The Corner

Education

The Government’s ‘Predatory’ College-Loan Program

Leftists usually reserve the word “predatory” for private lending they don’t like, especially quick “payday” loans. But did you know that the feds are running a college lending program that also gets that description?

Yup — it’s the PLUS Loan program and in today’s Martin Center article, Anthony Hennen scrutinizes it.

He writes,

PLUS loans are open to graduate and professional students, as well as parents of undergraduate students. Students and parents can borrow up to the cost of attendance set by the student’s university, minus other aid the student receives. What that means is the federal government imposes no direct borrowing limit. If a school sets tuition higher and higher every year, a PLUS loan will cover the increase.

Participation in this kind of student lending has been rising. Parents are getting sucked in and the ready availability of federal money for grad school is a big factor in continuing the glut of graduate degree holders desperately looking for work to pay the bills.

PLUS loans are another example of counter-productive government policy, Hennen observes:

A great irony of programs like PLUS loans is that those free-flowing federal dollars have made education less affordable, as the Martin Center pointed out in a research review of how federal funding inflates college costs. Universities have shown little interest in keeping down costs so long as federal loans will continue to flow freely, no matter how harmful the effects are to those who use the program and to the national economy as a whole.

So why continue PLUS loans? Politics explains it — this lending program helps to keep some influential schools going, especially HBCUs.

However unlikely, the right move would be to get rid of PLUS loans, Hennen argues. He concludes, “Abolishing PLUS loans would preserve an abundance of money for students while sending college leaders a warning: don’t count on government largesse to subsidize high costs forever.”

The federal government should never have gotten into the financing of education and a good first step toward getting out would be to end this loan program.

George Leef is the director of research for the John William Pope Center for Higher Education Policy.

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