The federal student-aid program demonstrates the law of unintended consequences as well as anything possibly could. When it was begun in LBJ’s “Great Society” era, the cost of college was remarkably low (by today’s standards) because not terribly many Americans thought that postsecondary education was needed. Schools charged what the market would bear — which wasn’t much.
But then, unintended consequences started to kick in. One of them was that colleges realized they could charge more since Uncle Sam was putting tuition money into the pockets of their customers. Reagan’s Education secretary William Bennett famously linked the steady rise in tuition to federal student aid in 1987. Does it make sense for the government to continue covering the sky-high cost of attending colleges that have pushed up tuition to stratospheric levels?
No, says former college chief financial officer Chris Corrigan in today’s Martin Center article.
He argues that just as the government limits Medicare reimbursements, it should limit student borrowing for college.
Corrigan writes, “It doesn’t make sense that students and (ultimately) taxpayers should provide payment to cover some universities’ exorbitant rates when lower-tuition offerings abound. Even government-backed mortgage programs require a rigorous appraisal process to make sure that the consumer is not overpaying and that the government is not taking on too much risk. I propose a reform in which federal loans can be granted only at institutions where the cost-per-credit-hour is at or below a federal maximum. As a starting point, that cost could be $300 per credit hour for undergraduates and $450 for graduate students, figures that are close to the national averages for four-year, public institutions.”
This strikes me as a very sensible idea. The cost to the taxpayers of defaults on student loans and government “forgiveness” of debts for many who can pay is huge and growing. Corrigan’s proposal would help stanch the bleeding.