Who's Responsible for Student Loans?
A meme on Facebook has been viral in the last 24 hours. It states:
“If your liberal arts degree doesn’t have enough value for you to pay it off, it certainly doesn’t have enough value for me to pay it off.”
When one libertarian friend posted it, another libertarian friend answered:
This is true of all degrees; there’s no reason to pick on liberal arts. I know computer science and biology and psychology and marketing grads who are out of work. Either debt forgiveness is a good idea or it’s a bad idea, but either way it wouldn’t depend on what your major was.
Good point and well said.
Another libertarian friend on the same thread wrote:
Libertarians: the reason tuitions are so high is because government subsidies and government credentialing make them artificially high.
Also libertarians (now): if you can’t pay off that high tuition yourself, that’s totally on you.
I agree with him that government subsidies and government credentialing artificially increase the demand for education and that pushes up tuition substantially. Those aren’t the only factors. Economist Richard Vedder has written on the causes in his 2004 book Going Broke by Degree: Why College Costs Too Much. Moreover, Vedder proposes some solutions. I highly recommend at least perusing his book, which is free on line as a pdf.
Vedder discusses the vicious circle of more government aid leading to higher tuition leading to more government aid, etc. Here’s a key paragraph on page 193 of his book:
To this point, the response of governments to the rising cost of education has been largely to throw more money at the problem. Recall the vicious circle. Tuition charges rise, so the public complains loudly. The federal government increases guaranteed student loans and other programs to help students finance the rising cost of attending college, while state governments increase subsidies to universities. More financial aid increases the demand for higher education, enabling universities to raise prices further. With no profit-based “bottom line,” universities try to maximize their income or their prestige—the latter often pursued by spending more money to improve their standings in the USN&WR or other ratings. The universities then increase spending more, necessitating still further tuition increases.
So I agree with the second libertarian friend. But here’s what I said in response:
I’m not sure where you go with this. You’re right that the government subsidies and credentialing are a huge part of this. But who’s more responsible for a student taking on debt: the student or taxpayers in general, almost none of whom had an appreciable role in formulating that policy?
I think it’s the former.