A fire of growing student loan debt has been burning for quite a while now, with the latest estimate topping out at $1.7 trillion.
Washington has just thrown gasoline onto the fire with student loan relief. The Biden administration recently made the decision to forgive $10,000 in student loan debt, or $20,000 for Pell Grant recipients, for those earning less than $125,000 annually.
This isn’t the first, or the last, time that Washington is making things worse. Whether it is education, healthcare, you name it — the federal government is great at creating more problems.
We can’t expect Washington to get its act together any time soon. But thankfully, states can help control the fire. Occupational licensing reform can get at the root cause of ever-growing student loan debt.
Research that I did last year with Kihwan Bae uncovered a link between licensing to student loan debt. We found that licensed workers are almost 10 percentage points more likely to have borrowed for their college education and almost 6 percentage points more likely to have outstanding student loan debt than unlicensed workers. Moreover, licensed graduates borrow about $12,000 (or 38.5%) more and have student loan debt balances about $7,000 (or 42.5%) higher than unlicensed graduates.
Everybody knows that lawyers have to go to law school and that doctors must complete medical school. But why does it make sense for states to mandate minimum levels of education for barbers and cosmetologists?
In Iowa, aspiring barbers are required to complete 2,100 hours of education to be legally authorized to work. Interestingly, New York sets no minimum, and many barbers are eligible to work after completing a program taking less than one-quarter of the time.
For 30 years, the great state of Alabama did not require barbers to get a license to work. Unfortunately, a law mandating 1,000 hours of education was passed in 2013.
It isn’t often that New York sets the ideal for light-touch regulation, but it provides a great blueprint for states looking to ease student loan debt.
Existing research has documented that fewer than one-third of cosmetology students graduate on time. Further, cosmetology schools provide a poor return on investment — leaving graduates unable to afford growing payments.
Thankfully more and more states are beginning to move in the right direction. Virginia is the latest state to trim licensing requirements for cosmetologists — joining 15 other states that have done the same in the last 10 years.
Gov. Larry Hogan of Maryland eliminated mandated college degrees for state government employees earlier this year. And as proof that eliminating state-mandated minimum education need not be a Republican or Democratic area, Josh Shapiro has made a similar proposal a centerpiece of his gubernatorial campaign as a Democrat in Pennsylvania.
Several states have also provided alternative pathways for aspiring license seekers — permitting apprenticeships to take the place of traditional education. Alabama and North Carolina passed this reform in 2019. Idaho and Iowa did the same in 2021.
If there is one thing we can all agree on, it’s that we can’t count on policymakers in Washington to fix all of our problems. Thankfully, states have the tools they need and do not have to reinvent the wheel to ease the pain inflicted by state-mandated minimum levels of education often resulting from occupational licensing. Rightsizing these restrictions can do a lot of good and will not cost taxpayers a dime.
Edward Timmons is director of the Knee Center for the Study of Occupational Regulation at West Virginia University. He is also a senior research fellow with the Archbridge Institute.
