Students are increasingly taking on greater levels of debt in order to attend college. College tuition and fees have inflated significantly in the past several decades due to the states involvement, forcing the majority of students attending post secondary educational institutions to take out ever larger federal student loans. This situation is pronounced at state supported schools but even more so at private institutions who also can feed their bloated institutions on students’ federal loans.
Between 2006-07 and 2016-17, published in-state tuition and fees at public four-year institutions increased at an average rate of 3.5% per year beyond inflation, compared to average annual increases of 3.9% and 4.2% over the two prior decades.
If the current situation continues, the state will continue to grow their already very large class of indentured individuals who are at their beckoned call. However, the situation goes beyond individuals.
The problem of having over a trillion dollars in student loan debt is significant beyond the burden it places on individuals. Many economists see this large overhang of debt negatively impacting GDP growth. Headlines like Student-Loan Debt Slows Recovery are common within the MSM and even on alternative news sites. The theory about the impact of student debt is based upon a rational assumption; payments to service student loan debt cannot not be used to: start a business, form a household, purchase a home or car, or even go out to eat; basically less money from younger Americans is flowing to our nation’s GDP and instead going to the student loan cartel.
Here are some market based proposals to slow the growth of student loan debt please let me know what you think of them.
- Stop sending the message that everyone should go to a four-year college. Obama advocated many times about college but he was wrong, there many professions and job opportunities for those without a four-year degree. Less demand for four-year college degrees means prices will fall for those who do obtain one.
- Local officials should revamp their high school curriculum and programs to meet the reality mentioned above. They can by offering a very rigorous and real college preparatory track as well as offer a serious vocational track which includes on the job training and apprenticeships. Beyond the educational value this offers to more students, this model will reduce demand at four-year colleges thus lowering costs.
- Stop federally guaranteed student loans – do not make the taxpayer the backstop for student loans as they eventually will be called on to do in the current system. Going back to free market principles which will force lenders to properly assess a student’s real ability to payback loans. For example, a student who did not fare well in high school will likely not do well at a four-year college and thus is a poor loan risk. For redemption, this student can go to a two-year program and prove they can handle a more rigorous course load before taking on significant levels of debt they will be unlikely to payback. This reduces the cost of bad loans to lenders those making loans more affordable.
- Raise admission standards at four-year institutions, this will force students to compete (scholarships) and it will also drive many marginal colleges and universities out of business. This action will likely assure those who take out students loans will pay them back. Here lenders see the best return on their investments feeding their desire to continue to offer high performing students (those who really graduate) loans.