In keeping up with fellow Democratic presidential candidates Bernie Sanders and Martin O’Malley, Hillary Clinton introduced a package of proposals Monday that she claims will improve college affordability. Like her rivals’ plans, Clinton’s proposal calls for vast government spending and intervention – $350 billion over 10 years – and just like those other schemes, it is likely to make the problem even worse.

Her plan would devote more than half the money to increasing state higher education funding, particularly through grants to states that guarantee “no-loan” tuition at community colleges and public universities. A third of the money would subsidize refinancing of student loans at lower rates.

The problem is real. There are now 40 million Americans with student loans totaling $1.2 trillion – second only to mortgages as a household liability. It is estimated that nearly 20 percent of that money will never be repaid.

But throwing more taxpayer money at the problem is only exacerbating it. A recent Federal Reserve Bank of New York study found, for example, that increases to federal student loan and Pell Grant programs have resulted in “a sizable pass-through effect on tuition of about 65 percent.” In other words, every $3 increase in student aid funding leads to a $2 increase in tuition.

As economist Richard Vedder wrote in 2012, the enrollment inflation spawned by expanding federal student aid programs has “added to the growing disconnect between labor market realities and student job expectations, creating armies of college graduates who are bartenders, taxi drivers, etc.”

Rather than trapping students with false promises of job prospects, subsidized loans and a mountain of debt, the government should get out of the loan business. We should have learned this lesson from the housing crisis.


Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.

filed under: