who can’t legally purchase a Bud Lite is legally allowed to borrow hundreds of thousands of dollars (and unlike other forms of debt, student loans can’t be discharged in bankruptcy).

And from a college’s perspective, why wouldn’t they charge skyrocketing rates of tuition when the pool of money students can borrow to attend is only growing? A report by economists at the New York Federal Reserve Bank found that for every additional dollar in student loans available, colleges raise tuition 65 cents.  Paradoxically, federal subsidies of student tuition (such a pell grants) raise the price of tuition too, with some studies suggesting colleges raise tuition 35 cents for every dollar in subsidies, in an attempt to “capture” part of the subsidy.

The Trump administration is unveiling plans to combat the student debt crisis, and it centers around drying up the supply of easy money for colleges. According to the Associated Press:

The Trump administration on Monday proposed new limits on federal student loans taken out by parents and graduate students as part of a broader proposal to curb the cost of college.

White House officials included the plan in a list of suggested changes to the Higher Education Act, a sweeping federal law that governs student lending. The legislation is getting its first overhaul from Congress in more than a decade.

The White House’s proposed solution is to cap federal loan programs available to students’ parents and to graduate students. The plan doesn’t propose specific limits, but officials suggested it could vary based on academic program.

Underpinning that idea is a belief that colleges are largely responsible for the nation’s debt woes. The White House says easy access to federal aid has led colleges to drive up prices, adding that they are “unable or unwilling” to make education more affordable.

To little surprise, Democrats are instead calling for more subsidies to colleges as a way to alleviate the student debt crisis, as if we haven’t tried that for the past half-century.