Fed making a mess of college education
By Beth Cody, Writers’ Group member
Iowa City Press-Citizen
Wednesday, May 14, 2008

There have been stories in the media lately about the “student loan crisis”, college-bound students having trouble obtaining student loans, and demands for Congress to “do something”.

But government has already done plenty to “help” students. The results: skyrocketing tuition, crushing debt for graduates, devaluation of college degrees, economic discrimination against lower-income workers, and these current loan difficulties.

Between grants, direct loans and subsidized loans, 60% of undergraduates receive some form of student aid. This means that families can “afford” larger amounts for college. Consequently, colleges have been able to increase tuition and fees by 70% in the past 20 years (adjusted for inflation).

Studies show that colleges do raise tuition in response to government aid increases. For every dollar increase in federal aid, colleges and public universities raise net tuition 50 to 70 cents. With room and board increases, total net cost actually increases following aid increases.

This then leads to more cries for help, subsequent aid increases, and spiraling cost escalation.

Many students simply borrow the maximum, and graduate with crushing debts – for graduates with engineering or business degrees, burdensome but repayable.

But liberal arts graduates will face difficulties, and would have benefited most from less aid and its accompanying tuition increases.

And the 40% of students who fail to graduate might have been better off not attending college at all. These marginal students – the partiers and the unprepared – historically would have had little interest in applying, and would have made a good living without a college degree, like most people.

In 1947, only about 5% of Americans had completed a Bachelor’s degree. Now nearly 30% do, and almost 60% have attended some college.

But more kids going to college is good, right?

Actually, it has led to degree “inflation” – devalued by its’ commonness. College used to be for serious academic students, but it has since devolved into a degreed trade school for social workers, “leisure scientists” and hotel managers.

These professions and others used to be open to those with a high school degree and perhaps a few classes at a trade school. But now that a high school diploma doesn’t guarantee that its recipient can read or add two numbers together (courtesy of even heavier government involvement in secondary education), college has become, in effect, the “new” high school degree. This has made the escalating cost of a college degree nearly mandatory for many job-seekers.

This hurts most those who don’t go to college, who suffer an “earnings gap” compared to the growing number with a degree – no matter how watered-down those degrees have become.

Even worse: this tax-and-subsidize scheme forces non-college-educated workers, who start working right out of high school, to subsidize college education for middle class students, who will then out-earn them. Is this right?

Finally, this latest loan “crisis” is wholly the product of government meddling. Last September, Congress passed the Orwellian “College Cost Reduction and Access Act”, which reduced interest rates for federally-insured loans – more than 70% of education lending – as well as loan yields, the lending banks’ profit.

And, surprise! Banks no longer lend when they lose money on each loan. So now Congress is trying to pass yet another bill that will subsidize those same banks that were making “too much” money before. Incredible.

Government should stop making a mess of education. Without government interference, tuition would decrease, making college more attainable for most students.

Colleges and private scholarships would provide grants to low-income students. Everyone wants to see them succeed, and many more people would donate to scholarships if they didn’t assume “government takes care of all that”.

Banks would still lend to students, but not indiscriminately -- they would assess the risk of default based on grades, intended major, and overall motivation to succeed, saving mediocre students from incurring ill-advised debt. And in “Human Capital” contracts, investors would be able to buy “shares” in groups of college graduates’ expected future earnings.

College is not a constitutional “right”, but something to be earned by those who have worked hard to succeed, regardless of income. It will be valued more by everyone if it isn’t cheapened by government bungling that ultimately hurts students. Something to keep in mind during this latest government-instigated “crisis”.