More than any other Republican vying for the presidency, Florida senator Marco Rubio has spent the past several years building a reputation as a policy entrepreneur. He’s borrowed heavily from the so-called reformicons and has proposed a variety of innovative policies on issues such as poverty and tax reform.
He has also been a bold and consistent voice calling for higher-education reform. And if his announcement of his presidential candidacy is any indication, he will make his proposals for revamping higher ed a prominent component of his domestic agenda. As a political move, this is both wise and important — higher-ed reform ought to be central to any conservative reform agenda.
Substantively, Rubio’s proposals for shaking up the college-accreditation cartel and increasing transparency are smart policy. But one of his reform proposals would make bad federal policy even worse, and could threaten to undermine his broader goal of controlling college costs.
Last July, Rubio joined with Senator Mark Warner (D., Va.) to propose the Dynamic Student Loan Repayment Act. This bill died in the Senate but would have, among other reforms, made income-based repayment (IBR) the default repayment option for all federal student loans. In other words, all students receiving federal loans would have automatically had their repayment schedules adjusted on the basis of their annual incomes. Rubio reiterated this proposal in his book American Dreams: Restoring Economic Opportunity for Everyone, calling IBR “a good deal for students and a good deal for taxpayers.”
Income-based loan repayment isn’t a new idea – the federal government already offers several IBR plans – but it’s a bad one.
While the usual rhetoric surrounding higher-education policy focuses on the burden of student loans, mounting student debt is the symptom of a deeper, more obvious problem: skyrocketing college costs. After a half-century of federal policy focused on subsidizing debt, we can now say with confidence that the famous “Bennett Hypothesis” is correct. Far from helping students and families afford the cost of college, cheap, taxpayer-subsidized debt encourages the profligacy of colleges and universities and contributes to ever-increasing tuition. In the words of a 2013 paper published by the National Bureau of Economic Research, federal aid “provides some potentially undesirable incentives for private colleges to ‘game the system,’ strategically increasing tuition to increase student aid.”
IBR only increases these perverse incentives by making it easier and more attractive for students to finance their college education by taking on more debt. As George Leef of the Pope Center for Higher Education Policy has explained, “income-based repayment would lessen or even remove the incentive that students now have to think prospectively about the cost/benefit ratio of college.” The message that IBR sends students is “Relax – if college turns out not to do much to increase your income, you won’t have to dig deep to cover the costs.”
It is important to note that the Rubio-Warner bill would have somewhat pared back the loan forgiveness offered by federal IBR plans. This, wisely, would have reduced the massive incentive that IBR currently gives students to take on ever-larger burdens of debt, knowing that any loans over a given threshold will be forgiven.
Yet, one has to wonder how long politicians would be able to resist the inevitable pressure to extend loan forgiveness to more and more students. Will the feds really be able to defend allowing the down-on-his-luck sociology major to continue accruing interest 15 or 20 years after graduation? This would be too-big-to-fail for higher education: No matter how unwise or unthoughtful a student’s education decisions, it seems likely the federal taxpayer will end up picking up the tab.
Any authentic higher-ed-reform agenda needs to focus on driving down college costs rather than subsidizing student debt. That means moving away from our destructive model of debt-financed higher education. Senator Rubio clearly knows this – that’s why he’s proposed creative solutions such as “student investment plans,” which would allow private investors to invest directly in promising students. If he wanted to move even further in the right direction, he could also adopt the proposal, once endorsed by the Heritage Foundation, to replace federal loan and grant programs with a capped tax deduction for college tuition.
On balance, Marco Rubio’s plans to reform America’s broken higher-education system would drastically improve federal higher-ed policy. But that can’t exempt him from much-needed criticism. It is still early enough for Rubio to improve his higher-ed agenda by moving away from the outmoded, status quo mindset that focuses on endlessly subsidizing student loans. If Rubio does that, he will move us that much closer to a future where college education is affordable, flexible, and accessible to all.
— Avi Snyder is a writer in New York City.
Editor’s note: This article has been updated to correctly identify Senator Mark Warner as the co-sponsor, with Senator Rubio, of the Dynamic Student Loan Repayment Act.