Tag: student loan program

Yes, We Do Bribe Kids!

While politicians probably support many policies for college students in part because they think the policies will be educationally or otherwise beneficial, vote buying is no doubt also important. Of course, it’s hard to find a politician who will actually cop to the latter. On this morning’s Today show, however, Democratic National Committee Chairman Tim Kaine came about as close to doing that as you could possibly hope for. 

Responding to interviewer Ann Curry’s observation that President Obama has aimed a lot of campaigning at college students lately, Kaine noted that young people voted for Obama in record numbers in 2008, and “the message to young voters is pretty simple… we’ve done the largest expansion of the student loan program in American history… we’ve done a health care reform that allows youngsters to stay on their family insurance policy until age 26, and we’ve done important credit card reform that has helped young voters. So we have their attention….” 

Translation: Kids, vote the right way, and keep that free stuff coming!

What “Taxpayers?”

In an editorial yesterday on President Obama’s proposal to end federal guaranteed student lending and turn everything into loans and grants direct from Uncle Sam, the New York Times had an interesting take on what constitutes putting ”taxpayers’ interests first”:

Private companies that reap undeserved profits from the federal student-loan program are gearing up to kill a White House plan that would get them off the dole and redirect the savings to federal scholarships for the needy. Instead of knuckling under to the powerful lending lobby, as it has so often done in the past, Congress needs to finally put the taxpayers’ interests first.

So let me get this straight: Redirecting tax dollars from lenders – who do get cushy fees and security through the guaranteed loan program – and giving it to students is somehow in the best interest of taxpayers? Maybe I’m old fashioned or something, but wouldn’t the best thing for taxpayers be to get their money back, not just see it shuffled from one special interest to another?

Obviously it would, and not just because taxpayers are best off when they decide how their ducats are used. As Andrew Gillen and I made clear in a Capitol Hill briefing last week, the best thing that could happen for taxpayers, students, and all of society would be for the federal government to provide much less aid to students, not more. The reality is that student aid drives massive, self-defeating college price inflation, creates ugly bloat and waste in our ivory towers, and ultimately cramps economic growth.

And we wonder why there are tea parties!

Shuffle, Shuffle, Shuffle…

This morning I attended a federal student aid event at the New America Foundation. The big topic? Not the effect of aid on out-of-control college prices, by far the most important concern from the contexts of economic growth, affordability, fairness to taxpayers, etc. No, it was the Obama Administration’s “bold” (NAF’s word) proposal to kill the federal guaranteed student loan program and do all lending directly from Washington. It was just the kind of debate folks in DC love, one that sounds really important but leaves the government-created problem almost totally untouched.

Here’s the critical reality that was completely ignored: taxpayer-furnished financial aid – whether coming directly from DC or delivered by “private” institutions completely backed by DC – appears to be a very big enabler of rampant tuition inflation. Quite simply, as I lay out in the most recent Cato Handbook for Policy, when government ensures that customers can pay more, students demand more and colleges raise prices.

Of course, the argument that aid drives prices is not without its critics, but they’ve got a tough case to make both in terms of economic theory and college cost reality. In Washington, however, this isn’t even being discussed. In DC, it’s all about the deck chairs and nothing about the sinking ship. But then, as we’ve learned oh-so-clearly over the last several months, politicians gain little from averting disasters they’ve helped cause, and lots from handing out life jackets.

Fortunately, Cato is here to remind politicians about the important stuff, not just to bicker over which special interest gets the biggest tax-dollar windfall. On April 7 we will address the fundamental problems with student aid, hosting a Capitol Hill Briefing on the effects not just of switching from guaranteed lending to direct lending, but of all federal student aid. It’ll be just the kind of discussion Washington so desperately needs but so rarely has.

Register here to attend, or watch online the day of the event.