Monday, April 22, 2019

The Dumb Conservative Response To Student Loan Forgiveness — And The Smart One

Elizabeth Warren’s weak showing in the pollslackluster fundraising, and late resignation of her campaign finance director make it obvious she’s got questionable staying power in the 2020 field. So, in an effort to remain relevant, she’s pitching mass student loan forgiveness. This is an appallingly dumb idea, mainly due to moral hazard:

  • What’s to prevent someone from borrowing the covered amount going forward, regardless of whether they need it, and then sticking Uncle Sucker with the bill?
  • What’s to keep institutions from further raising prices knowing they get paid up to the forgiveness limit?
  • Why should the public pay for an increasingly uneconomic service when the providers have zero incentive to economize and reduce fees?
  • What about debt contracted for private institutions? Won’t there be tremendous pressure to pay those debts off, too (regardless of the socioeconomic status of the families attending them)?

Unfortunately, Philip Klein’s response in the Washington Examiner is not just wrong-headed, but politically naive. His argument can be summarized as, you bought it with borrowed money, you pay it back. I’m in favor of enforcing the sanctity of contracted debt. I further agree with him that debt forgiveness as Warren outlined is a public financing catastrophe. But this response is bad as a matter of both moral clarity and practical politics.

  1. The creep of mandatory college degrees even for relatively low-level employment kneecaps the  idea that somehow, people should just suck it up and pay. This needs to change, and perhaps there are signs that it is, but if a degree is a prerequisite to having a career, this is very thin gruel.
  2. Universities are owned and operated by Democrats. This is a rare opportunity for Republicans to make the point that Democrats do not care about the people they supposedly serve. The growth of the administrative state inside universities has been fueled by easy college loans. This same bureaucracy administers unjust Title IX star chambers. Their salaries drive endless tuition hikes. Their annual tuition hikes make college unaffordable, and shackle young people with appalling levels of debt, preventing them from buying homes and starting families (in part).
  3. Hacking away at the administrative state means clearing entrenched political opponents. As I’ve pointed out before, a rationalization of tuition costs will necessarily mean a reduction in certain majors. Grievance Studies majors will almost certainly be on that short list.
The better response — one which expands on my idea of bankruptcy as a means for fixing the college debt crisis — comes from Kevin Williamson in National Review. His approach, basically, is even more draconian: get rid of college loans altogether.
Here is a three-part plan for something practical the federal government could do to relieve college-loan debt. Step 1: The federal government should stop making college loans itself and cease guaranteeing any such loans. Step 2: It should prohibit educational lending by federally regulated financial institutions or, if that seems too heavy-handed, require the application of ordinary credit standards in any private educational lending, treating the student himself as the main credit risk in all cases, including those of secured or unsecured loans taken out by parents or other third parties for that student’s educational expenses. And 3: It should make student-loan debt dischargeable in ordinary bankruptcy procedures.
This is, of course, sure to meet with howls of protest from the universities, who see the gravy train screeching to a halt. Well, good. It’s about time.

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