Washington is Making College Less Affordable
Between Sen. Elizabeth Warren (D-MA) 23% and President Obama, the left has made some pretty solid efforts to ensure college tuition remains on the rise, even if that is not their intention.
President Obama signed a memorandum Monday to extend the “Pay as You Earn” program to 5 million previously ineligible borrowers who took out student loans prior to 2007. While that may seem like a good move politically, it will harm students and taxpayers in the long run because it fails to get at the root cause of rising college tuition costs.
Current student loan policy already affords students generous options for financing their education and paying off their loans, but it puts no downward pressure on the cost of college tuition. The “Pay as You Earn” program caps what students can be required to pay to just 10 percent of discretionary income, and forgiveness begins after just 20 years (10 for those in “public service).
But if the goal is truly to make college affordable for more students, these policies are not working. Washington’s attempts over the past few decades to lower the cost of college have completely failed. The Heritage Foundation notes, “Since 1982, the cost of attending college has increased 439 percent, more than four times the rate of inflation. Increases in college costs exceed increases in health care costs, which have risen more than 250 percent over the same time period.”
This new move by President Obama will only give students more incentives to delay paying off their loans, further burdening taxpayers, while doing nothing to decrease the cost of college. As Yahoo Finance’s Editor-in-Chief Aaron Task states:
In 20 years the debt goes away if you haven’t repaid it all and guess who it goes back to? The taxpayer. And I just don’t think that that’s going to end very well for the taxpayer. It does give an incentive for someone to make less money because their debt payment is going to be less and they know over the course of time that debt’s going to go away.
Yahoo Finance’s Lauren Lyster points out, “That might be the origin of the student debt crisis in the first place – the availability of credit.”
In the Senate, Sen. Elizabeth Warren (D-MA) 23% has a bill that would worsen and perpetuate these trends by increasing subsidies for student loans and failing to use fair value accounting, which would provide a more accurate reflection of the true cost of her proposal.
The Heritage Foundation’s Lindsey Burke explains:
Ultimately, simply refinancing student loans and increasing federal subsidies can do nothing to solve the college cost problem. And it certainly won’t encourage colleges to keep costs in check.
Burke makes another important point: Washington is “transferring the burden of student loan financing from university graduates to taxpayers — three-quarters of whom do not hold bachelor’s degrees.”
How is that fair, especially when “college grads on average earn significantly more over the course of a lifetime than those without a college degree”?