Soccer Dad

College aid

After we had three children my wife went back to school. Her degree wasn't very marketable and she wanted to work. So she went back to school; we got government loans to pay for it. She thus was able to get her degree and gain marketable skills.
What would have happened if there weren't government loans available? We would have taken out market rate loans and have owed more. But my wife was determined to get that degree. Sure the student loans made my wife's second degree easier, but they didn't make it possible; that was her own drive. Student loans, though, come at a high price as Brendan Mininter recently wrote in "Uncle Sam's Tuition Bill":

Nonetheless, based on its original miscalculation, the federal government has now become the co-signer on nearly every student loan, even paying the loan's interest while the student is in school, and guaranteeing to lenders at least 98% of their principal should the student default. The government also guarantees private banks that they will turn a profit on student loans no matter how low interest rates fall. Under President Clinton, Uncle Sam even started lending to students directly.

This year the federal government will make more than $70 billion in financial aid available by guaranteeing loans, lending money directly to students, or handing out grants. Pell Grants alone will cost more than $13.4 billion next year as 5.4 million students will receive direct government funding (a million more than when President Bush took office in 2000). Moreover, the pressure to keep upping the ante is unrelenting from Democrats and Republicans alike, who never tire as posing as the protectors of children against the scourge of rapacious tuition increases.

Miniter writes further:

Unfortunately, by footing these bills and turning higher education into an entitlement, Congress itself is primarily responsible for isolating academia from normal consumer pressure by shielding most students (and their parents) from the true cost of higher education. That's why schools can keep ratcheting up tuitions beyond what any middle class family can reasonably afford to pay--because they know taxpayers stand ready to take up the slack.

It's not just the insulation at work here. It's inflation. By making more money available for college education - it will induce some who wouldn't or shouldn't otherwise go to college to give it the old college try, student loans exert an inflationary pressure on tuitions. So if student loans were not so readily available my wife might have been able to borrow less from a regular lender because tuition wouldn't have been as high.
I suppose that there's also another problem with all this extra money going to academic institutions. That's the creation of gender, ethnic and all sort of other pseudo academic disciplines. After all if you have all that money, how else to use it?
It's good that Miniter reports that some Congressmen are attempting to curb the excesses of federal help to colleges and universities. I'd say that's a good thing.

Posted by SoccerDad at July 31, 2005 6:37 PM