Posts tagged ‘George Leef’

March 23, 2015

College has become a very expensive entitlement

by Grace

Has a college education become a very expensive and less meaningful entitlement?

Due to government subsidies and cheerleading about the supposed benefits of additional years of formal schooling, over the last 50 years we have transformed higher education.

What had formerly been a rather inexpensive service that a small percentage of the populace thought worth striving for has been transformed into a very expensive one that’s now widely regarded as an entitlement. Thanks to government “help,” the cost of college has soared, but at the same time, academic standards have eroded and at many institutions, the curriculum has turned into a hodge-podge of narrow, trendy courses.

George Leef calls it a bad case of “credentialitis”.

That is, young Americans now go to college just for whatever “access” their credentials will provide, not because they want to learn anything or because they want to acquire useful skills. Credentialitis wastes resources, burdens taxpayers, leaves many students struggling with debt, but does nothing to improve our productivity or competitiveness.

The federal government is overly involved.

Leef believes the solution is for the federal government to downsize its role.  That’s certainly not the current trend, where a newly introduced Student Aid Bill of Rights guarantees the “resources needed to pay for college” for everyone.

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George Leef, “What Has Federal Higher Ed Policy Given Us? A Bad Case Of Credentialitis”, Forbes, March 17, 2015.

March 5, 2014

Federal student loan programs create perverse incentives

by Grace

Two problems with college loan forgiveness programs:

1.  They encourage students to choose less-valuable majors, according to George Leef.

.. income-based repayment would lessen or even remove the incentive that students now have to think prospectively about the cost/benefit ratio of college. With income-based repayment in place, the government is in effect telling students, “Relax—if college turns out not to do much to increase your income, you won’t have to dig deep to cover the costs.”

2.  They create “a perverse incentive for students to take out large loans they have no intention of paying back in full”, according to Walter Russell Mead.

… This is particularly true for graduate students, who have no limits on the size of the loans they can take out. As a result, the program has gone from “a safety net for undergraduates [to] a very large tuition assistance program for graduate students.”

Both income-based repayment plans and public service loan forgiveness programs absolve participants from paying back a significant percentage of the money they borrowed.

Mead describes how government policies are “Blowing Air into Debt Bubble”.

Over the past few years, the college cost crisis has evolved from merely an important issue facing parents and students into a serious national problem that could impact the future of the country. Moreover, most government programs designed to address the problem have only made it worse, inflating the bubble by encouraging students to borrow and giving colleges few incentives to lower prices. Federal student loans are the biggest offenders in this regard, but even other, more targeted programs have had this effect.

Related:

September 4, 2013

Politicized federal student loan program bails out ‘deadbeats’

by Grace

After a Wall Street Journal editorial related how the federal government advises “deadbeats” to avoid paying back student loans, George Leef of the John W. Pope Center for Higher Education Policy escalated the conversation with charges that politicized federal student-aid programs are promoting waste, fraud, and abuse,  In a surprising development, similar criticism is being echoed on the left.

The Consumer Financial Protection Bureau produced a report explaining how taxpayers are bailing out “deadbeat” student borrowers.

A new analysis by the bureau shows federal-backed student loan debt surpassing $1 trillion, which is nearly double what it was at the start of the Obama Presidency. As college costs have continued to balloon in tandem with federal loan and grant subsidies, students have assumed more debt. Many jobless Americans have also sought asylum from the Obama economy by returning to school….

But deadbeats need not fear. According to the bureau, “there are ways to avoid default on a federal student loan even when you think you can’t afford your payment.”

For instance, income-based repayment plans allow borrowers who meet the Department of Education’s criteria for a “partial financial hardship” to cap their monthly loan payments at 15% of their discretionary income (which is defined as income above 150% of the poverty line). They can also have their entire remaining loan balance forgiven in 25 years regardless of how much they still owe….

Graduates entering “public service” (i.e., government or 501(c)(3) nonprofit employment) get an even sweeter deal since they can discharge their loans entirely after a mere 10 years of making regular payments. That’s right. Take out a big loan, work 10 years for the government repaying as little as possible, and then have your debt entirely forgiven. Maybe this incentive falls under some previously unknown “Making Government Work Pay” program.

Leef’s response chastises the government’s politicized misallocation of taxpayer money that has helped to inflate college tuition costs.

Regarding your editorial “The Rolling Student Loan Bailout” (Aug. 10): Whenever the government gets involved in an activity that is not properly any of its business, we get the infamous trio: waste, fraud, abuse, and then the politicians feel the need to meddle still more in an effort to solve the problems they’ve created. The federal student-aid programs are a perfect illustration. Repayment of loans is being politicized, with easy terms for students provided they make the “right” choices in employment. That will only further misallocate resources and help to keep the higher-education bubble inflated.

Instead of further politicizing student lending, the right move is to get out of it altogether. Even if there were any constitutional warrant for federal lending to college students (and there isn’t), it would be a bad policy. Politicians and bureaucrats are very bad at deciding how to lend other people’s money.

Even Rolling Stone is conceding that easy access federal funds has played a part in propelling college costs to staggering levels.

The federal government has made it easier than ever to borrow money for higher education – saddling a generation with crushing debts and inflating a bubble that could bring down the economy

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