Government’s Attempt to Keep College Cheap is Making Your School More Expensive


The next chapter in the congress’s ongoing struggle over the fiscal direction of the nation is about to be written.

Student loan rates are set to double in the next couple of days as lawmakers in the capital wrangle over how to pay for extended rate cuts. Republicans want to fund the artificially low rate  by cutting money earmarked for healthcare programs. Democrats, on the other hand, want to raise payroll taxes to cover the extension. It’s a familiar impasse, and one that’s left many college-bound kids feeling caught in the middle.

Perhaps that’s why NPR had “college expert” (whatever that is) Kevin Kerry on their show today. Mr. Kerry correctly pointed out that for the first time, outstanding student loan debt now exceeds credit card debt in the US, and that unpaid student loans now total approximately $1 trillion. Whereas student loan debt was a rarity in the 80’s, today fully two out of three students with a bachelor’s degree have some form of student debt to pay off.

Student loan debt has skyrocketed – could the government be inadvertently causing the problem? *gasp*

Mr. Kerry believes that the massive increase in school debt over the last few decades is a result of some kind of “inter-generational betrayal.” When his sympathetic host asked him to elaborate, Mr. Kerry claimed that the rise in student loan liability was caused by wasteful spending by colleges and an abandonment of the youth by state governments. Only through tighter regulations on school spending and more government funding (which will actually just transfer the debt to the government, professor) can we save the children from the student loan Armageddon.

I guess I shouldn’t have been surprised; I was listening to NPR.

What Mr. Kerry fails to point out is a simple truth he could have picked up in a freshman Economics 101 lecture: with an inelastic supply (it’s hard to build new colleges) and more money in the market (cheap government-backed loans), prices go up. Ron Paul had it right on this one, folks:

The government is making college more expensive for you!

And of course, what’s the best solution to a government-caused problem? More government.

Genius, Kevin. You truly are a college expert.

If we keep loans cheap, we flood the marketplace with money. Colleges aren’t just going to leave money on the table, they’re going to raise tuition! If everyone has an extra $5 to spend from Uncle Sam, it’s basically like no one has the extra money in the first place – so why give it to them? And it’s not like you can just put a cap on college fees – all your good professors, facing fixed salaries, will just go back to the private sector where they can make much, much more.

Instead of the vicious cycle of debt spending to fund more debt spending, let’s get real about higher education reform. Distance learning, increased competition, and mass media will do far more to drive down costs than all-thumbs hand of government. You don’t need a Ph.D. to know that!

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I'm a young guy with a news addiction. I love engineering, politics, and economics, and I have a mind built for analysis. Also, I write a lot, though I hate the paperwork... You can read my work at www.dynamopolitics.com !

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DYNAMOpolitics

DYNAMOpolitics

I'm a young guy with a news addiction. I love engineering, politics, and economics, and I have a mind built for analysis. Also, I write a lot, though I hate the paperwork... You can read my work at www.dynamopolitics.com !

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