One of America’s worst mistakes was letting the federal government get into the financing of higher education. It had no constitutional warrant to do so and the results have been terrible. But we are stuck with this blunder, and recently the Department of Education made some moves to help students make better decisions.
In today’s Martin Center article, Jack Salmon looks at the department’s initiative and concludes that while it might do some good, it leaves the deep problems with federal student aid untouched.
He writes:
At first glance, the reform seems sensible. After all, with federal student-loan debt at $1.8 trillion and millions of borrowers delinquent or in default, something must change. Yet a closer look reveals that, while better information may help at the margins, it does not resolve the underlying problem: The federal loan system itself creates incentives for overborrowing, tuition inflation, and labor-market mismatches. Without deeper structural reforms, even the best consumer-education program will fall short.
Salmon observes that the Trump administration is offering a better approach than Biden’s student loan forgiveness — better decisions will slightly mitigate the student loan morass — but the problem is mainly structural, not informational.
Read the whole thing.