The Washington Post reported over the weekend that President Trump is “demanding aides present a plan to tackle student debt and the rising cost of a college education, worried that he has no response to expansive plans from Sen. Elizabeth Warren and other Democrats he may face on the ballot next year.” They cited unnamed “administration officials,” so take it with a grain of salt. The story claims that that, inside the White House, the president’s anxieties are boiling over, for fear that Warren may have a populist upper hand on him, with her promise to forgive federal loans for graduates earning under $100,000 per year, with phased-out forgiveness for those earning between $100,000 and $250,000.
Perhaps the bigger populist promise of a would-be president Warren is the commitment to make all public college “free.” I don’t know if the president really is sweating over his need to compete with this proposal, but I do know that it would not be easy to compete on a populist terrain with someone who was promising “free” college and the complete absolution of debt one freely took on.
But if the Post’s reports are true, the president does have a point that it could be politically dangerous to offer no solution at all in the realm of higher-education costs. Does POTUS have an opportunity here to counter a catastrophic policy proposal with a substantive counterproposal that truly moves the needle in unexpected ways? Indeed, rather than trying to play catch-up with a leftist in giving away money, a complete reframing of the conversation is the need (and opportunity) of the hour.
In my new book on Elizabeth Warren’s policy portfolio, I dedicate an entire chapter to the idea of forgiving debt for college graduates. It is a highly regressive idea that, if put into effect, would reward those of statistically higher income-generation potential more than those whose life circumstances may prohibit college entirely. Offering “free” college in the form of a federal subsidy to states would invite a frightening statist intervention into higher education. This would be a true example of something that theoretically can’t get worse that actually gets worse. Warren’s ideas are unaffordable (why let that bother anyone now?), unfair, immoral, impractical, and counterproductive.
But if you can’t beat something with nothing, and Warren has something, then President Trump may not win on this issue by saying nothing. The fundamental reason for the explosive amount of student debt over the past ten years is — wait for it — the explosive costs of college education. And the explosive costs of college education are a direct by-product of — wait for it — the access to unlimited federal loans. In other words, the easiest way to deal with “explosive student debt” is — follow me here – to stop giving it out.
I will lose far too many of you if I end there, as the instinctive response of “well, that then cuts off the entire next generation from accessing college!” is fair enough. But of course, the determination that the federal government will no longer serve as enabler-in-chief to university administrators who have absolutely no decency or sense in controlling costs would not end people’s access to college. The president has the opportunity to present two ideas that would shock the nation in their obvious sensibility.
1) Removing the unquestioned and unlimited supply of federal funding devoid of underwriting would set off the most dramatic price competition in history, as universities would be forced to define value, secure customers, differentiate, and compete. Breaking down the wall of indiscriminate funding would create price discovery and encourage students to reflect on what they expect out of college, why they are going, and what they want to accomplish. We would see a real cost-benefit analysis (like the kind grown-ups perform all the time). Schools would reply by competing over price, let alone value, something the infinite pool of federal loan dollars has made wholly unnecessary.
2) A policy proposal centered around dis-intermediating the $21-trillion-indebted federal government from being college lender-in-chief would, actually, open the floodgates for creative and competitive college-funding solutions. An entire marketplace for income-share agreements is currently jarred up, waiting to burst out and innovate not only the way costs (which will decline) are met for college but also the income productivity of college graduates. Employer-paid tuition assistance for graduate students would also see entirely new life, as competition for talent would intensify.
The entire subject certainly warrants more exhaustive treatment than I’m offering here. But if Trump feels pressured to offer something better on higher-ed costs than the populist progressive playbook of Warren and Sanders, he could shock the country with the boldest policy transformation of his presidency.
If one is earnestly concerned about the crisis of responsibility that is our current college-debt fiasco, nothing would move the needle more than tackling runaway cost escalations. And nothing would move the needle more than incentivizing innovation in college funding. This movement toward better decision-making, greater productivity, and less burdensome debt financing would be a potent populist counterpunch and a legacy even the president’s critics would admire.