One of the worst blunders in American history was the decision to let the federal government get into the business of financing higher education. The gusher of government money has driven up the cost of college while driving down its worth.
In today’s Martin Center article, Jeffrey Degner explains that federal student lending has become “a multi-generational financial trap.”
The victims of bad college borrowing are not just young Americans, Degner shows. He writes, “It’s Gen Xers and older generations, those aged 50-plus, who have seen the highest increase in late payments, with over 21 percent of older Americans with student debts going into serious delinquency. Not only are they falling behind on their payments the fastest but, as a group, these Americans have the highest average debt per borrower, at over $47,500.”
As Degner argues, federal lending for college has had the typical unintended effects that inevitably accompany government market meddling:
Legendary economist Ludwig von Mises quipped, “Economic interventionism is a self-defeating policy. […] They bring about a state of affairs, which — from the viewpoint of its advocates themselves — is much more undesirable than the previous state they intended to alter.” Too few economists and policymakers have heeded Mises’s words of wisdom. The economists should have seen these unintended but predictable outcomes coming and urged policymakers to reject this form of educational welfarism.
The Trump administration has taken some small steps to deal with the mess of federal student aid, but Degner favors far more radical moves — ending student aid entirely.