Two Bad Ideas on Student Debt, Part 2
By David Henderson
How about this: instead of forgiving everybody’s college debt, we force all the colleges who scammed millions of Americans into degrees in Useless Theory Masquerading As Valuable Life Skills to grant refunds. That would end the grift right quick.
This is a November 16 tweet by Ben Shapiro. I’ve heard this idea repeated a number of times, with slight variations. Tucker Carlson argued for it last week on his show.
Last week I posted about a bad way to handle existing student debt. I noted that University of Michigan economist Justin Wolfers agreed with my bottom line and also that we agreed on some of the reasons for that bottom line.
Ben Shapiro’s proposal above is also bad and is arguably worse. It’s much more of a violation of property rights than the Joe Biden-type proposal is.
Here are the problems.
1. How would he identify those colleges that actually engaged in scams? Presumably he would need evidence that the college promised X and didn’t deliver X. That’s possible but my guess is that most colleges were far more circumspect and didn’t promise X. If they did, then the former students would have a justification for suing the college, but this justification would be independent of the amount of student debt. Student A who went into no debt or who paid off all his debt, but who got scammed, would have just as strong a case as Student B who owes $30,000.
2. If Shapiro is saying that we don’t need to find actual evidence of a scam, then he is advocating a taking: the fact that a student has debt but has a fairly useless degree would be enough in this case for Shapiro’s remedy. That’s a problem. It would amount to the government taking forcibly from college D to give to student B.
3. It could even be worse. When Tucker Carlson discussed this kind of remedy on his show last week, he almost licked his lips as he discussed Harvard’s $40 billion endowment. He seemed to be saying that this amount should be distributed to students who had debt. Was it all students or just students who went to Harvard? And if the latter, how many of them are struggling with massive debt and low-paying jobs? I bet it’s under 10%. If it’s the former, then what distinguishes this proposal in principle from Stalin’s grab of land and food from the kulaks? I understand that the Stalin move was way more extreme: Stalin murdered millions of innocent people. I’m talking about the principle here, not the consequences.
4. Establishing the precedent that a student who doesn’t get what he wants from a college can sue to get a refund would, I admit, have some salutary effects. Colleges would substantially raise their standards and might even, gasp, quit discriminating against Asians. (If you follow the link, you’ll see that Harvard dodged a bullet and a federal court found that it did not discriminate. The data I saw caused me to think otherwise.) But it would be better to establish that principle going forward than to penalize colleges that, along with students, thought they were operating under different rules.