Bernie Sanders and Elizabeth Warren are right about one thing: student college loan debt is out of hand. It’s threatening the futures of young people. The $1.6 trillion in outstanding debt increasingly crowds out the life opportunities of college grads who, at their commencement exercises, are told to dream big and let nothing stand in their way. Nothing, that is, but suffocating debt.
Because of this debt, young people are delaying marriage, putting off families, and forgoing home ownership. In a way, they’re putting life on hold. That is simply not something a healthy and vibrant society should want to happen. So, Bernie and Elizabeth are right about the destructive effects of all that student debt.
Conservatives should take note. Even though they are wrong about everything else concerning the student debt crisis, the Bernie and Elizabeth crusade might just be an opportunity for conservatives.
That’s because the one thing Bernie and Elizabeth don’t talk about during their student debt rants is the cause of this calamity. How did such astronomical debt levels occur? No, it wasn’t the fault of Wall Street or the wealthy or big corporations. It was the fault of the federal government and a student loan program that backfired. That’s why progressives never talk about the cause of the debt crisis: because it represents yet another failure of a federal government that progressives only want to expand further.
The Federal Government Created the Higher Ed Bubble
The federal student loan program has failed at its primary goal: increasing the number of low-income students who receive college degrees. In fact, it has failed miserably.
What the federal government has done is to effect a steady rise in college tuition costs that has far outpaced inflation. Higher education has experienced price increases that no other sector of the economy has experienced. Why?
Through its student loan program, the federal government has made available to college students a practically unlimited source of funds with no underwriting requirements. There is no monitoring of what institutions are being attended or what courses of studies are being pursued. The federal government provides the money for wherever a student wants to go and whatever the student wants to do—no questions asked. The only stipulation is that the money has to be handed over to some college or university.
University administrators are more than happy to admit the student, let the student do whatever she wants, and then pocket all that federal loan money. It is no coincidence that universities have built more buildings and added more administrators during the life of the current federal loan program than at any other time in history. And it is no surprise that, in response to all the no-strings-attached money being provided by the federal government, universities have raised tuition faster and at a higher rate than at any other time in history.
Just as the housing crisis of 2008 was caused by a housing bubble brought on by a government-mandated erasure of underwriting standards, the current student loan crisis is a debt bubble brought on by a government program that encourages debt while simultaneously ignoring any concerns regarding repayment of that debt.
The whole program ends up being a huge transfer of wealth from the federal government to universities. But the person caught in the middle—the person who gets stuck for one hundred percent of the debt, the person whose college degree now costs exponentially more than it should because of a federal loan program that allows and encourages universities to raise tuition—is the student.
If the feds stopped the student loan program tomorrow cold turkey—just got out of the business of student loans altogether—two things would immediately happen. Tuition would fall dramatically, because the great majority of students could never afford the currently inflated costs of higher education. And second, universities would have to start eliminating the legions of vice presidents and other bureaucrats who have turned college life into a highly regulated behavior modification center and multimillion-dollar athletic complex.
If we take a broader look at the federal student loan program, the dynamics become clear. It’s a scheme of predatory lending. The federal government and higher education are tacitly working together to expand the activities of government while lining the pockets of universities, all at the expense of the individual, underage, vulnerable student. This is a government program that has to end. It is a program that acutely reflects how the false promises of big government end up hurting the people who are supposed to be the beneficiaries of those promises.
Again, it’s no wonder that Bernie Sanders and Elizabeth Warren, two people who seem never to be short on ideas and indictments, have nothing to say about the causes of the student debt crisis.
What’s the Solution?
Still, even without identifying the cause of the problem, Bernie is willing to assign responsibility for fixing it. He says a tax on Wall Street traders will furnish the funds to pay off the $1.6 trillion debt. But why Wall Street? Granted, no one likes Wall Street traders and hedge fund managers, but why should they pay for a problem created by Washington bureaucrats and greedy university administrators?
Wouldn’t it make more sense to tax the endowments of the universities who have long benefited from the silent conspiracy between the federal government and higher education? As long as Bernie and Elizabeth are out to tax wealth, how about a one hundred percent tax on all university endowments over $15 billion? Wouldn’t that make more sense? In addition to the endowment tax, we could add a progressive tax on universities based on the number and salaries of administrators.
Most likely, this tax on higher education will not come close to paying off the $1.6 trillion, even though it may very well achieve the goal of decreasing college costs by cutting expensive administrators. A broader source of funding will be needed, along with a broader social commitment to reduce debt. We pay for stadiums with a sales tax; why not pay for student college debt with a designated sales tax that puts everyone on notice about the costly consequences of an errant federal government?
Bernie has done conservatives a favor. He has highlighted the harm that a bloated and unaccountable federal government can cause. And in doing so, he has provided an opportunity for conservatives to build a strong alliance with millennials. He has given conservatives the chance to come to the aid of an indebted generation.
Getting Out of Debt
Despite the moral hazards of loan forgiveness, conservatives should sign on to the forgiveness of the student debt. But why stop there? If we are concerned about the indebtedness of a young generation, why forgive the small debt of student loans and ignore the much larger debt of the federal government? The federal budget and entitlement deficit pose a crisis-level threat to the well-being of young Americans that will prove much more catastrophic to young Americans. It is almost as if the progressive left thinks it can lull the youth into carrying the future burdens of a ballooning federal deficit by writing off their student loan debt.
To demonstrate to younger generations a commitment to reduce their overall debt burden, conservatives should couple student loan forgiveness with a credible plan to begin immediately reducing the federal deficit. Maybe Bernie took the first pandering step toward the millennials, but let conservatives take the more long-lasting and substantive step of true debt reduction.
One such debt reduction program could involve the entitlement budget. For every dollar used to pay off the student debt, another four or five dollars could be taken out of the entitlement budget to pay down the federal debt, with this policy continuing even after the student loans are paid and until the federal deficit is likewise reduced to a manageable level. In this way, the generation that incurred the debt will be the ones who begin paying it off.
The federal debt is like a pistol in a game of Russian roulette. It just keeps getting passed to the next player, the next generation. But eventually, the empty chambers will run out and the bullet will fire. With each new generation, the odds increase that they will be the ones to face the indescribable catastrophe of a national debt that finally blows up.
The progressive left in America talks about justice and compassion, but they do nothing about the single greatest looming threat to American economic health and political stability. They just keep handing over the gun, without telling the next in line that the odds of the gun firing are going up.
It’s time for conservatives to come to the aid of young Americans who have already been victimized by the traps laid by big government. Let conservatives demonstrate that they care more about the futures of all Americans than about the size of the federal government.