One of my favorite bloggers, Gucci Little Piggy, has another link to student loan article. Yes, the notion of a bursting student loan bubble is popular in the conservative blogosphere, but m y prediction is that nothing about student loans is going to change much during the next ten years.
Forbes lists five reasons for why there’s not going to be a student loan crisis the way there was a mortgage crisis.
Furthermore, student loans, while a big problem for some people who owe a lot of money, are not a problem for the majority of Americans. According to the NASFAA, even among people under the age of 30, only 40.1% have any student loan debt at all. Only 7.4% of people over the age of 40 have student loan debt. Thus only a tiny percent of the demographic group that votes most heavily has any student loans. Now it’s true that some of them are parents and may be concerned about their children, but that’s only going to be a problem for 40% of parents. Politicians care about two major constituencies: the majority (who can vote them out of office), and people who donate money to them. People with student loans are a minority and they are too poor to be significant political donors. On the other hand, politicians receive a lot of donations from banks, for-profit colleges, and other beneficiaries of the status quo.
Let’s examine who benefits from student loans:
* For-profit schools
* Faculty and other stakeholders of universities, who are an extremely influential bloc within the liberal elite.
* Rich people, because student loans prevent people in the middle class from catching up with their own kids.
* Poor people, because they don’t go to college and their children don’t go to college. Student loans make poor people better off because a middle class person with a job and student loans to pay off may actually not have any more spending power than an uneducated poor person collecting government benefits.
Who is hurt by the student loan status quo:
* The middle class.
The Half Sigma solution for the problem of student loans is to just get rid of them. (More accurately, the government would stop guaranteeing them, and they would become dischargeable in bankruptcy like regular debt, so there would no longer be any such loans available because no one would lend to students at those terms). Colleges would have to respond by cutting costs and making the education more affordable. The end result would be fewer people going to college, but the people who go would be paying lower tuition and graduating free of debt or with very little debt.
The Half Sigma solution goes against the liberal mantra that EVERYONE must go to college. No one would ever endorse a plan that would result in fewer people enrolled at college. Even Republicans wouldn’t endorse this plan because a Republican politician today has the same beliefs as a liberal from thirty years ago; Republicans also buy into the idea that everyone must go to college.
Meanwhile, as pointed out above, there are powerful constituencies in favor of the status quo, while the middle class hurt by the status quo don’t fully understand how the system is even screwing them over.
The debate is never going to be framed as anything else except liberals who says that the government should give away more money to colleges, and Republicans who say we should give away less money, and they compromise by funding the educational-industrial complex through student loans.