In this piece published on The Freeman today, “Loans, Tuition, and the Disease of Government,” authors Antony Davies and James Harrigan hit the bulls-eye by linking the housing bubble and our current rising tide of student debt. “Not even a decade has passed since the housing bubble burst, taking with it over $1 trillion in economic output, and already our leaders are walking the exact same road with student loan markets that they did with mortgage loan markets,” they write.
Politicians seldom resist the urge to “make things better” with the money and power at their disposal. That is how we got the great housing bubble. Many politicians figured that since successful people usually own their homes, home ownership itself must be good and contrived to wreck the old lending standards so that nearly everyone could obtain a mortgage. They’ve done the same thing with higher ed, Davies and Harrigan observe: “Getting the causality backward again, government acts as if a college degree causes, rather than results from, success.”
So true. We have so often heard politicians (and the cheerleaders for the higher education establishment) say that because people who have college degrees on average earn much more than do those without degrees, all we need to do is get more of the latter into and through college and they’ll similarly benefit. By now we should all know that the world doesn’t work that way. Many of the marginal students are ill-equipped for college and little interested in academic work. Whether they eventually graduate or not, they’re likely to wind up in default, with the taxpayers “forced to pay for the bad college loans, just as they were forced to pay for bad home loans.”
It’s too bad we ever got into government financing of education. There is no constitutional warrant for it and even if there were, it would be a bad idea because politicians are very poor stewards of capital.