McArdle argues against Obama’s proposed student-loan policy changes:
It’s not that the horror stories about people with low earnings and huge debts are imaginary – I have not only read those stories, but have also been one of them. However, that group is relatively small. And in order to give them an extra break on their payments, the president and Elizabeth Warren are proposing that we should also give a whole lot of money to folks who don’t really need it. That’s bad public policy; moreover, it’s not particularly progressive public policy.
That said, I do think we should do something to help people who are genuinely stuck with debt that they will never realistically be able to pay. We should end the exemption of student loans from bankruptcy so that anyone who is overwhelmed by debt can go to court and get a genuinely fresh start. The special treatment of student loans is an outrageous bit of self-dealing by the government, which appears to be fine with debt slavery as long as Uncle Sam gets to be the master. It should stop.
Drum counters:
[U]nlike McArdle, I’m persuaded by the aggregate numbers that we have a genuine problem here. We don’t have a problem with college grads buying ever more expensive cars, which is why no one wants to provide auto loan relief. We do have a problem with the cost of college skyrocketing.
The resultingly high aggregate student loan debt is having a noticeable adverse macroeconomic impact (family formation, buying a house, etc.) at a time when we can ill afford it, which makes the case for a temporary refinancing program fairly compelling. More generally, it’s also the case that no society is well served by making income a barrier to higher education. More and more, however, that’s what we’re doing.
Robby Soave’s view:
When federal lawmakers forgives debts – in part or in whole – they reward students who borrowed recklessly. They also incentivize universities to raise tuition prices. College administrators know that they can get away with demanding more money, because students will take out more loans, confident that the government will bail them out if they run into trouble – and the government will stick the taxpayers with the bill if the students aren’t able to pay.
Jordan Weissmann considers a Republican idea we noted yesterday:
Since 1983, Tom Petri, a low-key House GOP congressman from Wisconsin, has advocated an idea that education wonks sometimes call “universal income-based repayment.” It would completely scrap the convoluted system that former students currently rely on to repay their loans. Instead, college debt would work like just tax withholding. A borrower would simply pay a set percentage of her monthly earnings to the government, deducted straight from her paycheck.
Countries including Britain, Australia, and New Zealand already take a similar approach. And, as many educationexperts have agreed, bringing it stateside would likely cure some of the worst symptoms of America’s student loan binge. It would ensure that every single borrower’s payments stayed manageable and virtually eliminate the risk of delinquencies and defaults. Think of it as the financial equivalent of putting up gutter rails in a bowling alley – it’s a foolproof plan to stop borrowers from veering into trouble.
Meanwhile, Adam Ozimek argues that the real problem with higher ed is a lack of transparency about outcomes:
One potential concern is that transparency on outcomes might incentivize colleges to focus on selectivity to inflate their statistics. But even something as simple as reporting income divided by SAT score would incentivize schools to not just let the best students in. Or schools could use a value added type approach that incorporated more measures of demographics, socioeconomic status, and ability to estimate how much schools contribute to learning rather than simply selecting on ability. Overall, if you’re looking for a cause of our higher ed woes, then focus on informational problems, not debt. And if your looking for a policy, focus on transparency. That’s not to say there’s nothing that should be changed about student loans, but this is not the biggest issue here.
Reihan shifts the focus to the college experience itself:
Consider the findings of Paying for the Party, a masterful account of the many ways life at a large Midwestern flagship public university is rigged against students from working- and lower-middle-class backgrounds. Over the course of five years, the sociologists Elizabeth A. Armstrong and Laura T. Hamilton tracked a group of female students at “Midwest University,” a thinly disguised big public flagship school, starting in their freshman year. One of their most striking findings is that standard college advising consistently failed to meet the needs of students from modest backgrounds. Students from affluent backgrounds had extensive social networks at their disposal, which helped them turn degrees in “party majors” like sports communication and broadcasting or interior decorating into jobs in glamorous, or glamorous-sounding, fields. Students who didn’t have parents familiar with the ins and outs of higher education to help them navigate the system found themselves at the mercy of incompetent, indifferent, and overworked advisers who routinely led them astray.
The Dish 